The cycle to work scheme is one of the oldest salary sacrifice arrangements, and one of the simplest to offer. An employee gets a bike and equipment through their employer, paid for by giving up a slice of gross pay over a hire period, and because that slice comes out before tax and National Insurance, the bike costs them less. For you, it is a benefit staff appreciate that also saves employer National Insurance. The work is in running it correctly over the hire term, which is our part. This page explains how the scheme works for employers and how we handle the payroll side.
This is one scheme within salary sacrifice. For pension, electric cars and the general rules, see our salary sacrifice overview.
What the cycle to work scheme is
The cycle to work scheme lets an employer provide bikes and safety equipment to staff through salary sacrifice. The employee chooses a bike up to an agreed value, the employer hires it to them, and the cost is spread across a hire period as a reduction in gross pay. Because it is a genuine salary sacrifice, the sacrificed amount is not paid as cash earnings and does not attract National Insurance, so the bike ends up costing the employee less than buying it from taxed income. It was introduced to encourage greener, healthier commuting, and it remains popular for exactly that reason.
How it works for employers
The scheme itself is administered by a cycle to work provider, who runs the voucher system and the network of retailers your staff can use. Your role as the employer is to sign up with a provider, agree each hire, and run the salary sacrifice through payroll over the hire term. The bike remains technically owned by the scheme during the hire, and is usually transferred to the employee at the end. None of this is complicated, but it does need running accurately over months, per employee, which is where a payroll bureau earns its keep.
The saving and the payroll side
The saving works the same way as any salary sacrifice. The employee saves the income tax and National Insurance they would have paid on the sacrificed pay, and the employer saves employer National Insurance on it too. On the payroll side, we set the sacrifice up over the correct hire term, apply the National Insurance treatment, and make sure the payslip shows the arrangement clearly so staff can see what is happening to their pay.
Our salary sacrifice calculator gives a quick estimate of the take-home effect of a sacrifice, and our worked examples show how it lands on a payslip.
Limits and the end of the hire
There is no longer a fixed £1,000 limit on the scheme, so employers can offer higher-value bikes and e-bikes, subject to the minimum wage floor and whatever limit your scheme provider is authorised to run. At the end of the hire period the employee normally keeps the bike, either by paying a small transfer fee or through an extended hire the provider arranges to keep it tax-efficient. We close off the payroll side correctly when the hire ends.
Is it worth offering?
For most employers, cycle to work is an easy benefit to say yes to. It costs little to run, staff genuinely value it, and it saves you employer National Insurance on the sacrificed pay. The one thing to weigh is your workforce: it cannot be offered to anyone whose pay would drop below the minimum wage, so it suits some teams better than others. Beyond that, the main consideration is administering it properly, and that is exactly what we take off you.
What to watch for
- The minimum wage floor. A sacrifice cannot take cash pay below the National Minimum Wage or National Living Wage, so lower-paid staff may not be able to take part.
- Leaving mid-hire. If someone leaves before the hire ends, the balance usually has to be settled from net pay. We handle the payroll adjustment; the terms sit with your scheme provider.
- Keeping track. With several staff on different hire terms, it is easy to lose track of end dates. We keep them straight.
How we run it through payroll
Once your scheme is set up, we build each hire into payroll over the right term, apply the National Insurance treatment, keep the minimum wage check running, and handle the end of the hire when it comes. If someone leaves early, we make the payroll adjustment correctly. We are a South Wales payroll bureau with more than 60 years of combined experience, CIPP members and Chartered Accountants (ICAEW), ICO registered and Cyber Essentials certified. To offer cycle to work without the admin, talk to us about your payroll or see our pricing.