Chapter 4 - Payroll Giving
4.3 Employers
Does an employer have to set up a scheme?
4.3.1 There is no obligation on an employer to set up a scheme. But the Government is keen to encourage employers to do so.
How does an employer set up a scheme?
4.3.2 The first thing an employer should do if he wishes to set up a scheme is to contact an approved agency. The agency will provide the employer with a contract setting out the details of the scheme along with all the necessary forms. It is quite straightforward for an employer to run a scheme because the agency charity shoulders most of the administrative burden.
What does setting up a scheme entail?
- tell his employees that they can give to charities through the scheme;
- let them have forms (provided by the agency) authorising the employer to deduct their charitable gifts from their pay;
- make the charitable deductions before PAYE is applied. This gives the employees tax relief at their marginal rate;
- send the total charitable deductions to the agency charity each month at the same time as the PAYE remittance is sent to the Collector of Taxes. The agency will issue a receipt.
4.3.4 The agency can offer a number of options:
- personal option, where the employee simply agrees to give specified amounts to named charities out of his pay each week or month
- personal account, where the employee is provided with a charity card or vouchers similar to a cheque book. He can then use the card or vouchers to make gifts to any charity of his choice when he wants to.
- group option, where a group of employees pool their donations, which are then distributed to specified charity or group of charities.
- employers shared giving scheme, where employees’ donations are pooled and an employees’ committee decides how the gifts should be distributed to charities.
What records should be kept?
4.3.5 The employer should keep the following records:-
- a copy of the employer's contract with the agency;
- a copy of the employees' authorities to make deductions;
- details of payments made by each employee; and
- receipts from the agency charity.
What about the employer's costs?
4.3.6 There may be some additional cost for the employer in running the scheme but these are likely to be absorbed in the existing payroll costs. Any costs will be allowed as a deduction against the employer's profits for tax purposes.
Are there any other costs?
4.3.7 Most agency charities make a small charge to cover their administration expenses. The charge is usually deducted from the employees' donations before they are passed to charity. The amount will be spelt out in the contract. If the employer wishes to pay the agency's cost then, again this will be allowed as a deduction against profits.
Some agency charities do not make any charge for administration. Instead they are funded by the fundraising organisations which will help employers to promote payroll giving in the workplace. They in turn will make a charge to the charities for whom they recruit new donors.
