What happens if an employee needs to leave a cycle to work scheme?

Posted by Julie Connor on 20-Jun-2017 13:50:00
Julie Connor

what-happens-if-an-employee-needs-to-leave-a-cycle-to-work-scheme

There are a number of reasons why an employee might need to leave a cycle to work scheme before they have finished paying back an employer for a bike or cycling equipment that has been purchased for them. For example, it may be that they have been offered a new job elsewhere. 

Although this can complicate matters, it can also be planned for so as not to be too problematic. The important thing is to define what will happen should the situation arise and communicate this clearly so that no-one is taken by surprise. 

Usually, an employee decides what bike or equipment they want and their employer pays for it, with it then hired back to the employee by the employer until the cost has been recouped. Only at this point is ownership of the bike or equipment typically transferred to the employee. 

If an employee leaves the scheme early, the bike or equipment will remain the property of the employer. It may be the case that the employer wants to keep the bike for use by other employees. Pool bikes like this are becoming a more popular employee benefit offered by companies. The hire agreement would end with the employee leaving the company and the employee would pay no more money towards the bike or equipment. 

Far more likely, though, is that both the employer and the employee would still like to see ownership of the bike or equipment transferred to the employee. The first thing to bear in mind here is that the bike or equipment will become a taxable benefit when the employee ceases to work for the employer. As such, they will no longer be able to take advantage of the savings made by paying for the bike or equipment from their gross salary before tax. 

The simplest and quickest way to resolve matters in this situation is for the employer to deduct the remaining balance owed by the employee from their final pay. This means that ownership can be transferred immediately. Alternatively, to make repayment more manageable for the outgoing employee, the employer could split it over a longer period. This would require a new agreement to be drawn up and signed by both parties. Only after full repayment would ownership of the bike or equipment be transferred to the employee. 

Whatever approach an employer decides to take in the event that an employee needs to leave a cycle to work scheme before the end of the hire period, it's important that it is written into their initial agreement with the employee and communicated clearly.

Our free guide, 'Choosing a cycle to work scheme: an employer's guide', provides impartial advice on how cycle to work schemes operate, things to consider when choosing a scheme and best practices for setting up a scheme.

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Topics: employees, cycle to work schemes