2.4 Administrative support is available in-house, insurance issues are being addressed and the scheme is now ready to be taken forward.

Transcription

1 Report Resources Committee 17 July 2008 CYCLE TO WORK SCHEME 1- I. Reason for report The purpose of this report is to update Members on the Cycle to Work scheme and to seek agreement to the introduction of the scheme within Dumfries and Galloway Council. 2. Report Summary 2.1 The Inland Revenue Green Transport Plan Tax-exemption Scheme aims to promote healthier journeys to work and to reduce pollution by allowing employers to loan cycles and cycle safety equipment to employees as a tax-free benefit through a lease scheme. Section 9 of this report provides information on how the scheme would work. 2.2 The Asset Management Committee of 22 March 2007 received a report on the Cycle to Work scheme. At that time Members agreed in principle to the introduction of the scheme, recommended that facilities to support cycling be built into future budgets and be included in Asset Management Plans and to receive a report to a future committee once the scheme was ready for implementation. 2.3 The Scheme is now out to tender under EU regulations and a provider (or providers) will be selected following strict criteria based on guidance from the Procurement Unit. 2.4 Administrative support is available in-house, insurance issues are being addressed and the scheme is now ready to be taken forward. 3. Glossary of Terms SHAW - Scotland s Health at Work, a national Award Programme which rewards employers who demonstrate commitment to improving the health and ultimately the performance of their workforce. This programme has been replaced by Healthy Working Lives NI - National Insurance VAT - Value Added Tax PAYE - Pay As You Earn 4. Recommendation Members are asked to: 4.1 agree to the introduction of a Cycle to Work scheme in Dumfries and Galloway Council as outlined in Appendix 3, with the scheme being implemented on an annual basis for up to four years; and 4.2 approve an ongoing provision of up to f300,ooo of funding which will be fully recoverable.

2 Report Resources Com m ittee 17 July Corporate Plan Links and Contribution 5.1 The Cycle to Work scheme will contribute to the greener, healthier and safer and stronger themes of the Corporate Plan through a reduction in car use for short journeys, through contributing to the health and wellbeing of Council staff and in providing employees with an alternative way to travel to work. 5.2 The introduction of such a scheme complements the Combined Services Green Travel plan in operation at the Marchmount site in Dumfries. Feedback from the Marchmount site shows an increase of 5% in the number of employees cycling to work. Better bike routes, completion of the cycle track at Maxwelltown and cycle maps have all been highlighted as important in encouraging employees to cycle to and from work and as a leisure activity. 5.3 The Council s commitment to sustainable travel is evidenced by the upgrading and provision of cycle paths throughout the region and this commitment would be further enhanced by a willingness to support this scheme. 5.4 Sustainable travel and improving the health of the workforce are key aims of this Council as evidenced by the Dumfries and Galloway Local Transport Strategy, the work of the Health Improvement Officer Group including a campaign on the benefits of cycling which contributed to the Council s success in achieving a Bronze Award in the SHAW Programme. The Physical Activity Strategy for Dumfries and Galloway identifies the workplace as an important setting for promoting and supporting physical activity. 6. ResourcesNalue for Money Assessment 6.1 The scheme has no overall financial cost as the funding required to purchase the bicycles in the first instance will be fully repaid by employees. The only financial issue is a short-term effect on cash flow which will result in additional interest costs which are more than offset by employer national insurance savings. 6.2 Apart from officer time, the scheme is cost neutral to the Council and as such offers good value. 6.3 Based on information from bike suppliers and other Councils, uptake of the scheme is estimated at 1-2% in the first year. The maximum amount available to the employee for a bicycle and equipment is f 1,00O(inc. VAT).Member approval of up to E300,000 fully recoverable funding is sought to ensure as many staff as possible can participate in the scheme. 6.4 Any associated costs with the scheme will be met through savings accrued to the Council through Employer National Insurance saving. Appendix 1 presents an example of Employee and Employer savings based on an uptake of 150 employees. 7. Risk Assessment 7.1 A risk assessment exercise has been carried out in respect of the scheme and the results are appended (Appendix 2). It is intended that officer time will be met from within existing resources but this will clearly add to workloads and will need to be carefully monitored. 7.2 The Council s insurers have been consulted and have provided some general guidance on insurance risk for such a scheme. This includes employees having the 2

