How Payroll Giving can boost corporate social responsibility while benefiting employees

One powerful way to enhance corporate social responsibility (CSR) while offering substantial benefits to employees is through Payroll Giving.

This scheme enables employees to support their favourite charities directly from their salary, receiving tax relief in the process.

What is Payroll Giving?

Payroll Giving, also known as Give as You Earn, allows employees to make regular donations to charities directly from their salary.

These donations are deducted before tax is applied, meaning employees receive immediate tax relief on their charitable contributions.

The tax relief level depends on the individual’s tax rate, ensuring that all the relief for a donation stays with the employee.

Benefits of Payroll Giving

Employees receive tax relief at their highest tax rate, making their charitable donations more cost-effective. Donations are deducted automatically from their salary, requiring no additional effort.

They can choose to keep their charitable preferences private from their employer.

For employers, Payroll Giving can show their commitment to CSR, improving their reputation. It can also boost employee morale and engagement, showing that the company supports causes important to its workforce.

The Payroll Giving scheme costs are typically low and can be absorbed into existing payroll operations.

Implementing a Payroll Giving scheme

  1. Contact a Payroll Giving Agency

Employers need to partner with an approved Payroll Giving Agency. These agencies handle the distribution of donations to the chosen charities. The HM Revenue & Customs (HMRC) website lists approved agencies.

The agency will provide a contract and all necessary forms to set up and operate the scheme.

  1. Inform and involve employees

Employers should inform their employees about the new scheme, providing forms to authorise deductions and select their preferred charities.

They can send these forms directly to the agency or via the employer, depending on the scheme’s setup.

  1. Process payroll deductions

Once authorised, the employer will deduct the agreed amounts from employees’ salaries before tax under the PAYE system but after calculating National Insurance contributions.

These deductions are then sent to the Payroll Giving Agency along with the PAYE remittance.

  1. Distribute donations

The agency is responsible for distributing the donations to the selected charities within 60 days of receipt from the employer.

They must ensure that all donations go to organisations recognised as charities for tax purposes by HMRC.

Record-keeping and reporting

Employers should maintain detailed records of their Payroll Giving scheme, including contracts with the agency, employees’ donation authorisations, payment details, and receipts from the agency.

If your company hasn’t set up a Payroll Giving scheme yet, now is the perfect time to start. For more advice on the Payroll Giving scheme and assistance with applying, please contact us today.

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