Personnel Today - 03 July 2007
Extract from Personnel Today
Setting up payroll charity donations may be a headache for HR, but the rewards can be significant. Alex Blyth looks at the pros and cons of workplace giving.
While 35% of Americans give money to charity through payroll, only 4% of us do in the UK. This is all the more remarkable since Oxfam describes payroll giving as the easiest, most tax-efficient way to donate.
"Because donations are made before tax, a percentage of the donation is contributed by the taxman, so donors can afford to be even more generous," explains Steve Harvey, new products manager at Oxfam.
"In the case of standard rate tax payers, the tax is 22% of the donation. Givers who earn above the higher tax threshold of £33,000 are even better off as the cost to the taxman is 40% of the donation."
The secret £1bn
Payroll giving was introduced in 1987, yet it remains one of the least understood means of donating to charity.
A recent Oxfam/YouGov survey of 2,327 adults found that one-third of the UK workforce would donate an average of £9.60 a month through their salary if they knew how. Oxfam estimates that this could add almost £1bn to charity coffers.
As charities find it increasingly difficult to recruit new donors through traditional methods such as direct mail, telephone calls and the dreaded 'charity mugger' or 'chugger', they are increasingly looking to the workplace as a recruiting ground. Many HR departments, however, view these developments with some concern.
Implications for HR
Linda Chick, senior HR consultant at specialist employment consultancy PES, says that while there are clear tax advantages to payroll giving, companies should be wary of rushing in just because of these.
"They should bear in mind that they will be undertaking all of the administration and promotion work for the charity," she says. "It becomes another complication for the HR department to manage and for the accounts department to pay.
"Furthermore, in my experience, very few employees take advantage of payroll giving. I feel that if individuals wish to give to charity it is their personal business, rather than something else for overstretched HR departments to handle on top of their existing responsibilities. I also have concerns about 'giving fatigue', given the number of times individuals are approached for donations," she adds.
Maurice Cheng, chief executive of the Institute of Payroll Professionals, says: "These schemes can become incredibly complex for HR. In the worst-case scenario, you have each individual employee giving to a different charity, and you have some employees who have stopped giving for a certain time because they are on sickness absence or maternity leave. For this reason, it is often simpler to hire a Give As You Earn agency to do all the hard work."
Case study: Rufus Leonard
-Three years ago, London-based brand and digital media consultancy Rufus Leonard decided to set up a workplace giving programme for its 70 employees. From the outset, HR manager Lucy Kay wanted to focus on just one charity rather than spreading the firm's efforts across too many. So she e-mailed staff, asking them to nominate their preferred charity. The top five were related to children, so the company agreed to develop a relationship with the National Society for the Prevention of Cruelty to Children (NSPCC).
Since then, Rufus Leonard has raised around £9,000 through a range of events. It has auctioned items donated by clients, and held a 'school fete' in the office, which involved staff paying to throw wet sponges at the chief executive. During the football World Cup in 2006, it turned the design studio into a replica Wembley stadium, and last month it held a fundraising Derby Day. It also has an 'honesty box', where staff can contribute the equivalent cost of postage, phone calls and couriers that they have used for personal reasons.
"Doing all this sends out a clear message to potential staff and clients about the sort of people we are," argues Kay. "Interviewees have started asking what we do to give to charity, especially in the past 18 months.
"Furthermore, because we have built a strong relationship with them, people from the NSPCC frequently visit us to talk about how our donations are being spent. This is having a great effect on staff morale. In the past two years, we've seen a 75% increase in staff satisfaction in the employee survey."
She offers this advice to anyone who is considering setting up a scheme: "Don't rush headlong into it. Be clear about why you want to do it, ensure you involve your staff in planning the scheme, and make sure senior management has a clear understanding of the long-term potential benefits of running the scheme. Then, when it's up and running, constantly make sure everyone knows what is happening, the impact on the company, and how much of a difference you are making to your charity."