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We are a non profit school council an are accepting donations by PayPal. We would like to be able to have people donate, for example $50 and then have the fee on top of this as a convenience fee, rather than "losing" the fee money.
Is it possible to set up a button to do this?
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Short answer is not a good idea - what you have in mind is called a "surcharge" which would be in violation of the User Agreement.
Here's a snippet from the User Agreement:
No surcharges
You agree that you will not impose a surcharge or any other fee for accepting PayPal as a payment method. You may charge a handling fee in connection with the sale of goods or services as long as the handling fee does not operate as a surcharge and is not higher than the handling fee you charge for non-PayPal transactions.
However, after reading the above, there is a work around called a "handling fee". Charging a handling fee is quite common in the Ticket Sales industry. However there's a catch - the "handling" variable won't work with the "_donation" command. One option is to use the "upload" command, manually create the code and include the "handling" variable with a value amount. Note, Because this method does not use the actual command for Donations, it works similar to Buy Now item button code. You won't see the "Purpose" or "Donation Amount" headers on the PayPal Screens. You can still include the word "Donation" in the "item_name" field value and even collect addition info that you could not get using the "_donation" command.
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Short answer is not a good idea - what you have in mind is called a "surcharge" which would be in violation of the User Agreement.
Here's a snippet from the User Agreement:
No surcharges
You agree that you will not impose a surcharge or any other fee for accepting PayPal as a payment method. You may charge a handling fee in connection with the sale of goods or services as long as the handling fee does not operate as a surcharge and is not higher than the handling fee you charge for non-PayPal transactions.
However, after reading the above, there is a work around called a "handling fee". Charging a handling fee is quite common in the Ticket Sales industry. However there's a catch - the "handling" variable won't work with the "_donation" command. One option is to use the "upload" command, manually create the code and include the "handling" variable with a value amount. Note, Because this method does not use the actual command for Donations, it works similar to Buy Now item button code. You won't see the "Purpose" or "Donation Amount" headers on the PayPal Screens. You can still include the word "Donation" in the "item_name" field value and even collect addition info that you could not get using the "_donation" command.

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