News in focus: Smaller charities urged to cash in on payroll scheme

Payroll giving is said to be easy and effective, and the Government has announced cash incentives for smaller firms. Indira Das-Gupta investigates why both companies and charities are failing to sign up.

After the recent announcement of the Government's cash incentives for small- to medium-sized businesses (SMEs) to set up payroll giving schemes (Third Sector, Nove 17), it would appear that companies are running out of excuses not to sign up.

One crucial remaining barrier is the reluctance of many smaller charities to invest time and money in promoting it to companies, partly because it is widely perceived as a scheme which only benefits better-known charities.

But many feel that if such barriers could be removed, payroll giving could revolutionise giving in the UK. It is one of the easiest ways for employees to give to charity because donations are made straight from their gross salary before tax is deducted. For example, for a standard rate taxpayer paying tax at 22 per cent, a £10 donation will only cost £7.80, or just £6 for higher rate taxpayers.

Rhona Tait, an assistant manager for sponsorship and hospitality at the Royal Bank of Scotland, earns what she describes as an "average salary" but still gives to three charities. She says: "I give £6 a month to the RSPCA and £3 to Oxfam and the Dogs Trust. I could spend that amount on lunch with friends, but it's my way of making a difference."

Payroll giving now has the additional incentive of the new matching scheme for donations from staff employed by SMEs. The Government has pledged to match pound for pound, up to a maximum of £10 a month, an employee's donation for the first six months. It is hoped that the scheme might persuade employees that they can afford to give more, and with about 7.5 million people working for SMEs, the potential for fundraising is huge.

As a further encouragement, SMEs will also receive a one-off grant of £500 to set up a payroll giving scheme. The Institute of Fundraising, which will administer the new scheme in partnership with Business in the Community, estimates that it costs between £100 and £200 to set up, so companies can no longer claim they can't afford it. The programme will start in January, but matched payments will be back-dated to April 2004, and the scheme will continue until March 2007.

The Charities Aid Foundation estimates that the amount raised through payroll giving increased from £86m in 2002/03 to £91m in 2003/04. About 60 per cent of the UK's 250 FTSE companies operate a payroll giving scheme.

But given that it has been around for 17 years and CAF says that only 9,153 charities out of 165,000 receive donations in this way, it can hardly be described as a runaway success.

Critics of the scheme believe it favours well-established names. This is because employees are often told to choose from a list of beneficiaries that usually comprises the best known charities. Even if there is no list, donors tend to plump for those charities with high brand recognition, according to some.

But although Tait from the Royal Bank of Scotland gives to high-profile charities, employees of the company actually give to 2,500 charities in total. A spokeswoman said: "Although the majority of our employees give to charities such as Cancer Research, Oxfam and Childline, thousands also give to much smaller charities and after-school clubs. They can choose whoever they want."

Predictable income

The Motor and Allied Trades Benevolent Fund might not enjoy the brand recognition that Childline does, but it still received £800,000 last year through payroll giving. In fact it has been so successful that it now runs a scheme for its own employees.

Another lesser-known charity that has benefited from payroll giving for the past three years is Ty Hafan, a children's hospice in Wales. Business development manager Mary Canham says: "It provides us with £40,000 of the £2.1m we need to maintain our services, which might not sound like much but it's £40,000 that's predictable. It can also lead to employees organising their own fundraising days." Ty Hafan has 300 "payroll givers" from multinationals including Barclays and L'Oreal, as well as local companies that employ a handful of people.

Canham admits she struggled to promote payroll giving. She says: "It was hard work because some companies don't want to give you their time."

She could have made life easier for herself either by employing a professional fundraising organisation (PFO) or by setting up a consortium of like-minded charities and selecting a spokesperson to put forward the views of all.

Sharing the Caring, the wholly owned subsidiary of Help the Aged, which is merging with the Charities Aid Foundation, aims to promote payroll giving for the whole charity sector through its Give As You Earn scheme.

Jonathan Parris, chief executive of Sharing the Caring, who plans to leave following the completion of the merger, believes a lot of charities simply aren't aware of all the benefits of the scheme. He says: "As far as I'm aware, it's the only form of fundraising where you pay on a results-only basis. We represent about 100 charities at any one time and do all the work for them by promoting the concept of payroll giving, rather than the work of any particular charity."

Parris believes that a major reason payroll giving has not been more successful lies with the private sector. He explains: "Only 50 per cent of employees in this country can donate to charities through payroll giving if they want to - and that's the Achilles' heel. Everyone should have the option."

The Institute of Fundraising will address this problem by targeting companies as well as charities. Tina Steele, the institute's payroll giving project manager, says: "We will be calling on small businesses to recognise payroll giving as an opportunity to support local charities, and we will build a register of smaller charities that are looking to benefit from the scheme.

PFOs will also be encouraged to offer a more diverse list of charities of varying size."

Payroll giving might not be the answer to every charity's fundraising problems, but those who have opted for it haven't looked back. As Steele says: "Charities might initially have to invest time and money in promoting it, but the dividends can be great."

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