With traffic congestion and the health of the nation at a crossroads, maybe this is the year your company will take a right-hand turn – down a cycle track.
For the incentives are there, courtesy of Her Majesty’s Government, to launch a Cycle to Work Scheme that will benefit employer and employee alike.
The Department of Transport recently updated its Cycle to Work Scheme Guidance for Employers, and it pulls no punches.
At the sharp end, illness as an outcome of physical inactivity costs the NHS up to £1bn a year, with further indirect costs calculated at £8.2bn.
Cycling is one of those activities that not only improves individual health, but has wider benefits for society too. The more people ride to work to work, the lower the traffic congestion, the better the air quality, the greater the footfall in local shops and the more pleasant places are to live.
But the biggest winner of all is the individual who does, indeed, get on their bike. Cheaper travel, improved health, greater stamina and thereby increased productivity at work – what’s not to like?
The introduction to the DoT’s guidance notes states: ‘We want to make sure that Cycle to Work schemes continue to attract new cyclists and are as inclusive as possible so that people travelling to work have the opportunity to realise the benefits that cycling affords.
‘The scheme has involved over 40,000 employers across the country, and has contributed to help more than 1.6 million commuters to cycle to work.’
Basically, the Cycle to Work schemes are employee benefit schemes that subsidise the hiring of bikes – that are used at least 50% of the time to peddle to work – in return for a deduction from their earnings known as salary sacrifice.
An alternative option is to provide a loan to the employee to cover the purchase of the bike, much in the same way salary advances are sometimes made to help in the purchase of rail season tickets.
Loan schemes, including on an interest-free basis, may be subject to regulation by the FCA. Also, whether a loan scheme meets the criteria to be exempt from regulation will depend upon the nature and duration of the loan. If the loan is not exempt, the employer will need FCA authorisation.
Another alternative is to create a cycle-pool, whereby the business buys a fleet of bikes available either on a one-to-one or a pool basis.
Work place schemes should focus on attracting people who currently travel on less sustainable and less active modes, such as their cars, between local meetings or work sites.
The salary sacrifice element can, again, benefit both employee and employer. If the scheme meets the relevant criteria, it can benefit from a tax exemption introduced under Section 244 of the Income Tax (Earnings and Pensions) Act 2003.
Since a portion of the salary is foregone, the employee pays less tax and National Insurance Contributions (NIC), and the employer is able to save on employer NICs at 13.8% and Apprenticeship Levy at 0.5% (where applicable) on the amount sacrificed.
The employee must not own the bike themselves at any point during the hire agreement, but one of the three option that apply at the end of the term does include the possibility of purchase.
Option one: extend the hire agreement. Option two: return the bike. Option three: buy it under a separate agreement after the hire agreement has ended.
But there must be no option, whether express or implied, as part of, or alongside the initial hire agreement for the employee to purchase the cycle or equipment at the end of the hire agreement, because it could then be construed as a hire-purchase agreement.
It is important therefore that the employee is not given any expectation at the outset that they may be entitled to buy the cycle outright.