Something for nothing in a world where everything has a cost?
Not only free of cost but approved by the government!
And absolutely no cost to employers or employees! Surely not?
What are we referring to here? It’s the good old, often ignored, cycle to work scheme.
There aren’t many things in life that come free or save you as an employer and your employees money, but this scheme is one of them. As an added employee benefit that costs you the employer nothing but some cash flow, it’s a clear winner in the war to retain top talent.
And what better month to introduce this than next month when the UK celebrates Cycle to Work Day on the 3rd August!
If promoted well, the cycle to work scheme positively encourages your staff to live a healthier lifestyle and re-affirms your employer stance on employee wellbeing.
This scheme was first introduced in the Finance Act of 1999 and is still a great a method to incentivise your staff and allow them to be better off financially, which is so important in the current economic climate.
A few key facts on the scheme:
The scheme does have a variety of names as it is offered by different providers.
The principle of the scheme is:
The employer buys a bike based on the choice an employee makes and they then get to ride to work whilst 'hiring’ it through salary sacrifice.
It’s a hired process for up to 1 year.
The value of the scheme
By hiring the cycle through salary sacrifice the employee effectively reduces their gross salary for a set period and thereby reduces their tax and National Insurance deductions.You can use the scheme every 12 months.
Amount offered on scheme is really up to the employer as to what level of funding they are prepared to offer.
Dependant on the scheme provider there may be an ownership charge at the end of the hired period.
For employers the scheme is free to enter and could save you employer National Insurance.
There is of course funding of the price of the bike and accessories, and you should perhaps factor in the financing cost of a purchase, (our example below uses £2,400*), but the amounts may vary significantly. You will be unlikely to see more than 5-10% of your staff take up the scheme.
Here’s a real life example*
Employee Salary: £24,000
Hired: bike £2,000 + helmet and accessories of £400 = £2,400
Period: 12 months
Salary is sacrificed by £2,400, £200 pays the hired amount each month
Employee has their salary reduced by £200 per month, this reduces their tax and NI by £768 in the full 12 months.
Employee will pay an ownership fee of £168 at the end of the term.
The net cost to the employee is £1,800 for £2,400 of kit and the payments are spread over 12 months. This represents a 25% saving.
What to do if you wish to apply for a cycle to work scheme
There are various schemes and providers in place.
To introduce the scheme and make it available for your staff you need to register as an employer. This process can take from 3-14 days.
Important Note: employees cannot sacrifice salary if it takes them below the national minimum wage [£10.42 per hour]
Find more about the overall guidance here: https://www.gov.uk/government/publications/cycle-to-work-scheme-implementation-guidance
* Real life example based on https://www.cyclescheme.co.uk/calculator