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Payroll Giving Explained

There might be a few unfamiliar phrases associated with Payroll Giving but that doesn’t mean that it is a difficult process – the main key words and phrases below should outline what you need to know about tax-efficient charity donations. If you have any other queries please contact your Payroll Giving agency.

35 days

Once a Payroll Giving deduction is received, the Payroll Giving Agency (PGA) has 35 days to reconcile it with the relevant employee and organisation, process the donation, verify the charity details and make the payment. If any of these key pieces are missing or require further investigation the PGA has up to 60 days to chase the missing information from either the company or charity.

If a scheme is set up and running properly there should be no difficulties in meeting the 35 days deadline but delays can occur when:

  • Charities don’t advise PGAs of changes in bank details or addresses
  • There is a lack of, or inaccurate, information about the charity
  • The charity is new to the PGA (60 days is allowed to verify new charities)
  • The charity has closed
  • There is a change of person responsible for the Payroll Giving scheme in the workplace
  • The money is forwarded to a PGA without the employee listing, so the PGA will need to chase the data before being able to pay out the donations
  • An employee’s sign up form or registration has not been received by the PGA and they have no record of a donor
  • A change in value of deduction is not accompanied by an instruction on which charities are being supported
  • Employer does not send over funds as set out in legislation

Administration Charge

As charities themselves, PGAs need to cover the costs of administering Payroll Giving donations. Most PGAs do this by deducting a small fee from each donation before it is passed to the nominated charity. Some employers pay these fees on behalf of their employees from their corporate responsibility budget. Some smaller PGAs have different cost structures.

Anonymity

An employee can choose to keep their donation anonymous when they sign up, so that the charity just receives the donation amount and none of their personal details to allow future contact. It is best practice to allow details to be passed to the charities so they can thank their donors and keep them updated on the work they are doing

Charity Account

An additional option to Payroll Giving, some PGAs offer the provision of a charity account which allows an employee to pool their Payroll Giving donations into one place, from where they can make payments to charity at any time and with greater flexibility.

Charity Cheque Book / Voucher Book

Many PGAs offer a ‘chequebook’ as part of the charity account – a book of vouchers that can be written out and given to a particular charity. These can be useful for collections, sponsorship of individuals or fundraising events.

Disbursement

Another term used to describe the pay out of donations to charities from the PGA.

Disbursement statement

If a charity has arranged to receive a monthly charity / disbursement statement containing donor information from a PGA they will be able to trace when a new donor appears or when a previous donor has not given. Depending on the level of anonymity chosen by the employee, they could also receive their name, address and contact details.

Donor / Employee Listing

A monthly breakdown of all the employees donating through the Payroll Giving scheme which employers send to the PGA to allow them to process the donations. It must include relevant employee information (name, employee number, contact details etc), the chosen charities and the donation amount. This must be sent each month to the PGA, as without this listing the PGA will be unable to process the donation.

Due Diligence

One of the responsibilities of PGAs is to ensure that Payroll Giving donations are passed only to organisations eligible to receive them – this includes all registered charities.

Employee Registration Form / Donation Choice Form / Donor Instruction Form

The form that every employee who wants to sign up for Payroll Giving needs to complete. This is processed by the employee’s payroll department or bureau and then shared with the PGA. The forms include as standard the employee information needed to process payments, their chosen charities and the amounts and frequency of donations. Forms can be electronic or hard copy.

Payroll Giving / Give As You Earn / Workplace Giving

Payroll Giving is a scheme regulated by HMRC and administered by a registered Payroll Giving Agency.

It allows tax-efficient donations to be made via pay – an employee’s donation is taken before their tax liability is calculated, reducing their overall tax liability which means that it costs them less to donate. The value of the tax benefit is dependent on the tax code of an employee, so for an employee taxed at the lower rate of 20%, their donation will cost them 20% less overall while a higher rate tax payer will benefit from 40% tax relief.

Anyone can join Payroll Giving if their pay or pension is taxed through PAYE and their employer offers the scheme. There are no fees for an employer to set up a Payroll Giving scheme. Other brand names for Payroll Giving include Give As You Earn and Workplace Giving.

Payroll Giving Agency (PGA)

A Payroll Giving Agency is an organisation that is registered with HMRC which allows them to process employees’ donations before tax is calculated.

All PGAs are registered charities and their Payroll Giving activity is regulated and audited by HMRC. You can find a full list of HMRC-approved PGAs here

PGA members of the APGO are:
Charities Aid Foundation
Charitable Giving
Charities Trust

Payroll Giving Agreement

A Payroll Giving Agreement is needed between each company signing up for Payroll Giving and their chosen Agency.

This simple document lays out the obligations of the agency, employer and employee and ensures that all Payroll Giving activities comply with The Taxes Act and The Charitable Deductions (Approved Schemes) Regulations 1986 (and subsequent amendments).

The PGA notifies HMRC that the agreement has been signed and this means that the employer can begin to deduct donations from pre-taxed income.

Payroll Giving Deduction

The deduction is the regular or one-off donation amount nominated by the employee to be taken from their pay. This is processed by the company’s payroll team and then passed over to the PGA each month within 14 days of the end of the tax month when the deduction was made.

Payroll Giving Quality Mark / PGQM / Quality Mark

The Payroll Giving Quality Mark is a government-supported scheme which recognises and rewards organisations of all sizes for making Payroll Giving available to their staff.

Payout

PGAs pay out Payroll Giving donations to charities at least once a month. Donations to each charity are aggregated and paid in bulk to the nominated charity – this keep costs to a minimum.

Pre tax / Gross Pay

The total of an employee’s regular salary package (remuneration) including allowances, overtime pay, commissions, and bonuses, and any other amounts, before any deductions are made.

Professional Fundraising Organisation (PFO)

Professional Fundraising Organisations (PFO) work with employers to recruit Payroll Giving donors in the workplace on behalf of charities.

Many charities recognise the benefits of employing the services of a PFO to promote their cause and recruit new donors.

PFO members of the APGO are:
Bell Fundraising
Hands On Payroll Giving
Payroll Giving In Action
StC Payroll Giving
The Payroll Giving Team

The Charitable Deductions (Approved Schemes) Regulations 1986

The Charitable Deductions (Approved Schemes) Regulations 1986 and any subsequent amendments.

The Taxes Act

Section 202 of The Taxes Act allows the PGA to operate the Payroll Giving scheme.