3 Report Resources Committee 17 July2008 ~ ability, health and competency to cycle on the roads, the employee being responsible for the maintenance of the bicycle and the employee taking out insurance cover to include personal liability protection. These will be covered in the employee agreement which all participants in the scheme will be required to sign. I 7.3 The scheme applies to employees who wish to use a bicycle to travel to and from work, either for whole or part of the journey. What is still unclear in terms of the Council s liability is the position for employees who will also use the bicycle to travel while on Council business. A Dumfries and Galloway Council policy on cycling will help to address this and will be a future agenda item for this Committee. 7.4 There is a financial risk to the Council in respect of employees failing to meet the terms of the agreement. Steps will be taken to cover all eventualities such as individual agreements containing the authority from the employee to deduct any outstanding balance due from the final salary payment on leaving the Council s employment. 7.5 Approval of the scheme by the Inland Revenue is only available after the scheme has been introduced. If all the necessary paperwork is in place, then any risk is kept to a minimum. In the event of the scheme not complying with the Inland Revenue, there may be costs incurred and in such an instance this will be brought back to Committee. 7.6 Unison has expressed concerns regarding the salary sacrifice aspect of the scheme and the effect this may have on pensions and benefits. From research on other schemes and in view of the capping of the amount available to employees for purchasing a bicycle, the effect is likely to be minimal for most employees. Information will be made available to employees about the impact of salary sacrifice. 8. Consultations The Acting Director of Finance, the Finance Officer Treasury, the Group Manager Human Resources, the Governance Team, Legal Services, the Corporate Director of Planning and Environment Services, the Officer Green Team, the chairman of the Health Improvement Officer Working Group and Unison and TGWU have been consulted on this report and their comments incorporated. 9. Background 9.1 The Inland Revenue Green Transport Plan Tax-exemption Scheme, allows employers to loan cycles and cycle equipment to their employees as a tax free benefit through a lease scheme. At the end of the lease period, employees may then have the opportunity to buy the bike resulting in a saving on the cost of the bicycle. Through this scheme the Government aims to: 0 encourage sustainable travel 0 improve the health of the workforce 0 address congestion problems and free up car parking spaces 0 reduce pollution 9.2 The introduction of a scheme for Dumfries and Galloway Council would demonstrate commitment and leadership to staff and set a good example to other employers in the region and to the general public. The scheme will also help to reduce Dumfries and Galloway s carbon footprint.

4 Report Resources Committee 17 July In 2006, the Council introduced a Home Computer Initiative which provided staff with the opportunity to purchase a computer through salary sacrifice. The lessons learned from this have been taken into account in developing the Cycle to Work scheme. 9.4 Contact has been made with other Scottish Councils who have Cycle to Work schemes. These include Edinburgh City and Fife and the working group has looked at these schemes and the suppliers they use in some detail. Dumfries and Galloway College has a Cycle To Work scheme in place and NHS Dumfries and Galloway is just about to launch a scheme. 9.5 Dumfries and Galloway Fire and Rescue Service and Dumfries and Galloway Constabulary will be participants in the scheme. 9.6 How the cycle scheme works: 0 the bicycles are owned by the Council and then loaned to the employee as a taxexempt benefit. The bicycles are owned by the Council until ownership is transferred at the end of the payment period. The payment period will be set at 12 months. 0 the employee reimburses the employer for the cost of the loan by means of a salary sacrifice which is a reduction in their gross monthly salary. If the employer is eligible, they can claim back any VAT paid on the equipment and pass on this saving in whole or in part to the employee. In addition, because employees are being paid less each month, they pay less PAYE and NI contributions which adds to the savings made. Savings on the bicycle price can amount to up to 40-50%. 0 the salary sacrifice scheme may have an effect on an employee s pension entitlement, although the impact is likely to be fairly minor. Such details will be outlined in the literature available to employees and employees will be advised to seek independent pension advice where they have any concerns. 0 information about the scheme in the form of likely questions from staff has been drafted and is attached as Appendix The introduction of a Cycle to Work Scheme may lead to an increase in demand for secure storage of bicycles and equipment at Council Offices across Dumfries and Galloway. Bicycle storage is already available at a small number of sites across the region and where gaps are identified, external funding may be available from the Regional Transport Partnership and Area Managers for secure bicycle storage, as and when budgets allow. Secure bicycle storage will also encourage those who already own a bicycle to cycle to work. 9.8 The scheme has already attracted staff interest and several queries have been received about shower facilities for staff who cycle to work. Steps will be taken to identify shower facilities currently available and discussions are underway with Leisure and Sport staff regarding the use of shower facilities at leisure centres close to Council Offices. However the majority of staff are likely to be cycling short distances to and from work and therefore may not require shower facilities.

