Employers
Payroll giving is voluntary for employers and employees. As an employer, you must first choose to offer the payroll giving scheme to your employees before any other steps are taken.Note: Payroll giving is available to employers who file their EMS (IR348) and EDF (IR345) electronically using ir-File.
See the Inland Revenue website for more information about filing your EMS (IR348) and EDF (IR345) electronically using ir-File.
Once you have decided to offer the payroll giving scheme to your employees, you will need to check whether or not your payroll system is set up to calculate and report the appropriate tax credits for donations made through payroll giving.
Talk to your payroll provider if you are unsure about this.
Next you will need to decide how the scheme will operate within your organisation. This includes:
You will need to give some thought to the process for determining which donee organisations your employees can donate to through payroll giving. Some ideas of how this might work are:
- Allowing employees to nominate and vote for a specified number of donee organisations
- Allowing employees to select their own donee organisation(s)
- Allowing employees to vote on a number of donee organisations you have selected
You should consider whether or not you need to place restrictions around the frequency with which an employee can change their payroll giving selections, including:
- Recipient donee organisation(s)
- Donation amount
- Frequency of donations
Use of Intermediary Organisations
You may wish to consider whether or not you will use the services of a payroll giving intermediary to help you establish and maintain your payroll giving programme.A payroll giving intermediary is an organisation that facilitates payroll giving transactions between donors and the recipient donee organisations. Using an intermediary organisation to establish and maintain your payroll giving programme is likely to reduce the level of administration required by you or your payroll department.
You can find out more about intermediary organisations on the Employers section of this website.
Individual employee tax credits for payroll giving and employer total tax credits for payroll giving are then reported via ir-File (EMS (IR348) and EDF (IR345)).
Employees
Employees that wish to participate in the scheme then make their payroll giving selections, including:
- The donee organisation(s) they wish to donate to through payroll giving (based on those made available to them in Step One)
- The donation amount per pay period
- The donation start/end date (or ongoing)
If your employer chooses to use an intermediary organisation it is likely that you will be able to choose to donate to any of the donee organisations on the donee organisation list.
If your employer decides to restrict the number of donee organisations you can donate to through payroll giving, you may have the opportunity to nominate and vote for donee organisations to be included in the payroll giving programme. Once the donee organisations have been voted on and selected you will then be able to select which organisations you donate to from the available list.
Your employer may allow you to change the amount, frequency and recipient donee organisation(s) however there may be restrictions placed on how frequently you can do this, due to the administration that is required in modifying your selections within your employer's payroll system.
Your employer will establish a system for you to report your payroll giving selections and to notify them should you wish to make any changes to your selections at any stage.
This process is likely to vary between organisations however in some cases, your employer's payroll system may offer a self-service interface where you can add and change payroll giving donations as you wish. Furthermore, if your employer uses an intermediary service for payroll giving, you may be able to make these selections via an online portal.
Once employee payroll giving selections have been made, the payroll administrator inputs this information into the employer's payroll system.
At this point, you need to ensure that you have the correct payment and contact details for the donee organisations that are receiving funds through payroll giving. While an employee or a contact from the donee organisation may provide you with bank account details for the donee organisation that an employee has chosen to donate to, it is important that you have a process in place for verifying payment details so that you can be sure the funds are being transferred to the correct donee organisation bank account.
If your employer has chosen to use an intermediary organisation, it is likely that the intermediary will carry out the verification of payment information on your behalf.
Once the correct payment information and employee selections have been input into the payroll system, payroll giving deductions are applied to employees’ earnings. A 33% tax credit for donations made through payroll giving is then calculated and applied to participating employees’ PAYE. The deduction and tax credit for payroll giving donations are reported to employees on their payslip.
Funds donate via payroll giving must be transferred to the recipient donee organisations within a two month timeframe specified by Inland Revenue. You can find more information about the timeframe for passing donations to donee organisations here.
You must ensure you keep a record of all donations made through payroll giving, including the recipient donee organisations, donation amounts and payment dates.
Donee Organisations
Once you have received funds donated through payroll giving from an employer you must provide the employer with a receipt. Receipts should be made out to the business, rather than the employer or the individual employees that have donated via payroll giving and should clearly state that the funds were received through payroll giving.Inland Revenue provides guidelines around what information should be recorded on a receipt for payroll giving. You can find this information on the Inland Revenue website.
An employer may choose (with the employee's permission) to pass on contact information for those employees that are donating to your organisation through payroll giving. However, because there is no requirement for the employer to do so, you may not always be given sufficient information to be able to contact payroll giving donors individually. Furthermore, some employees may not wish to receive communications from donee organisations.
To the extent that you are able, communicate with payroll giving donors to keep them informed about your organisation and the impact of their donations.
If an employer chooses to use an intermediary service for payroll giving, then you may have the opportunity to promote your organisation and communicate with donors through the intermediary service. Read through the Employers section of this site to find out more about the offerings of intermediaries and how you can benefit from their services.