All's quiet on the workplace front

What is it about payroll giving that fails to convince both employers and charities?

Giving at work
Giving at work

This year, payroll giving celebrates its 20th birthday. Rather than toast the achievements of a well-rounded protege, however, the Institute of Fundraising is about to commission a review of how to improve it.

Launched in 1987, payroll giving has raised £700m for charity, according to Workplace Giving UK, the fundraising organisation with the task of raising awareness of the initiative. But it has never reached its full potential: only 640,000 people - 3 per cent of all employees - use payroll giving schemes, which are available to between five and seven million.

Funded by the Home Office, the recent Payroll Giving Grants Programme for small and medium-sized enterprises recruited 3,380 employers. The number of employees who signed up is still to be calculated, but a total of £4m in grants for the scheme was not taken up and was returned to government.

One barrier may be the apparent complexity of the process. First, a company has to register a payroll giving scheme through a payroll giving agency approved by HM Revenue & Customs. The payroll department then makes a pre-tax, post-National Insurance deduction from an individual's pay and passes a monthly cheque to the agency (which deducts commission) to divide between chosen charities.

These hurdles are not as daunting as they seem, according to Peter O'Hara, managing director of Workplace Giving UK. He says: "Once we show employers how it operates, they see it's easy - it takes less than 10 minutes to make the deductions."

Tina Steele, payroll giving project manager at the institute, says the process is cheap and efficient for charities: "They don't have to invest in it unless they are in a basket represented by a professional fundraising organisation, which takes a small amount for administration costs. If they are not in the basket, they can still receive donations without a fee."

Charities have complained that they can't email a payroll giver to ask for improved support, as they can with someone they have recruited to a direct debit scheme. But Steele insists that charities can communicate with donors. She says they can request lists of donors from PGAs, but this opportunity is being ignored.

As a result, contact is lost with employees who move from companies that offer payroll giving to ones that don't, schemes lapse and donors aren't developed.

Steele believes more could be done to advise higher-rate taxpayers that payroll giving is more effective than Gift Aid, which allows charities to claim back only the basic tax rate.

There are two different ways of running a payroll giving scheme. If a 'discount' scheme is operated, charities receive a sum deducted from an employee's gross pay. With an 'add' scheme, the sum is deducted from net pay and charities will receive that sum plus standard or higher-rate tax.

O'Hara says: "The majority of high-band taxpayers give through Gift Aid and aren't aware that payroll giving would be more beneficial. Charities themselves could do a lot more promotional work."

'Could have been better'

The £8m scheme to promote SME payroll giving could have been better exploited, says Barry Gower, managing director of Gift Aid recovery consultancy Gain.

Charities could have actively targeted small companies to sign up and donate all or part of the grants to charity, for example, he says. Financial advisers and lawyers could have campaigned to get their small business clients to sign up. A combined campaign by charity influencers such as the NCVO, the IoF and HMRC could have promoted the grants.

"There's no question it could work well," Gower says. "But to work well it needs to be promoted far more."

Simon Burne, senior consultant at Think Consulting Solutions, believes that payroll giving is simply too hard to sell to companies.

"Payroll giving is the British Leyland of the fundraising world," he says. "It has a role, but it's very difficult to say to charities it should be a major plank of their fundraising schemes.

"You have matched giving whereby Joe Bloggs sits in a bath of baked beans. It goes in the company magazine and fits in with its corporate social responsibility approach. Or there is payroll giving. It may be the most efficient way to give to charity, but is deadly dull from a CSR perspective."

So, Burne says, there are few incentives, either financial or celebratory, to those in the payroll departments who implement the scheme.

"To improve it, I would make it more of an opt-out than an opt-in," he says. "Employers should have to offer it to staff when companies are above a certain size."

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