Amsterdam-based The Social Handshake, a fintech startup that allows employees to automatically donate a part of their salary to charity, announced on Thursday that it has raised €1.1M in a fresh round of funding.
The company’s platform lets employees support charities tax-free and straight from their salary. With the rising popularity of these payroll giving donations, the Amsterdam-based startup will use the funds to sustain its growth and develop complementary products.
The round was led by JEX and Velocity Fintech Capital. Boralis and various startup founders also participated in the round.
Nick Hillebrand, Founder and General Director of JEX, says, “The vision of The Social Handshake seamlessly connects to the societal impact that JEX wants to make. We furthermore have the network from JEX to further accelerate the growth and, with that, increase the impact.”
Support charities right from your paycheck
Founded in 2019 by Sandra van Beest, The Social Handshake connects employers, employees and charities through Payroll Giving.
With Payroll Giving, a user can give a monthly donation to charities of their choice, straight from the paycheck – 100 per cent of the donation goes to charities. Moreover, users can also get a tax benefit which ensures that it costs less to give more.
“The phenomenon of ‘payroll giving’ has existed abroad for a longer period of time and is already popular in the Netherlands among generation Z and millennials,” says the company.
Sandra van Beest says, “7 in 10 employees expect their workplace to offer possibilities for social impact. Since the launch, we have been flooded with companies wanting to start with Payroll Giving, because doing good has to be easy and people want their euros to end up at the right place. Scaling up with the help of growth money is therefore important. Eventually, we want Payroll Giving to be just as common as a bicycle plan or a day of volunteering, courtesy of the workplace.”
A minimum donation amount of €5 applies per charity. If a user wants to support one charity, then they can give from €5 per month. In the case of two or three charities, the minimum donation starts at €10 and €15 per month respectively.
Does 100% of the donation go to charity?
Generally, charities pay fundraising costs, which means they have to pay a lot to recruit users as a donor, for example through campaigns or street fundraising. According to The Social Handshake, with Payroll Giving, charities do not have any fundraising costs and the administrative costs are paid for by the employer.
This way, The Social Handshake can make Payroll Giving technically, legally and administratively possible. Also, none of the donation(s) is lost and the charity is able to use 100 per cent of the donation for their activities.
Only charities with ANBI status can participate in Payroll Giving. This means that the charities serve the public interest with 90 per cent of their activities, are not profit-making and meet certain integrity requirements. In addition, the larger charities have the CBF quality mark. The CBF has strict quality requirements so that one can be sure that their donation contributes to a better world.
Currently, the company counts BUX, Squla, Bain & Company, The Student Hotel, and Hewlett Packard Enterprise among its clients.
Donation deduction and tax benefit
A user’s donation is deducted from their net monthly salary. For example, if one donates €26 per month to charity, they will receive €26 less salary in their account than before. The following year the user can receive part of this amount back as a tax benefit, but only if they pay Dutch income tax. This way, the donation of €26, for example, will ultimately cost only €16 per month.
“You pay Dutch income tax every month on your gross income. However, donations to charities require less or no tax. Because you paid too much tax on your donation every month, you will receive a refund of this overpaid tax in the following year,” says the company.
For instance, if a user gives €26 per month this year. Then from next year, they get €120 back (€10 per month), while the charity still receives €26 per month. The tax authorities, therefore, contribute to the donation, so that it costs less to give more to charities.