Vale & West Chartered Accountants Blog

Payroll Giving as an engagement tool

According to a recent study, a whopping 83 per cent of millennials say they would be more loyal to a business that enables them to contribute to social problems, so firms that advocate and support payroll giving could be very attractive in the recruitment and engagement stakes.

Payroll giving is a scheme that enables employees to give to any UK charity straight from their gross salary, meaning before tax is deducted, and to receive immediate tax relief.

The tax relief the employee gets depends on the rate of tax they pay. For example, a basic rate taxpayer would get 80p, a higher rate taxpayer would get 60p and an additional rate taxpayer would get 55p.

Employers who operate a payroll giving scheme run it through an approved agency, of which there are several but the most well-known are probably the Charities Aid Foundation (CAF) and Charitable Giving.

Employers who are thinking of setting up a payroll giving scheme should note that some agencies charge an administration fee, which is usually deducted from the employees’ donations before they pass them on to the chosen charity.

However, the employer can pay the fee themselves, meaning that the charities will receive more money. Employers should also note that they can deduct any costs of running the scheme from their business profits before tax.

Not only is payroll giving attractive to employees but it also serves as a differentiator for the employer, providing external recognition for charitable contributions through Government-recognised quality marks to help with ‘preferred employer’ status.

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