More and more companies are offering their employees an expensive bicycle as a job benefit. But do employees really save money by doing this? It depends.
Salary is no longer everything. If you believe the major online career portals, companies today have to do more than just pay their employees generously. And so you can now find so-called job benefits in almost every job advertisement. From a monthly ticket to a lunch allowance or gym membership, the list of “additional benefits” is getting longer and longer. You’re increasingly reading about company bikes in the leasing model. “By switching to a bike, everyone can immediately make an important contribution to climate protection,” enthuses one online provider, while another says: “An attractive offer attracts skilled workers and keeps your employees fit and healthy.” The e-bike has become a “status symbol,” you read elsewhere, and on top of that “a visible sign of sustainability.” One platform even promises: “0% effort for companies, 100% performance for employees.” But is it really that easy to get company bikes for the team? In the end, employees really benefit, or do they end up paying more than they’d like?
Save taxes and duties with a company bike
There is a leasing concept behind the company bike offers for companies and their employees. Similar to a company car, the bike is made available to employees for use for a certain period of time. A leasing rate is charged every month. The employer and employee can share the costs, or one party can cover them completely.
If the employee covers the costs, this is usually in the form of a salary conversion. This means that parts of the gross salary are not paid out, but converted into a so-called “payment in kind”. For example, if the leasing rate for a company bike is €200 and half of it is paid by the employee, the gross monthly salary is reduced by €100. Even if this initially means less pay for the employee, it also creates a financial advantage: a lower gross salary means fewer social security contributions and a lower tax burden. The costs do not disappear as a result, but are sometimes significantly reduced, so that the employees who cycle are supposed to get a good deal. Most providers advertise online that employees can save up to 40% of the purchase costs by leasing. But does this really add up?
The branded e-bike for 29€ per month
How high the leasing rate is and what this does to an employee’s net salary depends on the purchase price of the bike, but also on the salary and the respective tax rate. Here is an example:
Mario earns €3,000 gross per month at his company. His boss offers him company bike leasing for a period of 36 months and is prepared to pay 50% of the installment. Mario chooses a new e-bike for the hefty price of €3,200. What costs will this incur?
This can be quickly calculated online using various calculators from providers. One tool already calculates all the necessary insurances that cover wear and tear and inspection costs and calculates a leasing rate of €115.23 for 36 months. Insurance costs make up just under €24 of this. If we now assume that Mario’s employer covers these alone, Mario will have to pay a leasing rate of €45.71 (50% of €91.43), which will be deducted from his gross salary via salary conversion. This gives Mario a net charge of €29.66. How does this come about?
This is the net burden
| Monthly leasing rate (50% employer; 50% employee) | 91,43€ |
| Monthly rate including insurance | 115,23€ |
| Monthly salary conversion (deduction from gross salary) | 45,71€ |
| Actual net burden | 28,89€ |
The calculation assumes, for example, that Mario is an employee in tax bracket 1, does not pay church tax and would therefore normally pay €324.17 in income tax. The salary conversion reduces this to €315.58. The savings in social security contributions are somewhat lower. For example, contributions to health insurance are reduced by just under three euros, nursing care insurance by around four euros, and the savings in unemployment and nursing care insurance are less than one euro. Overall, the tool calculates a net salary of €2,082.58 without leasing and €2,060.92 with a company bike. In other words: the employee would pay just under €21.66 per month to ride a €3,200 e-bike for three years. In addition, €8 is deducted as a non-cash benefit if the bike is also used privately. What is this all about?
The 0.25% rule
Anyone who also uses a company bike for private purposes must pay a flat-rate tax on the monetary benefit they receive. Since February 2020, bicycles have only been taxed at 0.25% of the purchase price, which for example comes to €8 for a company car worth €3,200. For comparison: for a company car, it is 1% of the so-called gross list price.
In Mario’s case, the monetary benefit is €8. In total, his net monthly payment is €29.66 (€8 + €21.66), which results in total costs of €1067.76 after three years.
This is what happens with social security contributions
| Without company bike leasing | With company bike leasing | |
| Gross salary | 3,000€ | 3,000€ |
| income tax | 324,17€ | 315,58€ |
| Solos | 0€ | 0€ |
| Health insurance | 219,00€ | 216,35€ |
| care insurance | 56,25€ | 55,54€ |
| unemployment insurance | 39,00€ | 38,51€ |
| pension insurance | 279,00€ | 275,49€ |
| Net salary | 2,082.58€ | 2,060.92€ |
Is it worth it? A question of expectations
Whether leasing is financially worthwhile for the employee or not is primarily a matter of discretion. Anyone who has never been interested in buying a new bike ends up paying for something that they could actually save on. On the other hand, anyone who has been thinking about buying a brand new carbon bike for years could get a good deal. Employees can save up to 40% if they lease the bike first and then purchase it later, instead of buying it outright. But this only applies if an employee buys the bike from the provider after 36 months. One platform that offers such a leasing model calculates 18% of the original price (€3,200 x 18% = €576.00). On other websites, you can sometimes read about lower purchase prices, for example 10%.
Save €2,440 thanks to leasing?
What would Mario save in his case? If you add up all 36 leasing installments (€1,067.76) and the purchase price (€576.00), you end up with total costs of €1,643. In contrast, the platform shows the original price of €3,200 plus insurance costs of just under €900, which results in total costs of €4,084 – and thus €2,440 more than in the leasing model. Mario would have saved a full 60% of the purchase price with the leasing model.
As far as the takeover is concerned, roughly the same rules apply as for company cars. Most providers state that they will contact employees with a lead time of, for example, twelve months and make them an offer to buy. Anyone who has previously agreed on a specific leasing period must now generally make a decision and cannot simply continue to lease the bike.
The higher the salary, the greater the savings
In general, the higher your salary , the more worthwhile it is to lease a bike, because the greater the savings compared to buying it outright. This is simply because higher incomes also offer greater potential for tax savings. For example, with a purchase price of €2,000 and a gross salary of €3,000, leasing a company bike can easily save you 30% of the purchase price. With all other conditions being the same and a gross salary of €5,000, the savings are 36%.
Is the employer entitled to deduct input tax?
It is even cheaper if the employer, like most companies, is entitled to deduct input tax. In this case, no VAT is charged on the leasing rate. Ultimately, the employee also benefits from this because the rate is reduced – and with it his share.
Deductible as operating costs
But why should a company simply provide its employees with such a vehicle? Aside from the much-vaunted employee loyalty, employers can also reap financial benefits if their own employees have to pay less tax on their gross salary. This is because they also have to pay less social security contributions for their employees. Aside from that, the leasing payments can be deducted as operating costs. In other words: a company bike is an additional burden if the company contributes to the leasing payments. But this can be at least partially offset by tax advantages elsewhere. The alternative would be for employers not to contribute at all and thus not to bear any costs. And even in that case, the concept does not have to be unattractive for employees.
What applies in the event of termination or interruption?
But what happens if employees quit, go on maternity leave, become unable to work or are unavailable for a longer period of time or even permanently for other reasons? For all such circumstances, most providers take out special insurance policies that allow companies or employees to interrupt or terminate the lease early.