The Cycle to Work Scheme is a government-backed scheme designed to encourage employees to, quite literally, get on their bike and cycle to work. The scheme allows employees to hire a bike, and any necessary cycling equipment, through their employer to help promote a healthier lifestyle and reduce environmental impact.
No doubt you are thinking this sounds like a wheely good scheme, we have therefore detailed some of the main points below.
Who can take advantage of the scheme, and more importantly, what do they get?
The Cycle to Work scheme is for any employee, with an employer who is part of the scheme, who fancies bracing the UK weather and cycling to work. The employees can get whatever they need to keep them in the saddle and commute by cycling. This includes any type of bike, e-bike, or cycle with at least 2 wheels, cycle specific clothing, tyres, components, mudguards, locks, lights, child seats/trailers, bags (on-bike and off-bike) and most importantly helmets. The hire cost is usually subject to a £1,000 limit, depending on whether the employer has FCA authorisation or not.
Window-shopped and found your dream bike? What now?
If the employer is part of a scheme, the employee, their employer, and sometimes a third-party scheme provider, sign a hire agreement which details how much money will come out of the employee’s gross wages, as a salary sacrifice, to pay for all the gear on their wish-list. Usually, this is spread out over a year or so. The employer then orders the bike and gear from a registered supplier and deducts the agreed cost from the employee’s gross salary each pay period.
What is at the end of the Road?
After the agreed time (usually a year or so), the employee has some choices. They can either: –
- Pay a small “Fair Market Value” (FMV) fee to keep the bike. This fee is usually 3-7% of the original bike value.
- Return the bike and equipment to the employer.
- Some employers may offer the option to extend the scheme for a longer period or provide an option for upgrade to a new bike.
Sounds all a bit complicated… why not just buy the bike personally?
There are numerous advantages to this scheme. Some of which are listed below: –
- Saves both the employer and the employee money. Employers can make savings on their Employer National Insurance contributions whereas the employee get the benefit of the costs being deducted pre-tax and national insurance contributions.
- The employee gets the benefit of a swanky new bike on a much smaller regular cost as opposed to that large upfront personal cost they would normally have to pay.
- Where the bike is hired, if the employee no longer has the space, moves away or just decides they do not want to renew the scheme; they can give the equipment back and don’t have to go through the faff of selling the bike.
- Easy way for the employee to get their daily cardio-fix, enabling them to start their day awake and refreshed from the UK, no doubt drizzly, weather, all whilst saving the planet – need we say anymore?
Ready to ride off into the sunset?
The employer needs to register with a Cycle to Work provider, such as Cyclescheme or Halfords Cycle2Work. These providers handle the administrative aspects of the scheme, including arranging with the bike shop or supplier.
It’s also important to note that the exact details and procedures of the Cycle to Work Scheme may vary depending on the employer and the specific Cycle to Work provider they use.
Sounds great but are there any other options?
The Cycle to Work salary sacrifice scheme is great for some, but wont work for all. If the bike the employee would like is more than the 1K limit, or the employer wants to provide bikes for all employees, there are a few more options.
- Employee Loan – One alternative option is to provide a loan to the employee to purchase the bike and/or equipment. This would act as a ‘beneficial loan’ and would be subject to the rules and taxes accordingly.
- Pooled Scheme – Another alternative is the workplace pool cycle model. This is beneficial for commuting and for inter-site and business trip travel. You can purchase a suitable fleet of cycles for active travel and make them available to all employees. These cycles should be easily accessible in both terms of position, close to where they are needed and securely stored and maintained.
If you are interested in utilising any of the above schemes in your business, please contact us at Johnston Wood Roach for further details.