Payroll giving agencies will have to sign service level agreements with charities, and the time limit for processing donations has been nearly halved, as Treasury today unveiled its plans for reforming payroll giving in the UK.

But while many working in the sector have expressed support for some of the reforms, many have again voiced disappointment that changes have not gone far enough in transforming what many have criticised as a form of giving which has yet to reach its full potential.  

Treasury has announced it will reduce the amount of time an agency has to process a donation from 60 days to 35, although no time frame for implementing this new limit has been set. It will work to establish a system of contracts between charities and those who work for them in payroll giving, so as to make the system more transparent and accountable. Government has also responded to calls for a central portal wherein individuals can find out whether they can give via their payroll at their employer and it has pledged to establish working groups to take the entire system forward.

Minister for civil society Nick Hurd said: “These are useful steps in making payroll giving work better for donors, employers and charities. They are part of our broader strategy to make it more compelling to give.”

In proposals government put to the sector in January about making payroll giving, which presently raises about £124m a year for charities, easier and more popular, several other recommendations were put forward. Government had proposed opening up the system to for-profit providers, standardising sign-up forms, forcing agencies to be open to donors about their fees and developing exit packs for donors so that when they leave a company they can continue to support the charity they donated to through payroll giving.

Following the consultation, government said it now believes that opening up payroll giving to commercial providers would not have “a transformative effect” on the market.

Sector disappointment

But the government’s response has drawn a lukewarm and sometimes critical reaction from the charity sector, large parts of which had hoped from the outset for a more wide-ranging suite of reforms to the system.

Peter O’Hara, managing director of Workplace Giving, said: “Overall we are again deeply disappointed that the Government has missed a vital opportunity to make the changes needed to payroll giving.”

The Charity Tax Group in a statement said it welcomed government’s commitment to increasing payroll giving, but added a caveat: “We are concerned that the proposals set out will not substantially deliver the stated aims because they do not go far enough. The resources available for investing in payroll giving need to be focused on those areas that need attention – take-up, portability, simplicity and efficiency.”

Rhodri Davies, head of policy and campaigns at Charities Aid Foundation, the biggest processor of payroll giving donations in the marketplace, said he too wasn’t surprised, but that his organisation was “guardedly positive” about the Treasury reforms.

“We’re disappointed in that if you want to sort the system out you need to do something pretty radical,” said Davies.

Indeed, “some pretty radical changes” were exactly what Economic Secretary to the Treasury Sajid Javid in June said the Treasury was considering with respect to payroll giving reform.

Service level agreement

The government said that responses to its consultation showed that charities and agencies viewed the system differently, and so supported the Institute of Fundraising’s call for the development of a service level agreement between the parties involved.

In its statement Treasury said: “The service level agreement will improve the experience for donors, charities and PGAs alike by providing transparency and reaching agreements over key operating areas. By exploring arrangements under which lapsed donors could be contacted, and including these in a service level agreement, this government also hopes to increase the portability of payroll giving.”

The Institute of Fundraising, which originally said that wider reform of the scheme is “vital” said it was pleased with the government’s move. Help the Hospices also broadly supported the introduction of SLAs.

Daniel Fluskey, head of policy and research at the Institute, said: “We have long believed that more fundamental changes are needed to really allow payroll giving to achieve its potential. While the developments from this consultation won’t solve all the problems, they are a step in the right direction.”

Need for searchable register

Government responded to a common request for an online portal for payroll giving, by pledging to develop “a new home for payroll giving” within the gov.uk website. Initially it will draw together existing information on payroll giving with regard to employers, agencies and charities. But it aims in the future to “explore options” for developing a search tool which will enable employees to check whether their employer offers payroll giving.

Both Workplace Giving and CAF indicated that a searchable database of employers was vital in boosting and promoting payroll giving.

Cutting processing times

Both Workplace Giving and the Charities Aid Foundation however said that while it was good that donations be processed as quickly as possible, the vast majority of donations are already processed within a month, meaning that the government’s push to cut the timeframe for delivering donations from 60 days to 35 was not transformative.

Davies said that CAF’s internal timeframe for processing donations is 30 days, while O’Hara estimated that “80 per cent of the money is already being processed within 30 days”.

“I don’t think it will make the step change that government think it will,” O’Hara said. “I just don’t think [government] understand the scheme from the point of view of an employee.”

Davies said that while the hope had been that this year’s three-month consultation into payroll giving, which solicited over 100 responses, would be the end of discussions rather than the beginning, he welcomed the government’s consultative approach with the sector with regard to establishing working groups on payroll giving.

“You can’t be overly critical of government for working with the sector,” he said.