The company bicycle - what is allowed and what is not?
Traveling by bicycle is becoming increasingly popular, especially with fuel prices going through the roof. More and more employers are looking at options to get their employees to ride their bikes more often.
However, what are the ground rules regarding offering a company bicycle to employees? After all, there are different ways to make a bicycle available to employees. For example, this can be in the context of a purchase of company bicycle or in the context of a bicycle leasing plan.
Company bicycle (a bicycle in the name of the employer)
When a company purchases company bicycles and allows its employees to use them, the company (or a third party) retains ownership of the bicycles even if the employer proceeds to terminate the employment contract. The bicycle is not owned by the employee.
The provision of the company bicycle can be a surplus on top of the employee's normal remuneration or can be provided against part of the salary to finance the bicycle. This can be done, for example, through a cafeteria plan (i.e. a flexible personalized wage policy, where employees create their own wage package) or through the mobility budget (i.e. the right to exchange a company car for an annual budget, with which an employee can choose and finance his own means of transport).
If you use the bicycle for travel between your residence and your workplace, the benefit is exempt from tax and NSSO contributions even if you use it for other travel. If you do not use the bicycle for commuting, then the benefit of the company bicycle is taxable. Moreover, the company bicycle is also tax deductible for a company 100% provided that the employees use the bicycle for commuting.
Bicycle Lease
A company may also opt for a bicycle lease, possibly as part of a form of flexible remuneration. In a bicycle lease, an employee rents a bicycle through his or her employer on a long-term basis. Usually, at the end of the lease term, there is also an option to take it over (i.e. a purchase option).
During the term of the bicycle lease, usually 3 years, the employee pays a monthly fee for the bicycle. At the end of the lease period, the employee can then take over the bicycle at a residual value that must be at least 16% of the purchase price.
As mentioned earlier, a bicycle lease can constitute a form of flexible compensation. A company can fit the bicycle lease into the pay package of its employees; the lease cost is then directly offset against the user-employee's gross salary.
If an employee uses a leased bicycle for commuting, no additional amount is deducted as a benefit in kind for it. Consequently, the employee pays less taxes.
What in the event of dismissal?
With a company bike, the company purchases bikes in the employer's name and the company retains ownership of the bikes upon termination of the employment contract.
With a bicycle lease, the situation is different. The termination of the employment contract may cause the lease to be terminated early. If you do not take over the lease bike, you may have to pay a severance fee (depending on the contractual arrangements). If you do take over the lease bike, the purchase price will normally be higher, because the lease contract has not yet been fulfilled. In such case you are usually not obliged to take over the lease bike, but you may have to pay a cancellation fee.
A clear policy is a must. To play it safe, the consequences of termination should best be clearly articulated in the cycling policy to avoid misunderstandings and disputes.
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