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Cycle to Work

Legal Q&A: Cycle to work schemes

by Personnel Today 8 Sep 2009
by Personnel Today 8 Sep 2009

Cycle to Work schemes present various legal questions, the answers to which Ben Stepney and Megan Fradgley provide below.

Q Can employers insist that participating employees take out adequate insurance?

A Employers can make it a condition of the scheme that employees insure the bike against theft or damage. Most cycle to work schemes require employees to sign an agreement stating that they will insure the bike themselves.

If the bike is to be used in the course of employment (e.g. to cycle to a client meeting) employers should check that any claims are covered by their employers’ liability insurance.

If not, the employer could take out specialist cycle scheme insurance.
 

Q Can employers insist upon seeing evidence of insurance?

A Yes. Employers should highlight the need for adequate insurance by making it clear to employees that if the bike is damaged or stolen they will still be liable to pay for the bike under the scheme.


Q Can employers insist upon monitoring usage of bikes acquired as part of the scheme, for example, ensuring that they are serviced regularly and appropriately?

A Employers can require employees who sign up to the scheme to agree to maintain the bike in a roadworthy condition. Many cycle shops which supply bikes under the scheme will also offer maintenance and servicing, as well as a warranty in case of defects.


Q
If a participating employee leaves employment and does not return a bike acquired under the scheme how far can the employer go in recovering the equipment?

A If the employee is made redundant or leaves the company, they will have to pay any outstanding balance remaining on the bike without any tax exemptions. The scheme should allow the employer to deduct the balance from the final salary payments due to the employee.


Q
What are the employer’s liabilities under consumer credit regulations?

A The salary sacrifice and loan agreements used for the scheme are subject to the Consumer Credit Act 1974. The Office of Fair Trading has issued a group consumer credit licence to cover employers using the scheme, though this is limited to bikes up to the value of £1000 including VAT. For bikes worth more than £1000, the employer would need to apply for their own individual licence.

Employers must not guarantee to sell the bike to the employee at the end of the hire, as this would take the arrangement outside the scope of the group licence. Instead, the employer should offer to sell the bike to the employee at a fair market price at the end of the hire.


Q
What are the employer’s obligations under the salary sacrifice scheme?

A Employers should ensure that any salary sacrifice scheme is correctly structured to ensure compliance with HM Revenue & Customs’ requirements for the scheme. Employees’ contracts of employment will need to be varied to reflect the salary sacrifice.

HMRC requires a salary sacrifice to be irrevocable or for a fixed duration in order to benefit from the advantageous tax treatment. A unilateral right for the employee to demand to return to their previous salary would suggest that a true salary sacrifice has not been made.

It is important that the employer does not simply give the bike to the employee at the end of the scheme, as this may turn the bike into a benefit in kind which would prevent the salary sacrifice applying. 

Employers should also stress to employees participating in a cycle to work scheme that 50% of the bike’s use is for commuting, though as mileage doesn’t have to be logged then this is unlikely to cause any legal or taxation headaches.


Q
How is the salary sacrifice scheme affected by the National Minimum Wage?

A Employers must ensure that those on or around the National Minimum Wage (£5.80 per hour for an adult) do not sacrifice salary that takes them below the threshold – if they do then the employer will be in breach of NMW regulations.


Q
Does an employer have any health and safety responsibilities regarding employees who cycle to work?

A Employers have a duty to protect the health and safety of employees while at work, but this duty is unlikely to extend to bicycle journeys to / from work, in the same way that an employer is not responsible for the safety of employee’s who drive to / from work.
 

Q What happens if an employee suffers an accident because of a fault with a bike obtained through a cycle to work scheme? Could the employer find themselves on the wrong end of legal action for any damage caused?

A The employer should be able argue that any liability for a faulty bike lies with the bike shop from which it was purchased. The shop itself may then pass on liability to the manufacturer. 

There are numerous companies that run the cycle to work scheme on the employer’s behalf.  Employers who use these companies should clarify who is liable for faulty equipment in their agreement with the scheme provider.

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Answers supplied by Ben Stepney, solicitor, and Megan Fradgley, trainee solicitor, in the employment team at Thomson Snell & Passmore.

 

mktoMunchkin(“589-ITG-580”);

Personnel Today

Personnel Today articles are written by an expert team of award-winning journalists who have been covering HR and L&D for many years. Some of our content is attributed to "Personnel Today" for a number of reasons, including: when numerous authors are associated with writing or editing a piece; or when the author is unknown (particularly for older articles).

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