The cycle to work scheme was introduced in the Finance Act 1999 to reduce congestion and emissions within cities. Participants can claim a discounted bicycle and additional cycling paraphernalia whilst simultaneously receiving tax exemption from the scheme. The payment is usually paid in installments over a set time span, most commonly with a 12-month period.
Employers of all sizes across public, private and voluntary sectors can introduce the cycle to work scheme for their colleagues.
What are the benefits?
There are many benefits to the cycle to work scheme. By supplying employees with an alternative to cars, it can increase their fitness, which can extend to their overall physical and mental wellbeing.
Happier employees mean they’ll be more motivated in other aspects. Cyclescheme, a company specializing in the program found that 64% of employees using their service reported being more productive at work.
In another study, it found that cycling caused the least delays in comparison to other transportation methods with 32 hours lost by all staff annually. Surveys found that employees who were delayed on their commute to work were more likely to be distracted throughout the day, with 46% saying they weren’t as productive after delayed commutes.
Another factor to consider is Employer’s NICs (National Insurance Contributions.) As an employer, you can save up 13.8% annually in National Insurance contributions.
Things to consider with Salary Sacrifice
Salary sacrifice schemes are payment plans in which the employee agrees to accept a lower amount of salary in return for a non-cash benefit, in this case, cycling equipment.
As an employer, you do not require the authorisation of HMRC to implement the Cycle to Work Scheme or to operate a salary sacrifice scheme.
When an employee opts into the salary sacrifice scheme, they can adopt a system where payment is automatically taken from their paycheck. For most schemes, the maximum price of a bike, including additional equipment, is £1000.
Before entering the salary sacrifice, the right tax and national insurance contributions must be deducted.
The salary sacrifice arrangement can affect the gross pay of the employee. This means it can potentially affect any benefits they may be entitled to in the future, such as Statutory Sick Pay and Maternity Leave. It is important to check whether any of these benefits would be affected before entering the scheme.
The salary sacrifice scheme cannot be set up for an employee if their gross pay drops below National Minimum Wage. The current minimum wage stands at:
|Year||Apprentice||Under 18||18-20||21-24||25 and over|
|From April 2018||£3.70||£4.20||£5.90||£7.38||£7.83|
Employees can opt out of the salary sacrifice scheme in the event of changes to their financial situation like marriage, divorce, employee’s spouse or becoming pregnant. If an employee chooses to leave the scheme during the payment, the employer may require the employee to pay compensation.
Cycling to a better future
To apply for the cycle to work scheme, you can visit the CycleScheme website.
If you would like to find out more about payment plans, we’re here to help. Trace Payroll Services can work with your company to set up a salary sacrifice scheme, explaining the key benefits and any drawbacks that may arise. We can help to implement the scheme, ensuring that your employees receive the benefits they are entitled to and that you fulfil your employer tax liabilities without paying more than you need to.