Can I offer my employees longer than 12 months?

Yes, most scheme providers will allow you to extend the scheme period to 18, 24 or even 36 months. You might need to do this if an employee has chosen a costly package, or if their salary sacrifice over 12 months would put their cash earnings below National Minimum Wage.

How do I treat VAT for a Cycle To Work certificate?

HMRC guidelines state that VAT is applicable to the cost of equipment purchased through a Cycle To Work scheme. However, cycle helmets are an exception and are zero-rated for VAT. As an employer, you’re responsible for claiming the VAT paid when purchasing the bicycle and remitting to HMRC the VAT included in the salary sacrifice payments received from employees.

What happens if an employee leaves or is made redundant during the scheme period?

Once the agreement is signed, it becomes non-cancelable. There’s a 14-working day cooling-off period to allow employees to change their mind, after which they’ll need to pay the outstanding balance in full from their net pay (without any tax exemptions) if they leave or are made redundant. For instance, if an employee is on a 12-month scheme and has already made 4 salary sacrifice repayments from their gross salary before leaving employment, the remaining 8 repayments should come from their final NET salary.

Can I get a Cycle To Work scheme if I’m self-employed?

You can register both as an employer and a participant with most Cycle To Work schemes as long as you receive a salary through the Pay-As-You-Earn (PAYE) system. Unfortunately, sole traders aren’t eligible.

Cycle To Work Scheme | Complete Guide For Employers UK 2024

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Tom ConnerDirector

0127 364 6484

22/08/2024

7 mins

Riding a bike to work can make employees happier, healthier, and more productive. But they need the right gear to make it happen, which is where the UK’s Cycle to Work scheme for employers comes in. Here’s how you can help get your staff – and your business – pedalling to success.

What Is The Cycle To Work Scheme?

The Cycle to Work scheme is a great UK government program that lets employees get a brand new bike and all the gear they need through their workplace.

Here’s the deal: instead of paying for these goodies with their regular salary, employees use “salary sacrifice”, meaning they exchange some of their gross pay to cover the cost of the bike and equipment.

How Does It Work?

Here’s how it works: you, as the employer, front the money to buy an employee’s cycling equipment. The benefit has to be set up through an approved scheme, and the purchase has to be made through a participating retailer.

The employee then pays you back over 12 months through salary sacrifice. These payments come out of their gross salary before PAYE and National Insurance, meaning the employee pays less tax. After the 12-month period is up, they have the option to own the bike and gear outright at the end of it. It’s an affordable way to get your workforce moving.

For a quick overview, take a look at this video from Cyclescheme 👇

What Are The Different Schemes?

There are a few different UK Cycle To Work schemes that your business can sign up to, but the most popular ones are:

Each scheme provider has their own conditions, so make sure they offer options like folding bikes, e-bikes, or adaptive cycles, if you want to be as inclusive as possible. If you’re not sure which scheme is right for you, it’s best to chat to an employee benefits adviser.

Is Your Business Eligible For The Cycle To Work Scheme?

To be eligible for the Cycle To Work scheme, your business should meet the following criteria:

You pay your workforce through the Pay-As-You-Earn (PAYE) system
You have the authority to enter into a legal agreement on behalf of your business or organisation
You’re capable of covering the upfront costs of your employees’ bikes.

IMPORTANT NOTICE 🧐
The salary sacrifice shouldn’t push an employee’s take-home pay below the National Minimum Wage. This is especially important for E-bikes or adaptive cycles, which can be expensive. If this is the case, you can extend the hire period to reduce monthly payments.

What Are The Benefits Of The Cycle To Work Scheme?

The Cycle to Work scheme doesn’t just benefit your employees, it’s good for your business, too:

Benefits For Employers

Cost-Neutral

As explained, it won’t cost you a penny to join the scheme. It’s free to register, and even though you cover the initial bike costs for your employees, you’ll get that money back through their salary sacrifice after 12 months.

It Encourages A Healthier Workforce

Once your team starts cycling, you’ll enjoy a happier, healthier, and more productive workforce. It also reduces the number of sick days they take off – regular cyclists take 1.3 fewer sick days a year on average compared to non-cyclists.

Plus, if you’re looking to become a B Corp, part of the scoring looks at how employers help towards the financial and physical wellbeing of their staff, along with your environmental impact.

Boosts Your Green Credentials

Commuting by bicycle is a thumbs-up for the environment. The scheme helps reduce your company’s carbon footprint and that of your staff, which is becoming increasingly important to workers.

Nadeem Farid Head of Employee Benefits at Drewberry

Implementing a Cycle To Work scheme is a step toward fulfilling your corporate social responsibility by making the world a greener place.

