6 Pitfalls of Self-Run Employee Giving Programs

June 7, 2022

Employee giving activities frequently start as ad hoc efforts. From there, they may grow with some added resources and support, but the internal support structure may still remain fairly piecemeal. This “self-run” approach to employee programs comes with many pitfalls that ultimately limit the success of the program – inhibiting both employee involvement and social impact.

If organizations don’t formalize and automate their initiatives, program administration consumes too many internal resources. At the same time, widespread program adoption is unlikely. Therefore, companies that are truly committed to their employee giving programs must implement technology to help manage the programs, engage employees, and maximize the impact.

Still not convinced? Take a look at these six pitfalls that self-run programs encounter:

Pitfall 1: Vetting the Nonprofits

While there are different levels of vetting, most companies at a minimum will want to verify that a nonprofit is eligible to receive tax-deductible charitable donations. This may involve requesting proof of status from the nonprofit and researching their eligibility via online databases.

In the United States, this can be done through the Internal Revenue Service (IRS) Exempt Organization List. However, your business may appreciate the value of more thorough vetting, which requires additional work. In some cases, compliance or legal teams will need to ensure that donations to a nonprofit won’t violate any laws while aligning with the company’s mission and values.

Organizations that attempt to self-vet every nonprofit their employees want to donate to quickly realize how time consuming and expensive the process can be.

Pitfall 2: Creating Nonprofit Records in the Accounting System

Once a nonprofit is vetted, accounting needs to create a record to track donation payments. This record usually includes documentation on proof of status for tax purposes. Adding this documentation to multiple records is time-consuming, of course. Does this mean you limit the number of nonprofits your employees can give to?

Limiting nonprofit options is one of the biggest reasons why employee giving programs fail. Employees want to support their charities of choice, which means offering many options spread around the country and world. But onboarding that many organizations into your accounting system would be too time-consuming for an in-house individual or team.

Pitfall 3: Donation Processing and Matching

This is where the bulk of time will be spent for the HR team. In a self-run approach, team members will need to track each employee’s donation in a spreadsheet, verify receipts, and submit the request for donation payment to accounting. If matching is provided, HR will need to track all donations against the company’s matching policy.

An added challenge could then be managing payroll deductions for one-time or recurring donations. Once again, it’s easy to see how much time HR team members will have to dedicate to this part of the giving program.

Pitfall 4: Dealing With Uncashed Checks

This is where the bulk of time could be spent by the accounting team. Anywhere from 3% to 4% of donations made to nonprofits go uncashed. It could be that the mailing address has changed, the nonprofit no longer operates, nonprofit staff members are not in the office due to COVID, or any number of other reasons.

Your accountant will need to track any uncashed checks through the system, follow up with the nonprofit to determine why the check was not cashed, and then reconcile any differences against budgets.

Pitfall 5: Engaging Employees

For a workplace giving program to be successful, it needs to be promoted and include engagement incentives like donation matching. However, creating an engaging program is challenging for companies running them without a technology platform in place. Administrators are so focused on operating the program that they lack time to create the campaigns and incentives that not only motivate employees to give, but also keep them excited to keep giving – building a workplace culture of philanthropy.

Also, as noted above, due to the time-consuming nature of administrative tasks in a self-run program, the team is limited in its ability to offer a wide breadth of donation options. Fewer options typically means less engagement across the workforce.

Pitfall 6: International and Multi-Location Giving

Due to the complexities involved in all the areas mentioned above, most companies running their own programs won’t support international giving. Yet international relief can be where help is needed most and where employees want to give. For example, corporate employees across the country have donated money for humanitarian support in Ukraine following the Russian invasion.

In a similar vein, supporting a giving program across multiple office locations is often a challenge that companies don’t want to take on in a self-run program. The additional burden in tracking, managing and accounting for employee giving across multiple locations is too high.

How to Save Time and Money

While an in-house, self-run approach helps start an employee giving program, you will likely experience reduced employee engagement and high operational costs over time if you don’t implement technology for management.

By moving your program onto a user-friendly platform, you reduce the HR and accounting burden while improving the employee experience, increasing overall engagement and expanding your community impact.