5 Report Resources Committee 17 July Keylssues 10.1 The Cycle to Work scheme is a means of promoting healthier journeys to work and would demonstrate the Council s commitment to helping improve the health of its workforce The scheme would be no cost to the Council but would provide a benefit to employees and potential employees. Denise Kearney Policy Support Officer Corporate and Community Planning Chief Executive Service Tel: Leslie Jardine Interim Executive Director of Community and Support Services Council Offices English Street Dumfries Date of Report: 2 July 2008 File Ref: OGT/I - DwMBRe~003 APPENDICES - 3 Background Papers : Dumfries and Galloway Council Asset Management Committee - 22 March 2007 (Report and Minute on Cycle to Work Scheme) Dumfries and Galloway Council report to Area and Group Management Team - 14 February 2005 (Ref:OGT/l RepOO2) The City of Edinburgh Council Bike to Work Scheme Fife Council Bike to Work Scheme

6 Bike RRP Safety accessories RRP Value of goods VAT recovered by employer *** Cost to be charged to employee through salary sacrifice Employees PAYE saving through salary sacrifice Employees National Insurance saving through salary sacrifice Employees National Insurance rebate for contracted out scheme Cost to employee Saving based on cost of f 1,000 ** Employers National Insurance saving through salary sacrifice Employers National Insurance rebate for contracted out scheme Cost of bike and accessories f Employee Savings Higher rate tax payer paying NIC above upper earnings limit f APPENDIX I Basic rate tax payer paying NIC between lower and upper earnings limit f % % % -9-11% % % 40% Employer Savings 12.8% % % % Total Emolovers Saving Number of employees Take-up rate % Number of employees on scheme 150 Maximum amount per employee f 1,000 Assumed average amount per employee f 1,000 Total borrowing requirement for scheme f 150,000 Total employer saving on national insurance f 11,700 Total employer cost of interest on borrowing f 3,900 Net employer saving f 7,800

7 APPENDIX 2 Risk Assessment A risk assessment was applied to two options for the bike scheme. The two options were I-No change and 2-the new bike scheme. The risks were identified and plotted on the Risk Matrix. Option 1 - No Change (i.e. the Council continues to operate without a bike scheme for employees) The risks were identified as follows: 1.I The green agenda at both national and local level is undermined 1.2 The Council s health improvement agenda is undermined 1.3 Employees will not have access to benefits which are available to employees in some other councils 1.4 The current investment in cycling infrastructure is undermined Option 2 - New Bike Scheme The risks were identified as follows: 2.1 Increased investment by Council 2.2 Litigation and Council s responsibilities 2.3 Support /infrastructure cannot be accommodated. This refers to availability of secure bike storage, storage of bike kit, etc. 2.4 Barriers for significant numbers of staff in terms of their eligibility for the scheme due to where they live/work 2.5 Impact on other forms of transport 2.6 Administration of scheme in terms of assessing eligibility The use of the matrix identifies the greatest risks for the project that is, those that are most in need of action. The greatest risks fall within the area above the line in bold on the matrix and steps need to be taken to manage these so that the likelihood of risks occurring or their impact is reduced.

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9 APPENDIX 2 The risks which require to be addressed as a priority are 1.3, 1.4, 2.2 and and 1.4 will be addressed if the Council agrees to the adoption of a bike scheme. 2.2 Issues around the liability of the Council in respect of the bike scheme, require to be addressed 2.3 Storage of bikes will be an issue in all Council offices. Steps are being taken to ensure facilities to support cycling are built into future budgets.

