Ask the trade: What’s the acceptable commission level for Cycle to Work?

Quickly following from part one of our assessment of the Cycle to Work scheme’s perceived flaws, our panel discuss the main criticism of the scheme – what can often be a damaging cut to a retailer’s margin where the scheme is utilised…

cycle to workWhat is an acceptable level of commission if you are employing a third party to assist?

John Clarke, Velospeed
No more than 5%, but we’d prefer a flat rate per transaction. After all, all the middle men are doing is issuing a certificate, it’s not as if they are putting in any money or risk, and their work is the same whether it’s a £300 bike or a £9,000 one.

Anonymous, London retailer
The real benefit is to the employer and employee. They should be paying the commission, not the bike retailer who needs all the margin he or she can get to cover overheads.

The commissions are not based on profit, they are a percent of turnover and as such represent anywhere between 25% to 50% of the profit for a sale, which is outrageous. The commission should be no more than a credit card charge, in my opinion.

I must ask, how much are the third parties really doing other than providing a voucher?

David Stainthorpe, CycleSense
6% is the acceptable level. If the Green Commute Initiative can do it, why can’t others?

Matthew Cleathero, Grounds Cycle Centres
Margins on e-Bikes are much less for us against your average bike. Without over complicating it, I’d like to see a tiered commission, 7.5% for sub £1,000 bikes and e-Bikes. 10% £1,000 to £2,500 and 12.5% above £2,500.

It is seemingly possible to use the legislation without a third-party’s help, have you ever considered or done this?

John Clarke, Velospeed

No, but it would be interesting to try. The trouble is that companies only want to set things up once, because of the hassle and time it takes, and generally are signed up with the market leaders.

Anonymous, London retailer
Yes, this is how our own Cycle to Work scheme works, we provide the company with a hire agreement. There is a misconception that the third-party schemes are providing the mechanics for the salary sacrifice. In my opinion, they do next to nothing as the company’s PAYE payroll provider does all the hard work.

David Stainthorpe, CycleSense
We have considered it, but I’m not an accountant and I don’t feel that I have the skills to be able to introduce a scheme that would work legally. We do have a few employers that have run their own schemes in house, which results in us retaining our margin and we can give these customers a small incentive too – obviously at a lower cost than 6 – 15% off our total sales value.

Matthew Cleathero, Grounds Cycle Centres
Making headway against the established providers would be too costly and time consuming, so we’ve not explored it at all.