In recent years, there has been a positive focus on health and wellbeing for employees and within the workplace. At Charnwood Accountants, one such initiative that we have introduced for our staff, is the cycle to work scheme.
HMRC do not allow employers to pass many tax-free benefits onto their employees, however the cycle scheme is something that is well established and actively encouraged by the government for companies to offer to their staff.
How does it work?
In a nutshell, employers purchase a bike for their staff and then the employees “hire” the bike from the company over a period of time, for example 12 months with the “hire fee” deducted from their gross salary. By deducting from the employee’s gross salary rather than net amount, they receive tax and national insurance savings which can equate to a 32% saving on the cost of a bike if you are a basic rate tax payer (42% if higher rate). At the end of the salary sacrifice “hire” period, employees can purchase the bike from the company for a low fee, which ultimately determined by the market value of the bike.
The tax and NI saving, combined with the 12-month salary sacrifice option, has encouraged some of our employees here at Charnwood Accountants to purchase bikes that previously they would have deemed too much of a luxury to purchase for themselves.
How easy is the scheme to manage?
From our research, all schemes are very easy to set up and maintain. Some high street retailers even run their own schemes which offer different benefits including free service checks on bikes and additional vouchers instore to use against cycling equipment!
Do we have to agree on the bikes our employees have?
Not at all – the process is very simple. You set a limit that the employees can spend, they then select the items that they want and request a “voucher” for the value of the bike that they have selected. As employers, you pay for the voucher through an online portal and then it is down to the employee to take that into a store or order online in exchange for their chosen bike. As soon as the voucher is paid for, you set up the salary sacrifice from the employee’s salary.
Other than financial, what other benefits are there?
1. Reduced staff sickness – recent research suggests that regular cycling halves the number of sick days! The average worker misses 4.5 days due to illness per year, whereas the average cyclist misses just 2.4 days a year! In addition, increased physical activity will also support employees mental health which has also been found to reduce sickness and absenteeism in the workplace.
2. Solves car parking issues – office politics regarding car parking can often be a big issue. More employees cycling allows the company to make the most of limited spaces available, with no parking costs for the employee either.
3. Increased fitness and well-being – increasing physical activity levels can make staff feel more motivated and productive in the workplace. With staff arriving with higher brain function and a positive mental attitude, they are more likely to be motivated and ready to crack on (maybe after a quick freshen up!!), without needing to resort to a cup of coffee to kick start the working day.
4. Reduced congestion – how often do you get stuck in traffic on your daily commute? With many cities now introducing cycle lanes onto the busy streets, you may find it quicker to reach your destination by bike rather than by car.
If the cycle scheme is something that you would be interested in starting for your company then feel free to get in touch on 01509 621833.