10 APPENDIX 3 Cycle To Work Scheme for Dumfries and Galloway Council (DRAFT) The following may help answer any questions you might have about the Dumfries and Galloway Council Cycle to Work Scheme. 1. What is a Cycle to Work Scheme? The Cycle to Work Scheme is a government tax incentive created to encourage employees to cycle to and from work, thus improving general health, and to reduce air pollution through a decrease in the number of cars being used for travelling to and from work. The scheme enables employers to purchase bikes and safety equipment and lease them to staff over a set period without having to pay tax or National Insurance on the repayments. This tax exemption was one of a series of measures introduced under the Government s Green Transport Plan. 2. How does it work? Employees can lease a bike and safety equipment/accessories over a 12 month period for use in travelling to and from work. The lease cost is deducted from your gross pay in equal instalments over the 12 month period. You can lease equipment up to the value off 1,000 including VAT. You save money because your gross salary reduction means that you do not pay income tax and National Insurance on the amount by which your gross salary is reduced. 3. Who owns the bike and what happens to it at the end of the scheme? Dumfries and Galloway Council owns the bike and safety equipment/accessories for the duration of the lease. At the end of the 12 month lease period, the Council may seek to dispose of the bike and safety equipment/accessories and it is common in such circumstances for employers to offer to sell the equipment at a fair market value. A typical fair market value is estimated to be 5% of the original price of the equipment after 12 months. 4. Can any employee join the scheme? Subject to salary limits, as long as you have a contract with Dumfries and Galloway Council which will last for a period of at least 12 months from the commencement of the lease payments, you will be able to lease a bike. Unfortunately due to the length of the lease, short term temporary and casual workers will not be able to participate. You must also be at least 18 years of age and not due to retire during the 12 month period from the commencement of the lease period. Also you cannot participate if you are on, or due to go on, unpaid leave or a career break. Ref: OGTll Bike Scheme July 2008

11 APPENDIX 3 1 For the purposes of the scheme, employee includes those people employed by Dumfries and Galloway Constabulary. 5. I am part-time and do not have a high income, will I be able to join the scheme? Employees whose income would be reduced to less than the NI Lower Earnings Limit or the National Minimum Wage will not be able to participate in the scheme. Information is available at If you have more than one permanent or long-term temporary job with the Council, you can combine the salaries for the purposes of the scheme although you will be asked to identify which salary you want to pay the bike from. 6. Another member of my household also works for Dumfries and Galloway Council. Can we both lease bikes? Yes, as long as you are both eligible to join the scheme, each employee is treated separately. 7. Can I join the scheme more than once within the lease period? No. No more than one lease per person is permitted to operate at the same time. 8. I have a leased computer through the Council s Home Computer Initiative. Can I also lease a bike? Yes, subject to the minimum salary limits outlined in Q5 not being breached. 9. How will the scheme affect my pay, conditions of service, pension and state benefits? By participating in the scheme, you will be agreeing to a contractual change to your pay for a period of 12 months. Your new pay will be your original gross salary less this and any other salary sacrifice reductions you may have agreed. 10. When will I see the reduction in my pay? Under normal circumstances, the reduction will commence on the nearest possible pay date following closure of scheme orders. 11. What happens if I get a pay rise during the agreement? Any pay increases will be reflected against your original gross salary (your pre-salary sacrifice pay). Therefore you will not be adversely affected. 12. Will my pension rights be affected? Both your pension contributions and Dumfries and Galloway Council s contributions will be based on your pre-salary sacrifice pay. Any added years or Additional Voluntary Contributions you pay will also be based on your pre-salary sacrifice pay. Pension entitlement will be unaffected by participating in this scheme. 13. What is the effect on my contractual payments, such as overtime? Participation in the scheme will have no effect on contractual payments as these are based on your pre-salary sacrifice pay. Ref: OGT/l Bike Scheme July 2008

12 APPENDIX What happens if I go on maternity leave? Your Occupational Maternity Pay (that paid by the Council) will be based on your pre-salary sacrifice pay. If you take unpaid maternity leave, your lease payments will be suspended and will resume when you return to work. The lease period will be extended accordingly. However statutory Maternity Pay and Maternity Allowance will be based on your reduced pay. 15. What if I take unpaid leave or my sick pay will not cover the payments from my salary? Your payments will cease temporarily and the length of the lease extended accordingly. There will be a limit of six months temporary suspension of payments after which you will be treated as an early leaver and must agree to pay the o u tsta nd i ng account. 16. Will there be an effect on my state benefits? State benefits, such as Statutory Maternity Pay, Statutory Sick Pay and tax credits are based on your actual earnings after salary sacrifice reductions. You should therefore check how a reduction in gross salary may affect your benefits with the benefit provider. You can access further information through the link to the HM Revenues and Customs site hmrc.aov.uk 17. What happens if I leave my job before the end of the lease period? In this case, you become an early leaver under the terms of the scheme. You will be required to pay all the outstanding payments remaining on your Agreement from your final net salary. The deduction is taken from net rather than gross salary as you will no longer be entitled to benefit from income tax and National Insurance savings. If there is any shortfall, an invoice will be issued to you by the Council which must be paid within 30 days. 18. What happens if I want to terminate the agreement early? You cannot leave the scheme prior to the end of the lease unless you leave Dumfries and Galloway Council. 19. What happens if I change my mind after joining the scheme? Under the terms of the scheme, it is not possible for you to cancel the lease and you are therefore committed to making the salary sacrifice for the duration of the loan period. 20. Will any financial reference be affected? If you require a financial reference confirming your salary, this will show both your pre-salary sacrifice pay and your new contractual salary. You should be aware that a lender may base the decision on actual earnings (ie your reduced salary). 21. Can I elect to make a higher monthly deduction and shorten the term? No, the period is fixed at 12 months. 22. Is there a minimum/maximum limit on what I can lease? Yes. The minimum limit is E200 and a maximum limit of f 1,000 (both inclusive of VAT) for bikes and safety equipment. Ref: OGTll Bike Scheme July 2008

