Bike Leasing: How does salary deduction work for me as an employer?
With salary conversion, you, as the employer, deduct the lease payment for the company bike directly from your employees’ gross pay. Your company leases the bike and makes it available to your team through a lease agreement. Good to know: Only a small item is added to the pay stub—the monetary benefit calculated according to the 0.25 percent rule. And because the gross salary subject to social security contributions decreases, employers usually save on social security contributions as well. Convenient: The Lease a Bike portal provides the figures for payroll processing—and if continued pay is no longer provided, the missed payment protection kicks in under certain conditions.
Important note: This article explains salary conversion from an employer’s perspective but does not replace tax or legal advice. It’s best to clarify the specific details with your tax or legal advisor.
The most important points at a glance.
How does salary conversion work? Your employees forgo a portion of their gross salary. You withhold this amount each month and use it to pay the lease installment.
What role does your company play? It is the lessee and is responsible for paying the installments. Your employees use the bike under a lease agreement.
When does the tax office recognize the deferral? Generally, when your company is the lessee and the deferral has been agreed upon for the future.
What appears on the pay stub? The deferred amount and the monetary benefit: 1% per month of a quarter of the manufacturer’s suggested retail price, rounded down to the nearest full €100.
Does your company save money as well? Generally, yes, because the gross income subject to social security contributions decreases.
What’s the deal with the employer subsidy? It reduces the conversion rate—for example, through the “fair amount.” The monetary benefit generally remains the same.
Does company bike leasing work without any conversion at all? When provided as a salary supplement in addition to wages, the lease is tax-free. This does not apply to S-pedelecs.
What happens if continued wage payments are discontinued? The missed payment protection covers the installments for up to twelve months, provided the contract has been in effect for at least six months.
What does salary conversion mean for you as an employer in the context of company bike leasing?
Salary conversion means that your employees forgo a portion of their gross salary, and in return, you provide them with a company bike. In this way, part of their cash compensation is converted into a benefit in kind. The amount withheld is referred to as the conversion rate. It consists of the lease payment and the selected comprehensive coverage.
The roles in a company bike lease are clearly defined. Your company enters into a lease agreement with the leasing company, which typically runs for 36 months. As the lessee, you—the employer—pay the installments to the leasing company. Your employees, in turn, receive the bike under a bike-use agreement. This is usually a supplementary agreement to the employment contract and governs not only the use of the bike but also the salary conversion.
The actual effect occurs during payroll processing. Because you withhold the installment before taxes and social security contributions, your employees’ gross pay—which is subject to taxes and social security contributions—decreases. As a result, they pay less income tax and social security contributions. Your company also typically saves on social security contributions, since the employer’s share is likewise calculated based on the lower gross pay. In short: The installment is deducted from the gross pay rather than the net pay—which benefits both sides.
There is, however, a trade-off: Your employees must report the personal use of the bike as a taxable benefit in kind. With a company bike, however, this benefit is minimal. To learn how the pay conversion works from your employees’ perspective, read the article “How Does Pay Conversion Work for a Company Bike?”
What requirements must a salary conversion plan meet?
Salary conversion alters the agreed-upon compensation. For this reason, it must be structured properly from both a tax and an employment law perspective. These four points are crucial:
Your company is the lessee: Only then will the tax office generally recognize the conversion. Therefore, your company—not your employees—enters into the lease agreement.
The conversion applies to future pay: It must be agreed upon in advance under labor law. Wages that have already been earned cannot be converted retroactively.
The minimum wage is maintained: The right to the statutory minimum wage remains in effect. The conversion must not arbitrarily reduce the remaining pay. Mini-jobs are therefore generally excluded: At 603 euros per month (as of 2026), there is no leeway for a payment plan spread over three years. It’s also tight for apprentices with low pay.
The collective bargaining agreement permits it: If you are bound by a collective bargaining agreement, components of compensation covered by the agreement can generally only be converted if the agreement allows it. In some industries, company bicycle leasing is therefore already regulated by collective bargaining agreements.
There is also a tax rule that applies to the lease agreement: It must not specify a purchase price. To ensure that the company bike is treated as a lease and not as a disguised installment purchase, the agreements must comply with the requirements of the so-called Leasing Decree. Instead of a fixed price, we check well in advance of the contract’s expiration to see if a purchase offer is possible. There is no entitlement to a purchase offer or to the purchase of the bicycle.
Important: Therefore, have the lease agreement signed before you withhold the first installment. This is very simple, as you and your employees can sign it digitally via the Lease a Bike portal. We recommend using our free sample lease agreement as a template.
Learn more: The article “Company Bike Leasing: What Legal Considerations Must Employers Keep in Mind?” explains which other legal requirements apply.
How does salary conversion work in payroll processing?
Two items are added to the payroll: the conversion installment and the non-cash benefit. Most of the work involved is a one-time task at the start of the contract. Here’s how the process works:
Import data: All information for payroll is provided by a real-time export from the Lease a Bike portal. You enter this information once at the start of the contract.
Deduct the conversion rate: Your payroll department deducts the rate from the gross salary each month. It then calculates taxes and social security contributions based on the lower gross amount.
Add the monetary benefit: Personal use is considered compensation in the form of a non-cash benefit. Your payroll department adds the monetary benefit for tax and contribution calculations and then deducts it again. It is not paid out, as your employees already receive it in the form of the bicycle.
Pay taxes and social security contributions and record the benefit: You pay income tax and social security contributions as usual. You record the in-kind benefit in the payroll records.
