This requires the lead department to co-ordinate the relevant groups across the organisation. There needs to be general agreement on the roles and key process features.
For those staff who elect to finance the purchase rather than pay outright for the e-bike, the payment flows need to be agreed. There are two main approaches for the employer:
- A wage advance
- An employee loan
Each organisation should seek its own legal/taxation advice to confirm which option is best suited. (As noted earlier, many public sector organisations are not legally allowed to offer a wage advance or employee loan. Financing offers through the supplier can be an alternative.)
A wage advance involves the employer providing an advance of up to $2,000 into the employees’ bank account, enabling them to pay for the e-bike directly with the e-bike supplier. This is unlikely to be subject to Fringe Benefit Tax (FBT), providing the advance is no more than $2,000. See relevant IRD information:
Fringe benefit tax on low-interest loans(external link) (IRD website)
An employee loan involves the employer paying for the e-bikes on behalf of the employees. If the loan involves a preferential interest rate (eg zero interest) then this is liable for FBT. The preferential interest rate is discretionary, but recommended to incentivise uptake. Typically, roles involved in the employee loan option are:
- Payroll: set up deduction for repaying interest-free loans
- Finance: calculate and include in FBT returns, monitor loan repayments
- Accounts payable (finance): organise payments to suppliers for the purchases
A calculator for loan repayments, interest and FBT liability is available:
Fringe benefit tax annual calculator [XLSX, 38 KB]
If the wage advance option is used then a clear process needs to be agreed with the supplier (eg through an invoicing arrangement), whereby payment is made by the employer once the employee has confirmed collection of the e-bike. The employee will also need to provide any shortfall payment (eg if the discounted price is $2,250 and the funding provision is $2,000, then the employee needs to provide $250 on collection).
If the loan option (with preferential rate) is used then it is highly recommended that the supplier provide the employer with a list of those who have purchased e-bikes through the arrangement. Alternatively, the employee could provide proof of purchase to the employer. Either way the employer could then follow-up with any loanee employees who have not yet purchased a bike.
The employee sign-up process needs to be agreed. Base it on a simple agreement such as the Employee sign-up agreement template [DOCX, 21 KB].
The agreement defines the following, as a minimum:
- the type and price of the chosen e-bike
- the supplier
- the payment and collection process
- type of scheme (wage advance or employee loan)
- requirements of employees
- relevant contributions from the employer (repayable component) and employee (shortfall payment component).
The agreement will also cover exceptional circumstances (eg if the employee leaves the organisation prior to paying off the full amount). The employee agreement may need to include a caveat whereby final price is confirmed once total order numbers are known (as a minimum, the agreement should show the price range).
It is advisable that the supplier provides a pro-forma listing the e-bikes available, their pricing, and the discounts offered (including volume-based options if relevant). The employee can then just select their chosen e-bike model, including any preferences (eg colour).
The sign-up process will be open for a certain period after the ‘Have a go’ days (eg one or two months). A limited period is recommended so that employees are encouraged to make a decision, and as the supplier pricing may depend on order volume.
Based on the collated sign-ups, the organisation places the full order with the supplier.
Note: the scheme targets employees, but the organisation could also offer contract staff the opportunity to take part, and also family members of employees. However, these would be based on upfront payment of the full purchase price (less any agreed discount) rather than through a repayment approach.