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How Does A Cycle To Work Scheme Work?

In the recovery from the Covid-19 pandemic and with more people returning to work, cycle to work schemes are likely to grow in popularity.

These schemes have the backing of government and many towns and cities are already seeing changes made to make cycling easier.

In a separate post, we looked at why Britain is likely to see a cycling boom in the months to come.

However, while many people have a general understanding of cycle to work schemes they may not know exactly how they work or what the benefits can be.

In this post, we look at the scheme from both an employer’s and an employee’s perspective.

What Is The Cycle To Work Scheme?

Introduced in 1999 (as part of the Finance Act to be specific), the cycle To Work Scheme is a tax exemption that effectively enables employers to loan bikes and other cycling equipment to employees as a tax-free benefit.

The key aim of the policy was to encourage greener, more environmentally forms of transport, trying to make cycling a more affordable option and one without the large initial outlay for a bike that might only be used to get to and from the office.

Perhaps somewhat surprisingly, cycle to work schemes are not common around the rest of the world, even if cycling is hugely popular in many other nations. It will be interesting to see if that Changs as all countries look at alternate means of transport.

How The Scheme Works

The employer purchases the bike(s) and safety equipment and an employee then hires these from the employer over a specified period. The employee may be offered an opportunity to retain the bike and equipment at the end of the loan period, though this can vary by the exact nature of how the scheme is set-up at any given place of work.

The employee has access to a wide range of retailers and can purchaser the bike they would have bought directly, essentially they choose the bike, the employer buys it, and a hire agreement is then entered into. 

When operated through a workplace benefit provider this all happens through a hub automatically, with no arduous administration.

The employee makes the payments as a salary sacrifice and so saves against their tax and National Insurance burden for the year.

Benefits for the Employee

The key benefits are for the employee. They get to save money against tax and National Insurance and, depending on the exact set-up, come to own the bike at the end of the agreement,

They also find purchasing easy, they can select a bike online, choose through the hub, and then pay for it through the changes to their monthly payroll. Rather than having a sizeable outlay for a bike and equipment, they facer a small monthly reduction that is often barely noticeable.

The savings can be up to 32%, 42% or 47% (dependant on their taxation level), this against the considerable cost of a new bike a significant sum.

The process is also simple and there are no credit checks.

The benefits also extend to health and well-being, getting to work being a source of exercise rather than time sat in a car on or on public transport.

While many would cycle to work regardless of a cycle to work scheme, implementation of the scheme also showed that the employer values this form of transport and actively encourages it.

It is likely that having cycle to work scheme as well as facilities such as bike lockers and high quality showering facilities and drying rooms will become increasingly important as more people look to avoid public transport and the risk of infection,

Benefits for the Employer

It may seem that implementing a scheme has few benefits for the employer, but this is actually untrue.

There is no ongoing administration, this because the scheme can be managed by a work place benefits provider with all details automatically managed through an online hub.

There are somewhat intangible benefits such as having a happier, more motivated workforce – this applying to workplace benefits in general. Workplace benefits make employees’ lives that bit easier, helping them to save money on products and services they were already going to buy – gym membership, car leasing, dental care, meals out and many more. 

Workplace benefits and specifically cycle to work schemes can boost staff retention and also help a business to attract quality new recruits. 

Salary is always a key consideration, but employees also want to work for organisations that look out for them and help them to save in other ways – a suite of workplace benefits can potentially save any employee hundreds or even thousands of pounds per annum. For those who use the scheme, money saved through a salary sacrifice is every bit as valuable as money acquired through salary increase.

However, there will be more than just repetitional benefits and the intangible of more motivated staff. There are also financial benefits with savings of 13.8% on the salary sacrificed on bikes. The average saved by the company is £83 per bike. It is also of course worth pointing out that all members of the organisation can benefit from a cycle to work scheme, the directors can choose to join the scheme and so save money too.

The Setting-up of the scheme

Any business can of course choose to implement the scheme themselves but the benefits of this are questionable – it will eat into time that could be used for the purposes.

This effort would also be required for each additional benefit as the company looked to offer a suite of workplace benefits. Workplace benefits typically only work well if a wider range of offers are available, ensuring there is truly something for everyone. Not all employees will want to cycle to work, not all will want gym membership, some might ,be keen for dental or health insurance or reduced price car parking.

By focussing just on one or two benefits, the benefits can actually become divisive, creating a sense that certain groups of employees are well treated, others less so.

Instead, by working with a workplace benefits expert the company still benefits financially from he schemes, but this without the administrative burden. An expert can also help any employer set up a suite of benefits suited to their employees and any groups of employees they wish to target in future (talented graduates for example). In many cases, there are numerous benefits the employer simply hasn’t heard of.

At Enjoy Benefits, we are leading workplace benefits experts who have helped companies of all sizes and across all sectors in the UK. Please contact us for an obligation-free conversation.

About Us

At Enjoy Benefits, we have great experience in helping companies of all sizes introduce benefits that are suitable for their workplace, these including cycle to work schemes.

Benefits are easy to set ups and ongoing administration is then run through a hub, this allowing employees to manage their own benefits while the employer can see which benefits are proving popular and what level of take-up each has had.

If you would like an obligation free chat to discuss which benefits might work for your business and your employees, please contact us by calling 0800 088 7315 or using our Contact Form.

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