Cyclescheme works through salary sacrifice. Your employer buys the bike and/or equipment on your behalf. You pay them back in monthly instalments deducted from your gross salary, then make a final payment to transfer ownership of the bike from them to you. You save money because you don’t pay income tax or National Insurance on the part of your salary that’s sacrificed. Your employer saves money because they don’t pay Employers’ National Insurance Contributions on that amount. There’s more here on how it works.
Essentially, there are two key requirements.
- One is that you receive a salary and are paid, at least in part, through PAYE (Pay As You Earn); you can’t sacrifice what you don’t receive.
- The other is that your employer is enrolled in Cyclescheme. If not, invite them; it only takes a few moments.
If those two criteria are satisfied, you can start looking for your next bike. It doesn’t matter whether you work in the private, public, or voluntary sectors. Your eligibility can be affected by a few other factors, however. Read on if you earn the National Minimum Wage or close to it, if you’re under 18, or if you’re self-employed.
Salary sacrifice payments cannot reduce your gross pay below the National Minimum Wage (NMW) or National Living Wage (NLW) as this is against the law. You have to be earning at least the NMW after any salary sacrifice. That means you need to be earning a bit more than the NMW – although not much more, assuming a lower value package.
There’s no minimum value for bikes or accessories on Cyclescheme. Let’s say you’ve seen a bike and equipment that adds up to £208. You’re paid weekly and you work 37 hours a week. The weekly salary sacrifice over one year would be £4: £208 divided by 52 weeks. You would need to be earning 11 pence more than the NMW (i.e. £4 divided by 37 hours) to afford this.
Employers can help low wage earners participate in Cyclescheme by offering a longer salary sacrifice period – for example, running the scheme over 18, 24 or 36 months instead of 12. In the example above, your salary sacrifice payments would be only £2 per week rather than £4 if you made payments over two years rather than one. That would make the £208 package affordable even if you earned only 6p above the NMW. If you earned 11p or more above the NMW, you might sacrifice £4 over two years rather than one to get a package worth £416 instead of £208. To set up longer-duration schemes like this, your employer need only contact Cyclescheme, as our systems will accommodate a variety of options.
If you earn exactly the minimum wage you should speak to your employer, as they can still loan you a bike for free so that you’re not excluded from having the use of a bike to get to work. A pool of bikes for employees is an effective way for employers to promote health, punctuality, and positive attitudes among staff.
Ordinarily, you need to be 18 or older to take part in Cyclescheme, since the provision of a bike and/or equipment through salary sacrifice is a hire agreement that falls under the Consumer Credit Act. The law regarding this is different for minors, which is to say under-18s. There is a way around this for those aged 16 or 17. You just need a parent or guardian to act as a guarantor. On top of this, you’ll need to earn the NMW plus the value of the salary sacrifice (see Low wages, above). Realistically, you’ll also need plenty of hours at work each week as well. If you only work, say, 10 hours a week and earn 10p per hour above the minimum wage, that’s just £1 per week available for salary sacrifice – and £52 won’t go far.
You can’t take part in Cyclescheme if you’re a sole trader. As a sole trader, you pay income tax and National Insurance once a year under Self Assessment, the amounts being based on your profits. You don’t pay tax and National Insurance through PAYE because you don’t receive a salary as such. Without a salary to sacrifice, you can’t take part in a salary sacrifice scheme like Cyclescheme. The exception would be for a sole trader who had a second job that did pay a salary.
You can take part in Cyclescheme if you run your own limited company as a director, even if you’re the sole employee. With a single-person business like this, you’ll typically pay yourself a minimal salary through PAYE and take the bulk of your income as dividends. Probably the salary you pay yourself is at or even below National Minimum Wage; unless you have a contract of employment with your own company, which is unlikely, you are exempt from NMW.
To be eligible to take part in Cyclescheme, you’ll have to pay yourself differently. You’re an employee of your company, and as with anyone on low wages you must be earning NMW after any salary sacrifice payments. So you must pay yourself NMW plus the value of the salary sacrifice you’ll be making.
Your director’s salary will thus be larger in your annual accounts. You’ll still draw down dividends, but your administrative expenses will be larger by the increase you make in your director’s salary.
Disability bikes are essentially no different from the more readilly available models you might see in your local bike shop. The difference tends to come in the cost; adapted bikes and slightly more niche recumbants or hand cycles can be quite costly. Because of this there is a specific mention of them in the Cycle to Work implementation guidence albeit the guidance does not necessarily ensure additional support. The guidance states "It may be appropriate for an employer to consider making a reasonable adjustment to the value of a cycle package (i.e. a cycle and safety equipment) that it offers to one of its employees. (They) may wish to offer a package the value of which is above that normally permissible under a Cycle to Work Scheme under circumstances in which the employee has specific needs that require a specialist cycle and/or safety equipment. We would expect this to normally be limited to cases where an employee has a recognised disability for the purposes of the Equality Act 20103 or is outside of the height range covered by standard cycles and therefore physically unable to use them".
Reading between the lines, the guidance is indicating that the employer should/could offer a bike worth over £1,000 to their disabled employee in return for a salary sacrifice of £1,000 - essentially covering the disparity. As such, we would encourage disabled cycle commuters to talk to their employers about what is feasible within their organisation. If the organisation is unable or unwilling to pay for the additional cost of the cycle then the employee may choose to do this themselves. Alternatively, the employee could contact the Cyclescheme retail team and describe the type of cycle they are looking for and their budget and our team will do their best to meet the employees' needs. You can find more info on Cyclescheme's bike sourcing solutions by visiting our 'Any bike. Any brand. Anywhere' page.
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