Cycle to Work Scheme Explained

Through the Cycle to Work scheme, UK companies can support staff to hire and use bicycles for their commute. At a time when work benefits and company culture matter, access to such programmes can make a real difference to your workforce.

Depending on the type of industry and their personal circumstances, some employees might find the scheme more appealing than others. In this article, we will cover what you need to know before you offer and discuss it with your staff.

Work-related benefits can make or break the deal for both existing staff and new candidates. If you struggle with attracting the right recruits or retaining your existing employees, we can help. Call us today on 01455 858 132.

What is the Cycle to Work scheme in the UK?

This is a bicycle hire work benefit that offers a tax relief incentive from the government. Sometimes employers refer to it more colloquially as the Bike to Work scheme UK.

The Government introduced this tax exemption initiative in the Finance Act 1999. The UK Cycle to Work scheme gives employees the opportunity to hire bikes from their employer or a third party.

The scheme aims to:

• Encourage employees to commute using a greener means of transportation.
• Offer a financial incentive, as they will not pay income tax on the money used to hire the equipment.
• Encourage a healthy lifestyle for commuters who will get to mix exercise in their commute.

Official documents mention that illness caused by physical inactivity costs the NHS up to £1 billion each year. The programme means to target and improve public health while also promoting environmental benefits.

According to data from the government, Cycle to Work scheme statistics show that over 1.6 million commuters benefit from it.

How does Cycle to Work scheme work?

Government documentation explains at length how the salary sacrifice scheme works, which we will cover next.

With this option, the employee gives up a sum of money out of their pre-pay salary. The money goes towards the benefit offered by the employer – the hire of the cycle. Optionally, the employer can offer protective equipment too.  

Employees will sign an agreement to benefit from a hire scheme either from:

• The employer, who provides the equipment they either purchased or hired themselves from a third party
• A third party that acts as a scheme provider and receives remuneration from the employer using the salary sacrifice method

Another option to run a bike to work scheme as an employer is through a pool style programme. In this case, the company purchases a fleet of bicycles and makes them available on a one-to-one or pool sharing basis.

Employers can also offer a loan scheme, which needs FCA authorisation. This works like an advance salary given to employees for the purchase of rail season ticket.

Next, we will discuss the bike to work scheme rules.

Cycle to Work scheme rules

The programme gives the opportunity to both the employer and the employee to benefit from tax relief. However, they need to meet certain criteria for it to work.

The main points as outlined by the government include the following:

• The employee needs to follow through with the salary sacrifice agreement for at least 12 months, typically.
• The employee’s take home pay cannot fall below the National Minimum Wage after the deduction.
• They will not, at any point during the period of the hire agreement, own the bicycle. They can, however, offer to buy it at the end of the hire period.
• They need to use the cycle at least 50% of the time for work related journeys.
• The employee cannot pay for the cost of the cycle or equipment with their own money.
• The employer needs to offer access to the scheme to all staff members.

Initially, the government had capped the cost for equipment at £1000, but that changed in 2019. The changes to the Cycle to Work scheme mean employers can spend an uncapped sum per cycle, provided they have the FCA authorisation.

Is Cycle to Work scheme worth it?

The flexibility it brings, and the long-term advantages make the scheme attractive to both employers and employees. Understanding how to access and apply it to make the most out of it is key to achieving the whole range of benefits.

According to government data, employees can save up to 42% of the costs for a cycle and safety equipment. They can also agree to purchase them from the employer at the end of the hire period. So, staff members mix the advantage of acquiring quality equipment with the initial tax relief. This can make it a great option to include in your benefits package for your workforce.

How advantageous the scheme also depends on the distances that employees need to travel for work, and their fitness levels. A carer providing domiciliary care to elderly who live within a wide area might need to travel faster between clients than possible by bike.  

Other Cycle to Work questions

Two other frequently asked questions by employees don’t have a straightforward answer:

• How long does the Cycle to Work scheme take?
• Can I cancel the Cycle to Work scheme?

The answer to both these questions is the same. It depends on the agreement signed between the employee and the employer, or with the provider. Most providers offer a period of grace of 3-14 days for the employee to change their mind.

If the employer provides the equipment, then it remains entirely up according to the negotiation with the employee.  For example, they can include a clause in the initial agreement about what happens in case of termination of employment. Usually, such clauses establish that the employee will pay for the remainder of the hire period out of their last salary/wage.

Talk to a friendly Croner advisor

Attracting and retaining the right recruits depends on several factors. And one of these factors you can control, without offering unsustainable pay levels, is a workplace benefit. Consider the flexibility and tax relief advantage that come with this scheme and survey your workforce to gather interest.

We can help you with the documents necessary to get such a scheme up and running. You can also talk to us about other workplace incentives that would make a real difference to your workforce. Call us for HR advice today on 01455 858 132.