The Ultimate Guide to the Cycle to Work Scheme for Employers

Introduction

The Cycle to Work Scheme in the United Kingdom is not a new initiative – it was started in 1999 and has been a core pillar of the government's commitment to fostering healthier and more sustainable commuting practices.

The scheme was introduced to incentivise employees to embrace cycling as a viable mode of transportation while providing financial incentives for both employees and employers. It has been quite a success. The Cycle to Work Alliance (C2WA), a coalition of the four largest providers of the Cycle to Work Scheme - Cycle Scheme, Cycle Solutions, Evans Cycles and Halfords, says that in the last 10 years, they have encouraged more than 1.5 million people to cycle to work and save on the cost of a new bike. On top of that, several smaller providers of the scheme are not included in this statistic, meaning the actual number of people who have benefited is higher.

The scheme experienced a big explosion of growth during the pandemic, and in 2020, there was a 50% growth in participants. This trend will likely slow down but will continue upward as more people embrace car-free journeys to work.

1. What Is the Cycle to Work Scheme?

The scheme is a tax-exempt, salary-sacrifice employee benefit through which employers who sign up for it can help their employees access a bike without the bulk payment and upfront costs for the employee. The employer is the one that covers that initial bulk payment, and the employee then pays the employer back in instalments over a pre-agreed long period of time, like 12 months or more.

As the scheme operates on the premise of a salary sacrifice arrangement, this innovative approach allows employees to select bicycles and essential accessories from registered suppliers, with the associated costs deducted from their pre-tax income. This means that your employee gets a bike and accessories, as well as saving on tax and you on National Insurance.

The symbiotic relationship between employers and employees is integral to the scheme's success. In collaboration with approved providers, employers facilitate the acquisition of bicycles and accessories for their workforce, contributing to the creation of a bike-friendly workplace.

Beyond its financial benefits, the scheme aligns with broader societal goals, promoting physical well-being through increased physical activity and addressing environmental concerns by reducing carbon emissions associated with traditional commuting. The bike-to-work scheme is a policy that resonates with the larger narrative of sustainability and resilience in transportation infrastructure.

2. How Does the Cycle to Work Scheme Work?

The Cycle to Work Scheme is generally implemented similarly by all organisations that offer it. However, there are some slight differences, like the existence or lack of a cap funding amount, provision of marketing materials, and the handling of the end of scheme period. So, when you are selecting a provider, make sure you check all the details. However, regardless of small differences, the basic idea is the same, and it is a fairly simple process.

You choose a provider, go to their website and register with them – this is usually only as complicated as a simple online form. Then you direct your employees to register, too. Once that is done, your employee can choose a bike and accessories from the scheme provider-approved shops. You need to review their request and approve it, and then you, as an employer, pay for it and enter into an agreement with your employee for them to pay you back through monthly instalments taken through payroll.

Keep in mind that you can set your own internal rules - for example, bike and equipment should not cost more than £1500. In general, it is a good idea for employers and employees to exercise good judgement – an employee probably shouldn't be buying a costly bike, which would set them back a silly amount a month and leave them worse off.

Another thing to remember is that different providers handle the end of the scheme differently. When the initial agreed period of, for example, 12 months, ends, your employee doesn't automatically own the bike, and if they acquire it, that incurs a tax liability.

With most providers, there is an end-of-scheme payment because, technically, the employee has loaned the bike, and they have to buy it at fair market value. This usually works out at around 7%. However, for example, the Green Commute Initiative, at the end of the period, gives your employee a free-of-charge loan of the bike for a further five years and nine months and subsequently after 6 years, under a separate agreement. After that, they can transfer the ownership title to your employee for a £1 processing fee, which fee of £1 acts as a marker to protect them from any future claim that HMRC may make. However, they manage all this entirely, and you, as an employer, don't need to do anything.

3. Who Can Participate in the Cycle to Work Scheme?

- Employers

The scheme is open to any employer regardless of size and sector. The restrictions on who can participate are instead on the employee side.

- Employees

To be eligible, employees who can participate in the scheme must receive a salary via the Pay-As-You-Earn (PAYE) system. The other tricky thing is that they should make more than the National Minimum Wage or National Living Wage after salary sacrifice. If your employee receives NMW or just a little above it, they will not qualify. Additionally, as an employer, you should know that people under 18 can join but need a guardian-signed guarantor agreement.

4. Who Are the Providers?

Most providers offer a similar way of running the scheme, but they differ slightly, so it is worth researching before you sign up for a specific one. The major providers of the Cycle to Work Scheme in the UK are:

5. What Can an Employee Get on the Scheme?

The primary offering through the Cycle to Work Scheme is the opportunity for employees to acquire a bicycle tailored to their commuting needs. This includes e-bikes and e-bike conversion kits, often out of the price range for many people but quite accessible via the scheme.

In addition to the bicycle, participants can include essential accessories such as helmets, locks, lights, reflective gear, tyres, mudguards and other safety equipment. The idea is that anything that is reasonable and will help you and your cycle to arrive at work safely is basically allowed.

There are however, some exceptions:

GPS ride trackers, bike computers and cameras
Bike racks for cars
Turbo trainers or rollers
Nutritional products - drink or food

6. What Happens If an Employee Leaves the Job Before They Have Repaid the Money?

If an employee has taken part in the Cycle to Work Scheme but leaves before all their instalments are paid, they must repay any outstanding amount. Usually, this is done through their final salary payment, but that must not take them below the minimum wage before tax. If that final salary payment does not cover the amount left to pay, they must pay through their own means.

