Make the most of bikes-for-work schemes

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Bikes-for-work plans have tax and national insurance efficiencies, but take-up can vary between 2% to 20%.
Employers can make a scheme more appealing by introducing measures that make it easier to cycle to work, such as bike-parking facilities and onsite showers.
Promoting it alongside wider initiatives, such as employee health and wellbeing, or carbon emission reduction programmes, can draw further attention to a scheme.

Case study: Octopus reaches out for bikes for work take-up

When Lisa Hamill joined marketing and PR company Octopus Group as HR director two years ago, she set out to revive the firm’s salary sacrifice bikes-for-work scheme.

The company started promoting the scheme in March 2011 as the weather improved, using its intranet to explain how it worked and outline the benefits.

“We launched it around April and back then we had 55 employees and five took it up, so we got a 10% take-up, which is not bad for a first time,” says Hamill.

Four of the five staff who took part are based in the firm’s London office, but Hamill also has high hopes for the scheme at its Windsor premises. “We need to do as much as we can to attract people from the local area to come and work here,” she says. “It also benefits us to know we do not have to find a parking space. It costs us about £800 a year for each person to park in Windsor.”

The firm’s workforce has increased to 70 over the past year and Hamill now intends to run a second campaign in the spring to encourage more to sign up.

“We are considering offering some kind of personal benefit or points toward cycle equipment for every mile people cycle, or maybe we will make a contribution to charity for every time staff cycle the equivalent of John O’Groats to Land’s End,” says Hamill.

Bikes-for-work schemes are a cost-efficient way to boost an employer’s green credentials, improve employee health and motivation, and save on tax and national insurance, says Nick Martindale

With above-inflation rail fare rises taking effect this month and fuel prices remaining stubbornly high, a bikes-for-work scheme could make a real difference to staff struggling with high commuting costs.

Under such a scheme, employers can offer staff access to heavily discounted bikes and cycling equipment – up to 32% or 42%, depending on whether they are lower- or higher-rate taxpayers – with the outlay usually paid back over 12 or 18 months through a salary sacrifice arrangement.

Employers can see huge benefits, too, because schemes usually pay for themselves out of national insurance (NI) and tax savings, while healthier and fitter staff should lead to greater productivity and lower stress levels. Making salaries go a little further could be the difference between keeping or losing top talent in these austere times.

But take-up of bike schemes remains relatively low. Steve Mason, key account director at Personal Group, says it can vary between 2% and 20%, depending on the organisation. “One employer might have a local workforce that can realistically cycle to work every day, whereas another might have an employee base whose commute is further and would not be practical by bike,” he says.

There is no hard-and-fast rule for how many staff will be interested in cycling to work, says James Borley, account manager – marketing at Cyclescheme. “A good way to gauge whether staff will be interested is to ask them,” he says. “Send out a short questionnaire to gauge the receptiveness of staff.”

A 10% take-up would be a good target for most organisations, says Simon Harris, tax-free cycle manager at Cycle Surgery. Employers can make schemes more appealing by implementing measures such as bike-parking facilities and onsite showers. “They could also facilitate this by promoting cycling events at work, and starting up a bike users’ group to help new cyclists get advice and tips on cycling from colleagues,” he says.

Where schemes already exist, running a targeted communication campaign can make a big difference. Mark Brown, head of Evans Cycles’ Ride2Work scheme, says: “We generally see an average employee take-up of 3-5%, but this has been in double figures in many organisations that have experienced strong demand, supported this with effective communications, and invested in cycling infrastructure and initiatives.”

What is included in a scheme?

Educating staff about the scheme should also cover what is included. Staff can spend up to £1,000 on equipment, more than enough to cover most standard bikes. Mason says: “As well as cycles, this can include safety equipment such as helmets, bells and reflective clothing, but not equipment such as bike computers and satellite navigation systems.”

Picking the right time of year for communications is also important, says James Malia, head of employee benefits at P&MM. “The best time to run a scheme is in the new year when everyone is feeling a little portly, having overdone it over Christmas,” he says. “Spring is another good time because people find there is a lot more day than night.”

Another way to promote bike schemes is to tie them into wider initiatives to boost employee health or reduce carbon emissions. Matt Duffy, head of online benefits at Lorica Employee Benefits, suggests promoting bikes for work alongside programmes to encourage the use of green cars, car-share plans, carbon offsetting or charitable giving projects.

“Alternatively, these can sit alongside season ticket loans where staff can use a cycle to travel between station and work and home,” he says. “This not only helps with a green travel policy, but also ties in with health and wellbeing. It shows an employer is supporting staff, both in offering flexibility and promoting health initiatives.”

Despite recent uncertainty over the structure of bikes-for-work plans (see box page 39), take-up has remained strong. According to the Cycle to Work Alliance, more than 400,000 staff in 15,000 organisations have joined the programme since it was introduced in 1999.

“With government targets to improve fitness levels of adults and children, as well as reducing C02 output, cycling will play a critical role,” says Cycle Surgery’s Harris. “A cycle scheme in the workplace is the most financially beneficial way to do this.”

Court ruling ends uncertainty

A ruling by the European Court of Justice in July 2011 that imposed VAT on the provision of several benefits offered via salary sacrifice, including bikes for work, has reduced the scope of savings for employees.
HM Revenue and Customs has said employers that provide bikes-for-work schemes through a salary sacrifice arrangement must account for tax based on the value of the salary forgone by the employee in exchange for the hire or loan of a bicycle.
The new regime, which came into force on 1 January 2012, means employers will be able to recover the VAT incurred in providing the benefit, subject to the normal rules. In instances where the employer charges the employee an amount less than the original cost, the value of VAT will be determined by the cost incurred by the employer.
The reductions available remain attractive, however, with basic-rate taxpayers able to get a discount of up to 32% and higher-rate taxpayers as much as 42%.
For employers passing on the additional cost to staff, the additional NI savings on the higher purchase price make the scheme even more attractive.