· 4 min read · Features

Payroll giving - Save as you give

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Deducting donations to charities direct from employees' salaries is seen as an important step in an employer's commitment to CSR. Yet many haven't even heard of payroll giving.

It is a sad fact that payroll giving - the scheme that allows employees to donate to charities of their choice direct through their pay - has remained something of a national secret for the past 20 years. Compared to the US, where 30% of employees automatically donate to charities direct through the payroll, (a proportion that raises more than $300 billion - equivalent to the entire GDP of Poland), in Britain the figure is a minute 2.5%. This equates to just over 775,000 donors, in total contributing to approximately £100 million a year.

For those companies that already run HR-sponsored payroll-giving schemes (Clydesdale Bank, for example, has 14% of its workforce signed up), the option is increasingly being seen as a credible adjunct to their CSR policies. While many already have 'charities of the year' to which they donate, Louise O'Reilly, community affairs manager, Boots, says her broad mix of employees prefer to give to a wide pool of charities rather than be told by their employer which they should support (see case study opposite). She says more HR professionals could make use of the flexible approach to donating that payroll giving offers: "We're using it as the first step in our CSR plans," she says. "The company is monitoring it to see which charities staff are giving to so we can choose the ones that reflect their support."

At the start of the year O'Reilly relaunched the company's payroll-giving options for HQ staff, and in April extended the scheme to store-based employees after contributions dropped to less than 5% of staff. The renewed communications (on staff newsletters, emails and posters) yielded an immediate 500 new staff signing on, with 1,500 more expected in the next few months.

One of the main benefits highlighted in the communications exercise was that staff could support charities in their local community, and that Boots was acting in line with its published CSR principles. Also stressed was the fact that payroll giving is one of the most efficient ways of supporting charities. When money is donated direct from an employee's pay, the donor's tax is passed straight onto their chosen charity through the Gift Aid scheme. It means a gift of £5.00 from a 20% tax-band payer only costs the employee £4.00, with the taxman paying the rest. The benefits climb even higher for individuals in higher tax bands.

So important is the link between payroll giving and CSR that in May a new campaign was launched in Parliament by Labour backbencher Anne Snelgrove to encourage more employers to sign up. The 'Geared for Giving' pledge asks employers to promise to communicate the community benefits that payroll giving can bring. "Recent research by Oxfam and YouGov found that one third of employees would give an average of £9.60 per month to charities if they knew payroll giving existed," said Snelgrove. "This would generate more than £1 billion of extra funds."

Snelgrove says that if all the money staff currently give to charity through other avenues was actually deducted from employees' wages at source, an extra £900 million would find its way back to charities at no extra cost - enough to fund the work of the British Red Cross for nearly five years.

The aim of Geared for Giving is for employers to collectively sign up one million more donors through payroll giving - more than the current total - in just one year. Arcadia, where 2,500 staff donate through payroll giving, is among the supporters of the scheme, as is Lastminute.com, where 12% of the workforce have signed up to payroll giving. Ian McCaig, CEO of Lastminute.com, says: "One has to ask not why would you offer this to your staff, but why wouldn't you. Since launching payroll giving last October, we've had a fantastic response. Not only is it enabling us to prove commitment to our CSR values, but we're also seeing it generate fantastic engagement."

Karen Thomson, associate director, policy and research, at the Institute of Payroll Professionals, says employers worry about the administration payroll giving entails, but says the reality is very different: "Most payroll systems have a deduction element to them. Once set up, it is automatic, and there are various charitable bodies - such as the Charities Trust - that handle all the payments to chosen charities at a minimum cost."

Not only does payroll giving strengthen employees' feelings of belonging to their communities, Martin Narey, chief executive of Barnardo's, says it also allows charities to establish stronger relationships with corporates and their staff. "Charities often struggle to communicate that they are there for the long-term, not just a 'charity of the year'. With payroll giving charities can promote themselves more like businesses because they can predict their income better." Narey says 7.5% of Barnardo's income already comes from payroll giving and employees can feel they are helping more constructively to meet that charity's needs.

BOOTS STAFF CHOOSE THEIR OWN CHARITIES

All of Boots' 65,000 staff have the opportunity to give to any charity they choose by having a deduction made straight from their pay. Boots rewards each commitment with a one-off additional £10 donation to the member of staff's chosen charity. Boots' target is to reach the Government's Silver Quality Mark with a 5% payroll-giving uptake. The workplace giving scheme is seen as a way of delivering a service to staff and sending a clear message that Boots has a commitment to corporate social responsibility. Louise O'Reilly, community affairs manager, says: "These days more and more employees look at what a company does for the local community or charity and many choose to work for a business that focuses on more than simply making a profit."

Workplace Giving UK, a leading fundraising organisation, manages the day-to-day running of the project, which will include presentations to every employee. Those who sign up are entered into monthly competitions to win 'bonusbonds', a monthly prize of £250 with a £1,000 annual prize at Christmas. O'Reilly adds: "We have already created a bespoke campaign called 'Put A Charity On Your Payslip'. We will also be making workplace giving an integral part of our induction programme and using payslip messaging to keep staff up to date with their success. This is about everyone doing a little to create a huge effect."

GEARED FOR GIVING - WHY IT APPEALS

Payroll giving should appeal to employees' generosity. A survey published by the Charities Aid Foundation in April found that 29% of employees support giving 2% of their income or more to charities per year (for someone earning the average wage that would mean £498.16). Only 7% thought they should give nothing at all. Duncan Bannatyne - one of the dragons on BBC1's Dragons' Den show - was present at the launch of Geared for Giving, and admitted he was embarrassed that he had never even heard of payroll giving. "It's abysmal that I didn't know about it," he said, "but I will promise to introduce it into all of my businesses after today."