Cycle to Work Schemes... just how do they work?
14 March 2023
You’ve probably heard of the Cycle to Work Scheme, but do you know how it works? There are benefits for you and your employees to enjoy. It's the easy-to-embed, fully managed scheme that boosts your employees' physical and financial health. Read on to discover the opportunities our Cycle to Work scheme can open up for your business.
First introduced in 1999, this scheme has been adopted by more than 40,000 employers and provided bikes to over 1.6 million employees across the UK. Although it’s been around for over 20 years, we still get asked about how the scheme works and how it can benefit businesses and employees.
If you’ve yet to invest in such a scheme with your company, you probably have questions about how it can benefit you, which is why we’ve put together this in-depth guide.
What is the Cycle to Work scheme?
The Cycle to Work scheme began in 1999 to promote healthier, greener ways of travelling to work. Fast forward to 2023, and these aims seem more critical than ever.
Since its inception, employees have benefitted by saving up to 40% on the cost of a new commuter bicycle. According to an Institute for Employment Studies report, approximately 180,000 people participate in this employer-run scheme every year.
The Cycle to Work scheme has three main objectives:
To encourage employees to commute via greener, more environmentally friendly transport
To provide employees with a financial incentive to invest in a bicycle for work
To promote a more active lifestyle.
How does the Cycle to Work scheme work?
Essentially, this scheme allows employees to hire a new bicycle at a lower rate by saving through reduced income tax and lower National Insurance (NI) contributions – also called salary sacrifice.
Under this scheme, the employer effectively purchases a bike, and the employee makes repayments through monthly wage deductions. These are taken from an employee’s gross salary before any tax or NI is deducted. This means an employee pays less tax and NI while making payments for their bike.
This ‘salary sacrifice’ period usually runs for 12 to 18 months, with the cost of the bike repaid through set monthly payments. Because of the reduced rate of tax and NIC, employees could save over 40% on the initial cost of the bicycle – the actual rate is about 32% for basic-rate taxpayers, but this increases to around 42% for higher taxpayers.
The Green Commute Initiative has designed a helpful calculator to help you find out exactly how much you could save.
The steps & rules of the Cycle to Work scheme
The process for purchasing a bike via our Cycle to Work scheme involves three steps:
A company signs up for our Cycle to Work scheme
Here at Pluxee UK, we have access to over 98% of bike brands in the UK (including the electric bike market). So, the next step is for your employees to choose the perfect bike for them from a huge range, select their safety gear and helmets, apply, and wait for approval
Employees collect their new bikes and repay their employer through monthly instalments/salary sacrifice.
Additionally, as outlined on the government's website, some rules must be followed for an employee to qualify for the scheme:
The salary sacrifice agreement must span at least 12 months, and the employee can’t pay for the bicycle with their own money
Employees must use the bicycle for at least 50% of commutes and work-related journeys.
The Pluxee difference...?
Aside from the huge range we can give your people access to, our pricing is completely transparent. There are no hidden costs and no end-of-hire purchase fees. When an employee completes the repayments through their salary sacrifice scheme, they own the bike.
Whilst there are scheme rules to follow (as outlined above), launching a Pluxee UK Cycle to Work scheme is easy. The contract is user-friendly, and once signed, the employee will receive their vouchers within a few days.
We’re also big on compliance, so working with Halfords ensures everything is up to standard.
The benefits for you
The key benefits:
Save up to 13.8% on National Insurance Contributions
Support the health and wellbeing of your workforce
Boost productivity and retention by providing financial and physical wellbeing-boosting benefits and rewards
Reduce your organisation’s carbon footprint
The perks for your people
From health to a massive choice of bicycles, here are the ways an employee can benefit from the Cycle to Work scheme:
Saving on transport costs, including parking, fuel, tyres and servicing
Boost physical and financial wellbeing
No credit checks are required to qualify
No upfront costs or end-of-hire fees
What happens if an employee leaves before repaying their scheme?
If an employee leaves employment through redundancy or resignation and their bike scheme is yet to be paid in full, the outstanding salary sacrifice repayments will be deducted from their final NET salary payment. They will not meet the criteria for further tax exemptions.
Can any contracted employee join the scheme?
The Cycle to Work scheme should be made available to all employees, but whether your people choose to use the scheme is down to personal preference. However, for an employee to qualify, their take-home pay must not fall below National Minimum Wage after the salary sacrifice deduction.
Get your Cycle to Work scheme rolling with Pluxee UK
Ready to sign up for the Cycle to Work scheme? When you partner with Pluxee UK, your employees can benefit from the scheme without creating extra work for your HR department.
We’ll provide you with our fully managed system and easy-to-use online portal, all while helping you to develop an effective communications strategy to get your employees onboard.
With over 60 years of experience, we’re specialists in providing services and solutions that improve the lives of your people. From supporting employee financial wellbeing with exclusive discounts to rewards and recognition packages, we can help you make a real difference to your workforce.