7. What Are the Benefits for Employees?

- Tax Savings

Employees enrolled in the Bike to Work Scheme benefit from financial savings through the salary sacrifice arrangement. By deducting the cost of the bicycle and accessories from pre-tax income, participants enjoy lower income tax and National Insurance contributions.

- Accessible Bicycles and Equipment

The scheme makes high-quality bicycles and accessories more economically accessible. By spreading the cost over a long period, the scheme allows employees to afford a bike and, even better, a good quality bike with the appropriate accessories to make their commute safe and enjoyable.

- Healthier Lifestyle

Cycling is a holistic solution to employee well-being by promoting physical and mental health. The physical benefits of regular cycling include enhanced cardiovascular fitness, muscle strength, and weight management. Cycling is also great for mental well-being, reducing stress, improving mood, and providing a therapeutic and enjoyable experience. The daily commute becomes an integrated exercise routine, fostering a healthier work-life balance for employees.

8. What Are the Benefits for Employers?

- It is Free

The best thing about being part of the Cycle to Work Scheme is that it is free for employers. There is no cost to signing up, and the bike cost is fully recouped from your employee at the end of the period.

- NI Savings

Due to the fact that instalments are deducted from pre-tax salary, as an employer, you can save up to 15.05% in National Insurance contributions for every employee who signs up for the scheme.

- Being a Better Employer

One of the ways that employers can distinguish themselves from others is to take good care of their employees and do their best to attract and retain talented workers. This is often done through, along with a fair salary, great employee benefits. Signing up for a bike-to-work scheme is a really quick and easy way to start offering a new type of benefit in a cost-effective and staff-engaging way.

- Healthier Workforce

Cycling to work means having healthier employees who are happier, more focused, and take fewer sick days off. There is a mountain of research showing us that physical activity boosts productivity, reduces stress and anxiety and reduces absenteeism – people who cycle usually take 1.3 less sick days a year. In a survey done by the Cycle to Work Alliance, 77% of employers consider that the scheme has had a positive impact on their organisation in relation to employee health. Meanwhile, 86% of employees believed that cycling to work has led to health benefits, and of them, 89% believed that it had improved general fitness, 52% thought that it had contributed to weight loss, and 46% believed that it had reduced their stress levels.

- Net Zero

This is a way to personally contribute to the country's net zero goals and reduce your carbon footprint as an employer. One of the biggest culprits when it comes to CO2 emissions is transport, and a sizable chunk of it is our daily car rides with an often single-person occupancy and for under 5 miles – trips that can often be replaced with a bike ride.

Employers are often in a position to be part of the solution to the current climate struggles, and encouraging your employees to have a more active commute is exactly one of them. If you need further inspiration, we have a lot of blogs and resources written on how to become a more bike-friendly employer, encourage active travel or how to design the ultimate bike-to-work facilities to help your employees truly make the best out of cycling.

It is sometimes perceived as a difficult and administratively cumbersome process; however, this couldn't be further from the truth. Most schemes have simple online forms that you just need to fill out to register. Usually, you then get a PIN, which you can give to employees, and most of the admin from there on falls on the scheme provider. The scheme provider prepares and sends you the hire agreements for you and the employees to sign and send back and often handles most of the subsequent admin, too. The whole process is hassle-free for employers.

10. How Do I Promote the Cycle to Work Scheme as an Employer?

Once you're all set up, giving the scheme a big shout-out is a good idea – it would be a shame to offer such a great employee benefit and nobody to hear about it. There are several things you can start with – online and offline.

Online

If you have a staff intranet or an employee portal, adding a new section - Benefits is a good idea. If you already have an employee benefits section, add Cycle to Work Scheme to the list. Create a page explaining how the scheme works and the benefits for your employees. Ensure you leave clear instructions to your staff of the next steps if they want to participate – this will save you, accounting and your employees time.

It is a great idea to also do an e-mail shot to all your employees dedicated to the new benefit they can access. You can explain it all in the e-mail, or better yet, you can outline the scheme and then send them to the page mentioned above where they can find all the details.

Post the information onto any other relevant platforms you and your team use, like Teams or Slack. This will usually spread the word quickly as everyone monitors their notifications throughout the day.

Offline

Create some posters and pin them across your offices. Toilets and common rooms like kitchens are good places to target as they get a lot of traffic, and everyone ends up there sooner or later.

Get on organising events and scheduling them on your company's calendar. There are a lot of good examples of cycling events which already exist, and all you need to do is get involved and promote them – there is Cycle to Work Day in August, Bike Week and Love to Ride's Cycle September or Winter Wheelers. These are all annual events that anyone can join; with some, there are even prizes to be won. Alternatively, you can organise your own work event and get everyone who has a bike to cycle on a specific day or let your imagination cycle wild and come up with something even better!

Overall, you should aim to become a cycling-friendly workplace. For people to be able to use their newly acquired bikes, you would also ideally be looking to give them a good cycling experience at work. For this, you will need the obvious essential hallmarks – safe and secure bike storage and end-of-trip facilities like showers and lockers. For a more in-depth look, you can see our detailed guide on designing the best end-of-trip facilities.