Nadeem Farid
Head of Health & Wellbeing

Benefits For Employees

Supports Financial Wellbeing

Cycle To Work schemes offer a responsible and affordable way for employees to get a new bike. They’ll never miss a repayment because it’s taken straight from their salary, and it’s better than buying on finance as there’s no interest fees or credit check required.

National Insurance Savings

Paying for a bike and accessories through a scheme also means employees will save on the cost. This is because, as a result of salary sacrifice, they pay less National Insurance. To give you an idea of how much employees can save, we’ve provided example savings below.

Employee NI Savings
Bike RRP	£1,000
NIC Saved (8%)	£80
Total Cost	£920

Based on the above, rather than having to pay £1,000 upfront for a new bike, employees can spread the cost over 12 months via salary sacrifice and save £100 as a result of NI savings.

Cuts Commuting Costs

Along with spreading the cost of the bike itself, employees also save money on commuting costs. By choosing to cycle rather than take the bus/train/car, they have more money in their pocket for other things.

Boosts Health And Wellbeing

Employees who choose active travel, like cycling to work, boost their fitness and overall wellbeing.

EXPERT TIP 🤓
According to The Health Foundation, increased walking and cycling in England could save 1,189 people from early deaths each year.

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How Much Does It Cost To Offer A Cycle To Work Scheme?

Apart from the up-front cost of purchasing the bike and gear for your employees, the Cycle Scheme is a cost-neutral benefit that you can start offering your workforce. And as repayments are made to you through salary sacrifice, you save on your National Insurance contributions, too.

You can save up to 13.8% for every employee who hops on the cycling train. On average, that’s £138 saved for every £1,000 you handle through the program.

Employees also enjoy savings ranging from 25% to 39% on their bike and accessories. Take a look at what you could save with the employer calculator.

EXPERT TIP 🤓
It is important to note, if you do use a benefits broker, they may charge you a fee for implementing and managing the benefit on your behalf.

How Are Cycle To Work Schemes Taxed?

HMRC guidelines state that VAT is applicable to the cost of equipment purchased through a Cycle To Work scheme. However, cycle helmets are an exception and are zero-rated for VAT. As the employer, you’re responsible for claiming the VAT paid when purchasing the bicycle and remitting to HMRC the VAT included in the salary sacrifice payments received from employees.

Corporation Tax

If you purchase bikes and equipment outright to hire out to your staff, this is considered as an allowable business expense, so you can also reduce your corporation tax bill. This is because your taxable profit will decrease by the total value of the salary sacrificed by the employees. It’s a win win for you and your employees.

It can cost around 30-40% of a leaver’s salary to hire a new employee. With this in mind, it’s important to consider how an employee benefits package can help retain staff.

Nadeem Farid
Head of Employee Benefits

How To Set Up A Cycle To Work Scheme For Your Employees

Ready to set up a Cycle To Work Scheme for your business? There might be slight differences between scheme providers, but here’s how the entire process generally works:

Step 1: Register With A Scheme

Kick things off by choosing the right scheme for your business and registering as an employer. You can usually do this online – just make sure you have the authority to enter into a legal agreement on behalf of your workplace.

During registration, you’ll need to provide details such as your address, staff count, and your VAT number (if applicable). You’ll also decide whether to pass National Insurance Contributions savings to your employees, and nominate an administrator, accounts and payroll contacts.

Once your scheme account is set up, you’ll receive a unique employer code for your workplace and be able to start implementation.

Step 2: Promote To Employees

Time to start telling employees about their new perk! Send out company-wide messages and schedule regular reminders. The scheme you registered with will have customised welcome emails, posters and flyers to help you communicate the benefits of taking part.

Step 3: Process Employee Applications

If your employees are excited to get pedalling, they’ll need to apply on your chosen scheme’s website, using your organisation’s name or employer code. They then choose their ideal bike and cycling gear, and apply.

You’ll get notified through your scheme that you need to review the request. Make sure the employee meets eligibility criteria, like being over 18 (or over 16 with a guarantor) and salary sacrifice doesn’t drop their earnings below the National Minimum Wage or National Living Wage.

Our My.Drewberry platform makes managing benefits, such as Cycle To Work, a breeze. Employees can sign up from within the platform, and as an employer, you can manage everything from the admin section. Everything’s all in one place!

Richard Noble
Senior Consultant, Employee Benefits

Step 4: Pay The Invoice

Once approved, you’ll be issued an invoice for the request. Pay this promptly, because your employees will be buzzing to get their new bike!

