Socially-responsible multinationals have gotten good at mobilizing employee support after major disasters like the Haiti and Chile earthquakes, collecting and matching payroll-deducted donations. But outside the US, soliciting employee charitable donations raises legal hurdles.
These days, when a catastrophe strikes anywhere in the world, socially-responsible multinationals step up and help. But corporate budgets for charity are limited. One clever strategy for maximizing corporate dollars to needy catastrophe victims while engaging employees in the relief effort is to solicit, and perhaps match, donations from employees. This approach helped raise tens of millions of dollars for victims of the January 2010 Haiti earthquake. According to a US Chamber of Commerce website page called “Response to the Haitian Earthquake—Corporate Citizenship in Action,” multinationals launched dollar-for-dollar—even two-to-one—programs matching employee donations for Haiti relief. The US Chamber website names a huge list of these socially-responsible multinationals including (and sticking only to examples beginning with “A”): Aetna, Altria Group, American Express, Amgen, Ashland, and Avon. Similar programs will likely spring up for victims of the late February earthquake in Chile.
The strategy of soliciting employee donations for catastrophe relief may have taken off with the September 11, 2001 attacks and the December 2004 South Asia tsunami. While the US government drew criticism for being too stingy with relief dollars for the tsunami, corporations donated huge amounts partly funded by their own employees. Fortune magazine (January 24, 2005) reported that “many American corporations [leapt] into action in the tsunami aftermath,” in the first two weeks alone contributing “US$178 million…on pace to top the previous record, the US$682 million” that corporate America “eventually gave to 9/11 victims.” Multinationals went on to build up the trend, re-launching payrolldonation initiatives for Hurricane Katrina in August 2005 and now, most recently, for Haiti and, likely, Chile.
But a multinational soliciting and collecting charitable donations from employees worldwide confronts some extra legal hurdles. Employee donation-deduction programs are theoretically possible almost everywhere, but before collecting a single local donation, a multinational should check, in each affected jurisdiction, compliance in four areas: (1) authorization for deductions; (2) tax deductibility; (3) consent documentation and (4) information/consultation. Indeed, the analysis in this regard is the same for any ongoing cross-border employee donation/ corporate-match employee benefit initiative, even initiatives not linked to a specific catastrophe.
Best Practices Tip:
Before soliciting employee charitable donations internationally, check local law in each affected country in four areas: authorization for deductions, tax deductibility, consent documentation and information/consultation.
Authorization for Deductions
Employee fundraising initiatives often work by payroll deduction. But in some countries—Argentina is one example—a government agency must affirmatively authorize any payroll deduction. Check, country by country, where there are local payroll-deduction authorization requirements. Local payroll providers might be helpful in flushing out where authorization is necessary. Getting authorizations takes time, which may not be available where emergency relief is time-sensitive. If the process is just too slow, a multinational trying to respond nimbly to a major disaster might have to rely on employee payday contributions that are not payroll-withheld.
The US is said to have a particularly friendly tax system for charitable deductions. The other side of that coin is that, abroad, employees’ right to deduct what they donate to charity may be restricted. Even in jurisdictions where donations can be deductible, employees will not likely get deductions for contributions to a charity on an employer’s “approved” list if the local country tax regime does not recognize that particular organization as taxexempt (if the charity does not have the local equivalent of US “501(c)(3) status”). Have employees in each country earmark payroll donations only to charities recognized as tax-exempt under local law. Christian and Jewish relief charities have reaped lots of relief dollars from US employers, but those might be less appropriate choices in, for example, Muslim countries. Global charities like Doctors Without Borders and the International Red Cross/Red Crescent may be more widely tax-exempt, but locally-raised contributions in foreign countries may need to funnel through the charity’s in-country affiliate. “There are 186 national Red Cross and Red Crescent societies around the world,” according to the Red Cross/Crescent website. Consider involving foreign local HR, payroll providers, or tax specialists in selecting charities to receive locally-contributed funds.
Employer-sponsored donation programs can raise the specter of coercion. Allegedly coerced contributions can give rise to reimbursement claims. Plus, outside of US employment-at-will, there is the related threat of employment-law claims from staff who chose not to donate and later allege they were unfairly treated. The practical issue here is proving employee donations really were voluntary. Communications explaining the contribution program should stress: each employee’s decision to contribute is genuinely voluntary; not contributing has no effect on any employees’ job; and the employer will not track who contributes, other than for payroll administration. Collect documentary proof that staff who donate really intended to give voluntarily. The documentation/sign-up contribution form can be short—a single page. But it should be clear. The form might be phrased as a first-person request from employee to employer asking the employer to deduct and pay funds over to the employee’s designated charity, including such provisions as:
- “Because of my humanitarian concern about [the specific disaster], I have decided I want to contribute to needy victims. I ask my employer to deduct [X amount] per [payroll period] for [Y] payroll periods, and pay this over to [the designated charity]. I ask my employer to facilitate my contributions. My decision to contribute, or not, is totally voluntary.”
- The form should say that 100 percent of the contribution will go to the employee’s designated charity.
- Check whether the local head of state or a local government agency issued a statement of support for victims of the catastrophe. A quote from that statement in the form could be helpful later to show that local public policy aligns with the employee-donation program.
- The form should be revocable at any time up to when the deduction is taken, as long as the employee revokes in writing.
- The form should be in the local language—even if local employees all speak English, and even if the employer has declared English its “official” company language. In jurisdictions like France, Quebec, Belgium and Turkey, local law effectively requires that forms like this be in the local language.
Where an employer has employee representatives (ombudsmen, trade unions, works councils), a local representative may argue that the employer has a legal obligation to inform and consult/ negotiate before launching a new payroll-deduction initiative. The legal analysis here is like US mandatory subjects of bargaining; employees may want a voice in, say, which charities can get their donations. Whether the employer’s unilateral launch of a relief contribution initiative via payroll deduction is within its management rights (without consulting) will be a question under local labor law, subject perhaps to a local collective agreement. A good practice is for headquarters to give its own local management-side labor liaisons a “heads up” about the incoming donation initiative. Seek these liaisons’ input as to the best information/consultation strategy.
“Best practices” employers take these four areas into account in each country before launching any socially responsible employeedonation initiative for funding humanitarian relief to victims of disasters like the recent Haiti and Chile earthquakes. Take a multilocal approach and collect employee charitable donations only after checking compliance in each affected jurisdiction. Because surmounting these hurdles in some affected countries will take time, which is so precious in the rush to contribute donations to catastrophe victims in urgent need, a multinational might perhaps think through these issues in advance of the next catastrophe. After disaster strikes, charitable fundraising efforts are better focused on collections rather than on compliance.