Cycle to Work — Employers FAQs • Employers • Cycle to Work • Customer Service • About Us • Alpine Bikes
- Which employees can use the Cycle to Work Scheme?
- What is salary sacrifice and how are the savings made?
- Must the bicycle be used for work-related journeys?
- Do we as the employer need to monitor the usage of the bicycle?
- Is there a restriction to the bicycle an employee can choose?
- Can our staff take advantage of all Alpine Bikes sales or exciting offers?
- How long is the repayment period?
- What are the scheme's rules?
- Will the employee own the bicycle and equipment at the end of the repayment period?
- How much can an employee spend?
- What happens if the employee leaves the employer before they have repaid the full amount?
- What happens if the bicycle has a warranty problem during the hire period?
- How much will the scheme cost to implement?
- What is the administration process involved in setting up the scheme?
- Will work related pay benefits be affected?
- As it’s a benefit, does the employee need to tell the Inland Revenue?
- As it’s a benefit, does the employer need to tell the Inland Revenue?
- Where can I obtain more detailed information about the scheme?
- Which employees can use the Cycle to Work Scheme?
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- Employees who have contracts of employment that outlast the duration of the salary sacrifice period.
- According to Scottish law, employees need to be 16 years of age or older.
- Employees must pay tax via the PAYE system.
- Employees must not drop below the minimum wage once the loan repayment has been deducted from their gross salary.
- What is salary sacrifice and how are the savings made?
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A salary sacrifice occurs when an employee agrees to a reduction in pay in return for the employer providing a non cash benefit. The reduction comes out of the employee's gross, rather than net pay. This causes a reduction in income tax and National Insurance payments, which is where the savings are made.
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Yes. The primary use for the bike should be for work related journeys travelling to and from work or between work sites. The bicycle can be used for recreational purposes the rest of the time.
- Do we as the employer need to monitor the usage of the bicycle?
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No, by ensuring that the Hire Agreement, terms & conditions, FAQ’s and any other supporting marketing material clearly state that the primary use for the bike must be used for work related journeys, the employer is doing all that is required to ensure compliancy.
Alpine Bikes staff are trained and aware that the bicycle must be suitable for travelling to and from work.
- Is there a restriction to the bicycle an employee can choose?
- The bicycle must be suitable for travelling to and from work. For this reason children’s bicycles are not available to hire under the scheme.
- Can our staff take advantage of Alpine Bikes's sales or exciting offers?
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Yes. There is no restriction or added fees to bikes and equipment featured in a sale or on offer.
- How long is the repayment period?
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- The normal length of the repayment period is either 12 or 18 months. Ultimately this decision is made by the employer, though Alpine Bikes would not recommend a repayment period of more than 18 months. An employee would have the right to cancel the lease agreement after 18 months, unless an exemption from the Office of Fair Trading is received to stop employees from doing this.
- Employers are able to choose a repayment period of less than 12 months if required.
- What are the scheme's rules?
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As the bicycle equipment will belong to the employer, the employee must:
- Make sure that the bicycle and equipment is insured. The easiest way to do this is to get it added to household contents insurance, if it is not already covered. Replacement equipment is not available under the scheme. If the bicycle equipment goes missing or is damaged, the employee will still have to pay the monthly amount for the remainder of the repayment period.
- Keep the bicycle equipment clean and in good order.
- The following rules apply so that the employee does not pay tax on this benefit:
- The bicycle equipment is used primarily to commute to work;
- The bicycle equipment remains the property of the employer for the length of the repayment period.
- Will the employee own the bicycle and equipment at the end of the repayment period?
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No. To be able to save on the tax and National Insurance contributions, the agreement must be a Hire Agreement not a Purchase Agreement. At the end of the scheme it is common for the employer to offer to sell the bicycle and equipment to the employee for a fair market value (Alpine Bikes will be able to advise of the fair market value of a bicycle and safety equipment at the end of the scheme), although employees must be made aware that there is no guarantee of this taking place.
Alternatively the employer may allow the employee to continue to use the bicycle without ownership of the bicycle being transferred to the employee.
- How much can an employee spend?
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If an organisation wishes to offer bicycles and equipment to the value of more than £1,000, the employer must have a Consumer Credit Licence. For a limited company, a Consumer Credit Licence costs £970 and is an indefinite licence that does not expire. The application to receive one normally takes 6 to 10 weeks. For for information on the Consumer Credit license please click here.
- What happens if the employee leaves the employer before they have repaid the full amount?
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- The employee will have to repay the outstanding amount that is left to pay from their final payslip. However, this amount will not be tax-free as it will be taken from their net salary.
- So for example, if they leave a year into the hire agreement for a £300 bicycle, and they have paid £200 so far, they will have to pay the remaining £100 outstanding on the bicycle. The employee will not be entitled to receive the Tax and National Insurance savings on this outstanding £100. However, they will still have benefited from saving the Tax and National Insurance contributions on the first £200.
- If the employee's final salary does not cover the outstanding amount, they will be sent an invoice for the remainder of the balance.
- What happens if the bicycle has a warranty problem during the hire period?
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When each employee chooses a bicycle and equipment, Alpine Bikes will advise them of the warranty period, as they vary with each bicycle – some bicycle frames feature a 5 year, 10 year or even lifetime warranty.
If the experiences problems within the duration of the warranty period, Alpine Bikes will liaise with the supplier on the employee's behalf. The employer, despite owning the equipment, will not need to be involved in the warranty process at all.
- How much will the scheme cost to implement?
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Alpine Bikes will not charge your organisation for implementing the scheme.
The cost of implementing a Cycle to Work Scheme can be negligible. Some administration duties are detailed below but there are also significant opportunities for the employer to save while using the scheme. For example, for every £500 an employee hires on the scheme, the employer saves £64 NI contributions. Private companies can also claim capital allowances on the cost of the bike and safety equipment while they are owned by the employer.
These savings can help offset any set up costs and if additional revenue is created from implementing a scheme, this revenue is normally used to improve cycling facilities within the organisation. We would recommend that you have secure bicycle storage facilities at work to prevent theft. For more information and advice on this please contact cycle2work@alpinebikes.co.uk or call Alpine Bikes on 079 2075 2062.
- What is the administration process involved in setting up the scheme?
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The level of administration to set up the scheme can be outlined as below:
- Making the legal documentation as supplied by Alpine Bikes available to all staff.
- Assist in marketing the scheme using the tools provided by Alpine Bikes.
- Checking the eligibility of employees and issuing authorisation letters.
- Implementing the salary sacrifice process.
- Paying invoices from Alpine Bikes within agreed terms.
- Managing leavers from the scheme.
- Dealing with the fair market value payment if required.
- Will work related pay benefits be affected?
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Yes. There may be an impact on an employee's entitlement to benefit payments such as Statutory Maternity or Paternity Pay, Statutory Sick Pay and Working Tax Credit, as they will be calculated on the employees reduced pay. There may also be an impact on the employee's state pension.
- As it’s a benefit, does the employee need to tell the Inland Revenue?
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No. The scheme is set up so that under the current tax rules the employee does not have to pay tax on the benefit and therefore the employee does not have to notify the Inland Revenue.
- As it’s a benefit, does the employer need to tell the Inland Revenue?
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The employer does not need to inform the Inland Revenue prior to the start of the scheme.
However, it is advised that the employer submits an example of an employee's payslip prior to the scheme starting and an example of an employee's payslip once the salary sacrifice has been started to ensure the reductions have been implemented correctly.
- Where can I obtain more detailed information about the Scheme?
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You can find out more about Cycle to Work by downloading the Department for Transport's Information Booklet about the scheme. To download this booklet follow this link.