13 APPENDIX What happens if I don t use the full amount of the package I selected on my order? The salary reduction will be as specified on the Employee Hire Agreement i.e. the amount you selected on your order. Even if you do not fully utilise this amount, your salary will be reduced by this amount. Therefore you are strongly advised to fully utilise the amount selected. 24. Can I pay more than the value I select? Yes but you will need to pay by cash or credit card, the amount by which your selection exceeds the bicycle package already selected. This amount will not form part of the Employee Hire Agreement and therefore no tax/national Insurance savings will accrue. 25. Can I order equipment over the E 1,000 limit? Yes. You will need to pay the amount exceeding f 1,000 directly to the bike supplier. The surplus amount is not subject to any tax relief and fair market values are only paid on the f 1,000. In addition, the bike will still be the property of the Council 26. Do I have to use the leased bike to travel to work? Yes you will be required to use the bike for journeys to and from work. However you will not be expected to use it for work journeys all the time. You may also use the bike for partial journeys (eg to and from train stationdbus stops/parking on outskirts of town). 27. What happens if the bike is damaged or stolen? You are responsible for the bike and equipment during the period of the lease. It is a requirement of the scheme that you insure it adequately against theft and other usual risks. Please note you will still be liable for the lease payments even if your bike is stolen or written off. Therefore your insurance should cover the full cost of repairing or replacing the bike and equipment. 28. Do I need personal insurance for cycling to and from work? Yes it is a requirement of the scheme that you have personal liability cover whilst cycling and you will be required to show evidence of insurance. 29. What kinds of bikes are available on the scheme? You can choose any bike as long as you use it mainly for travelling to work as opposed to leisure use 30. How much can I expect to save? You can save up to 40-50% on the retail cost of the equipment through tax and National Insurance savings as you pay the lease costs from salary, before tax. This is known as salary sacrifice. The amount saved will be dependent upon your individual tax coding and tax bracket. 31. What equipment is included in the scheme? Any equipment that contributes to your safety on the bicycle is included. This includes lights, helmets, locks, reflective bands and high visibility clothing. Mudguards, bags, pannier racks, bike carriers (for cars) and child seats can also be included. Ref: OGTll Bike Scheme July 2008

14 APPENDIX Will I be able to upgrade my bike? Yes, you can change the pedals, wheels, gears etc. However if by doing so the frame is damaged, it will no longer be covered by the warranty. 33. Who is responsible for repairs and maintenance? During the period of the lease, you will be responsible for any necessary repairs and maintenance. The bike will normally come with a one-year manufacturer's warranty covering the frame and possibly other parts. The warranty period starts from the date you receive your bike. The warranty does not usually cover any wearing parts (such as brake pads, tyres). The bike supplier will provide a free check / service after approximately six weeks but you will have to pay for any other work required after that. 34. Can I sell the equipment obtained under the salary sacrifice scheme? No. For the period of the lease, the equipment is not yours to dispose of or sell. 35. Does the Council provide storage for bikes at the workplace? Some premises will have bike storage. However there will be premises where there is a demand but no provision. It may be possible to extend the storage to meet demand. Please contact the scheme administrator to discuss. 36. As this is a non-tax benefit, do I need to inform HM Revenues and Customs (HMRC)? No, the scheme is set up so that under the current tax rules, you do not have to pay tax on the benefit and therefore you do not have to notify the HMRC. Ref: OGTA Bike Scheme July 2008