Step 5: eCertificate Issued

After payment, employees will receive an eCertificate via email with a redemption code to collect or order their Cycle To Work package. At this point, the hire period begins.

Step 6: Payroll Setup For Salary Sacrifice

Then the salary sacrifice needs to be set up on your payroll. Your scheme provider should issue any info needed to ensure this goes seamlessly. Just make sure the benefit is put down as a reduction, not a deduction, and apply it as a “negative adjustment” to the gross pay.

Step 7: Enjoy

At this stage, your obligations as an employer are complete. The employee receives their new bike and starts repaying the costs through deductions from their salary. After 12 months, you’ll have recouped your initial costs, and saved through tax benefits. At the end of the hire period, the scheme will contact your employee directly to manage their ownership options.

If this sounds like a lot of admin, well… that’s because it is. But that shouldn’t get in the way of you providing a valuable benefit like Cycle To Work. And it’s even easier if you have Drewberry™ experts at your side. Give us a call on 02074425880 or email help@drewberry.co.uk to get started.

How To Promote And Communicate The Scheme To Your Employees

Don’t keep the Cycle to Work scheme a secret – your staff won’t benefit if they don’t know about it. Here’s how to spread the word:

Post on your company chat, intranet, or benefits platform (like My.Drewberry), explaining the scheme and providing instructions on how to join. Make sure it’s easy to find
Place posters in visible spots around your workplace to catch everyone’s attention
If you send out internal newsletters, regularly mention the scheme and provide links to more information on your intranet
Host a cycling event to foster a biking culture among your staff. It could be group rides, workshops to improve riding skills, or even maintenance sessions to boost mechanical know-how
The major scheme providers usually offer free marketing support, such as digital and print materials like posters, graphics, logos, and email text. Some may even arrange demos, roadshows to explain the scheme, group rides, and maintenance workshops for your employees. Make use of them!
Mention the Cycle to Work scheme in your recruitment ads. It showcases your commitment to your employees’ health and wellbeing, and it’s an attractive, cost-effective, and often faster alternative to commuting by car or public transport.

You need to have a well-planned communication strategy to get the most out of your benefits offering. Getting started can be daunting if comms aren’t your forte, which is why we’ve put together a guide to communicating employee benefits effectively.

Supporting Employees Who Enrol In The Scheme

The Cycle to Work scheme is a fantastic way to kick start your employees’ cycling journey, but it’s just the start. Do you have shower facilities or secure bike storage? What about cycling clubs?

You should explore additional ways to create a thriving cycling culture that benefits both you and your employees. Cycle To Work can be more than just bike purchase; it’s a holistic approach to support cycling and healthy lifestyles in your workplace. That’s where Cycling UK’s Cycle Friendly Employer (CFE) accreditation steps in.

CFE sets the global standard for promoting cycling as a way of getting to work and provides a robust framework for creating a cycle-friendly workplace. When you earn this accreditation, you gain access to tailored and continuous support from Cycling UK. They help you provide everything your employees need to start or continue cycling to work.

Common Cycle To Work Scheme Questions

Can I offer my employees longer than 12 months?
Yes, most scheme providers will allow you to extend the scheme period to 18, 24 or even 36 months. You might need to do this if an employee has chosen a costly package, or if their salary sacrifice over 12 months would put their cash earnings below National Minimum Wage.
How do I treat VAT for a Cycle To Work certificate?
HMRC guidelines state that VAT is applicable to the cost of equipment purchased through a Cycle To Work scheme. However, cycle helmets are an exception and are zero-rated for VAT. As an employer, you’re responsible for claiming the VAT paid when purchasing the bicycle and remitting to HMRC the VAT included in the salary sacrifice payments received from employees.
What happens if an employee leaves or is made redundant during the scheme period?
Once the agreement is signed, it becomes non-cancelable. There’s a 14-working day cooling-off period to allow employees to change their mind, after which they’ll need to pay the outstanding balance in full from their net pay (without any tax exemptions) if they leave or are made redundant.

For instance, if an employee is on a 12-month scheme and has already made 4 salary sacrifice repayments from their gross salary before leaving employment, the remaining 8 repayments should come from their final NET salary.
Can I get a Cycle To Work scheme if I’m self-employed?
You can register both as an employer and a participant with most Cycle To Work schemes as long as you receive a salary through the Pay-As-You-Earn (PAYE) system. Unfortunately, sole traders aren’t eligible.

Manage Your CycleScheme And Other Benefits With Drewberry

Want to implement a Cycle To Work scheme, but already juggling too many benefits and providers? That’s where your Drewberry experts come in.

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