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- Bikes-for-work schemes can have a number of advantages for employers and staff.
- Through such schemes, employers can loan bikes and accessories to staff with payment made via a salary sacrifice arrangement, which results in tax savings for the employee, and national insurance savings for the employer and employee.
- Bikes-for-work schemes can also help to support employers’ health and wellbeing and corporate social responsibility initiatives, as well as possibly ease travel disruption for employees caused by this summer’s Olympic and Paralympic Games.
Jennifer Paterson looks at the top 10 reasons why employers may want to consider launching a bikes-for-work scheme
Bikes-for-work schemes offer benefits for both employers and staff, including lifestyle and environmental advantages, lower travel costs, and tax and national insurance (NI) savings.
Employee Benefits has compiled the top 10 reasons why employers may want to consider a bikes-for-work scheme.
1. Cost savings
Some 73% of 44,000 employee respondents to the Cycle to Work Alliance’s Behavioural impact analysis report, published in February 2011, said potential savings were the main reason for joining a scheme.
Rising fuel prices, public transport costs and charges for workplace car parks make commuting by bike attractive. Steve Edgell, director of Cycle Solutions and chair of the Cycle to Work Alliance, says: “The cost of the daily commute is going up. A lot of employees are finding it too expensive to get to work.”†
2. Tax-efficient savings
Employers can loan bikes and accessories to staff via salary sacrifice, with the cost deducted from their gross monthly salary for a period of 12 to 18 months. Staff stand to save tax and NI on the portion of salary sacrificed.
Schemes also offer staff average savings of 38-45% on the purchase price of a bike. Mark Brown, head of Ride2Work at Evans Cycles, says: “If staff are working to a monthly budget, want to save money and to get into cycling to work, this is the thing to be doing.”
Employers can also make NI savings of up to 13.8%. Paul Bartlett, director of Cyclescheme, says: “It is a more significant benefit since employers’ NI has gone up.”
3. Ease of administration and registration
A scheme is also simple for employers to administer and for staff to register for. Most providers manage all marketing and administration, as well as online registration. Charles Ashwell, corporate sales manager at Halfords, says: “Providers are easing the administrative process for the employer. We have introduced an online hire agreement process, which is more secure and easy to manage.”
4 Clarification of legislation
Clarification of legislation in recent years has resulted in more uncertainty about bikes for work, but providers and industry bodies are working to simplify these for employers.
In 2009, HM Revenue and Customs (HMRC) clarified its definition of fair market value to ensure there was a set process to value a bike at the end of the loan period. Employers now have the following options to ensure this is the case: a P11D declaration, a PAYE settlement agreement, following HMRC’s price list or extending the lease period over three to five years to diminish the bike’s residual value.
Brown says: “The scheme used to be one-size-fits-all and now employers have different options on how to handle fair market value.”
A ruling by the European Court of Justice in relation to a case between HMRC and AstraZeneca followed. The guidance, which came into effect on 1 January 2012, involved the VAT treatment of several benefits offered via salary sacrifice. As a result, VAT is now payable on the hire or loan of a bike and accessories through salary sacrifice, but an employer can continue to recover input VAT on the purchase. Brown says: “This has not had a huge impact because it has only reduced savings by about 10%.”
Providers have responded by offering bigger discounts for staff, for instance on the value of equipment supplied.
5. Commuting during the Olympics
With the 2012 Olympic and Paralympic Games taking place at venues across the UK this summer, bikes may be a practical way to help staff beat the commuter chaos. Cycle Solutions is even providing a scheme to staff at the London Organising Committee of the Olympic and Paralympic Games for their commute to Canary Wharf. “Some employers are looking to get staff in and out of London during the games,” says Edgell. “With roads expected to be at gridlock and the tube over capacity, cycling is a good alternative.”
Many employers are also tying in launches or relaunches of schemes with the Olympics. Brown adds: “It can help staff and employers get into the Olympic spirit.”
6. Getting fit and healthy
With many employers focusing on health and wellbeing strategies, bikes for work can fit in well. “Employers are finding that staff who cycle to work regularly are arriving fresher and with more vitality than those who are sitting in traffic jams,” says Edgell. “Employees who cycle are becoming fitter and leaner.”
7. Reducing carbon footprints
Bikes for work also ticks the corporate social responsibility (CSR) box for employers. The Cycle to Work Alliance’s report found scheme users save 133,442 tonnes of CO2 a year. “It can be part of a green travel plan,” says Halfords’ Ashwell. “Employers look at the scheme and try to quantify the benefit in terms of CO2 savings. The scheme works well for those organisations because they already have the ethos and ethics to support that kind of initiative.”
8. The Summer of Cycling
The Summer of Cycling campaign from the All Party Parliamentary Cycling Group and The Bicycle Association, which runs from March to October 2012, aims to encourage as many people as possible to get on a bike. Brown explains: “Its objective is [for] one cyclist to get one non-cyclist cycling this summer.”
During the campaign, Evans Cycles will put case studies on its Facebook page and hold promotions with employers.
9. Focus on cyclist safety
In his 2012 Budget report, Chancellor George Osborne allocated £15 million to Transport for London to improve the safety of cyclists at key London road junctions.
To keep all staff safe on the roads, bikes-for-work providers recommend the use of helmets, bells, reflectors and high-visibility gear. Employers have no liability in this respect because the bike is for private, not work, use.
10. Lifting the barriers to schemes
Some employers may also have issues with bicycle storage so may want to consider alternatives, such as: encouraging staff to use folding bikes, installing innovative storage options or offering a bike-share scheme.
Case study: Virgin staff offered bike choices
Virgin Media launched its first bikes-for-work scheme, Ride2Work, in November 2011 after a staff survey showed it was the most popular choice of possible new benefits.
The telecoms firm gives staff a range of choices at the end of the scheme’s hire period. At the end of the 12-month contract, ownership of the bike reverts to provider Evans Cycles for a period of time, depending on its value and when it was purchased. Staff then have three options: keeping the bike for 48 or 60 months, depending on the original cost; owning it outright by making a one-off payment to Evans Cycles; or returning it at no extra cost.
The scheme is also being incorporated into Virgin Media’s focus on health and wellbeing and its corporate social responsibility programme. Paul Farrell, head of group benefits, said: “We are taking responsibility for growing our business in a way that is good for staff and the environment.”
Case study: McDonald’s had own bike scheme
McDonald’s Restaurants ran a bikes programme in May and June 2007 in response to staff feedback. Its ‘On your bike’ scheme, which was not part of the government-sponsored bikes-for-work scheme, enabled staff to buy a range of bikes and accessories at discounts of up to 60%.
The restaurant chain has 70,000 employees, 60% of them under 21 years old. It decided to create its own scheme because under-18s cannot access the government scheme without a guarantor’s signature, and the scheme must be made available to all employees.
Neal Blackshire, benefits and compensation manager at McDonald’s, says: “We would have had to exclude our under-18s, which was enough of a barrier for employees to say this is not a top priority right now.”
The restaurant chain also had to solve the problem of a lack of storage facilities for bikes at its premises.