The monetary benefit and the 0.25 percent rule
Since 2020, the 0.25 percent rule has applied to the monetary benefit. Officially, this means that 1 percent of a quarter of the manufacturer’s suggested retail price—rounded down to the nearest 100 euros—is applied each month. For example: If the recommended retail price is 3,000 euros, one-quarter is 750 euros, which rounds down to 700 euros. The monetary benefit is therefore 7 euros per month—and this applies for the entire term. The basis is the recommended retail price including sales tax, not the actual purchase price paid. This amount also covers the commute for bicycles and e-bikes.
Good to know: Whether your company is eligible for input tax credits affects the amount of the conversion rate. Companies eligible for input tax credits generally convert the net lease payment, while all others convert the payment including sales tax. You don’t have to calculate this yourself: Our portal automatically applies the appropriate option.
Salary deferral, subsidy, or salary bonus.
Which model is right for your business?
As an employer, you determine how the company bike is financed. There are three models to choose from:
Traditional salary conversion: The standard option. Your employees cover the full conversion rate themselves, and you calculate the monetary benefit.
Salary conversion with a subsidy: You reduce the conversion rate with a voluntary employer subsidy. As long as part of the installment is deferred, the taxable benefit generally remains in effect.
Salary bonus: You provide the bike in addition to the wages already owed and cover the leasing installments in full yourself. The provision is then tax-free under Section 3 No. 37 of the German Income Tax Act (EStG), and no taxable benefit arises. Social security contributions are generally not applicable either.
With a subsidy, the “fair amount” is a reasonable middle ground. In this case, you pass on to your employees the social security contributions you save through the conversion. Your company thus only gives up what it saves anyway - and still makes the offer noticeably more attractive. It’s best to decide on a model before you start. This will save you from having to make case-by-case decisions later on.
Different rules for S-pedelecs.
Different rules generally apply to S-pedelecs. While pedelecs traveling at speeds up to 25 km/h are classified as bicycles under traffic law, S-pedelecs traveling at speeds up to 45 km/h are classified as motor vehicles. For tax purposes, S-pedelecs are therefore treated like electric company cars. Accordingly, your payroll department must levy additional tax on the commute, and the tax exemption for the salary supplement does not apply to them.
What happens to deferred compensation in the event of illness, parental leave, or resignation?
Salary deferral depends on your current gross salary. The catch: If continued pay is discontinued, there is simply nothing left to defer. This is the case, for example, after more than 42 days of sick leave with sick pay or during parental leave. As a lessee, however, your company still owes the lease payments.
Lease a Bike offers payment protection specifically for this gap. It covers the lease payments for up to twelve months, provided the contract has been in effect for at least six months. You can report the interruption with just a few clicks in the Lease a Bike portal - preferably before the interruption begins. The bike remains with your employees during this time, and the lease resumes afterward. If the protection doesn’t apply—for example, because the contract is too new - we’ll work together to find a solution. A cost-neutral return may also be an option here. For more details, see the article “What Happens to the Company Bike During Parental Leave or Long-Term Sickness?”
If the employment relationship ends before the 36 months have elapsed, the conversion also ends. The lease agreement, however, continues for the time being, since your company is the contracting party. To ensure you aren’t left stuck with the payments, there are four options: a change of user within the company, an early termination by mutual agreement with the employee taking ownership of the bike, a transfer to another company following a credit check, or returning the bike. The same options apply when employees retire or become self-employed.
By the way: At the regular end of the contract, you simply stop the conversion. You don’t need to cancel anything, as the lease agreement ends automatically after 36 months. If your employees purchase the bike, Lease a Bike Deutschland GmbH taxes any potential monetary benefit at a flat rate in accordance with Section 37b of the German Income Tax Act (EStG). This means the purchase does not create any additional work for your payroll department.
How do you set up deferred compensation in your company?
One question remains, however: How can you get your salary conversion program off the ground without any hiccups? The good news is that much of it is decided before the first contract is signed and can be easily prepared in advance. It’s best to clarify these points beforehand:
Determine Eligibility: You decide who is eligible to lease a vehicle through salary conversion. In general, full-time or part-time employees subject to social security contributions are eligible, as long as their gross pay covers the monthly payment. Your criteria should be objectively justified and apply equally to everyone. For example, you may not treat part-time or fixed-term employees less favorably without an objective reason (Section 4 of the German Part-Time and Fixed-Term Employment Act (TzBfG)).
Involve the works council or staff council: Co-determination rights may be affected by eligibility criteria or subsidies. The rules can be formally established in a works council agreement or staff agreement.
Clarify responsibilities: Determine who will transfer the portal data to payroll. If you work with an external payroll service, inform them before the first contract is signed.
Provide Clear Information: Because the gross income subject to social security contributions decreases, your employees’ pension entitlements will also be slightly lower - roughly 2 euros per month for a 3,000-euro bike. Be sure to point this out before signing the contract.
Consult with your tax advisor: Discuss sales tax, salary supplements, and S-pedelecs with your tax advisor in advance.
Tip: Refer your employees to our bike leasing calculator. There, they can see in advance how the salary conversion and non-cash benefit will affect their take-home pay. This will save you a lot of follow-up questions about payroll.
Checklist: Is the deferred compensation plan set up properly at your company?
Is your company the lessee, and is there a lease agreement for each bicycle?
Was the conversion agreed upon in advance, before the first payment was due?
Is the remaining compensation after the conversion above the minimum wage? (This is usually not the case for mini-jobs.)
Does your collective bargaining agreement allow for deferred compensation if you are bound by such an agreement?
Has it been decided whether you will pay a subsidy or offer the bike as a salary bonus?
Does your payroll system calculate the monetary benefit according to the 0.25 percent rule? (Basis: recommended retail price including sales tax)
Does your payroll system treat S-pedelecs separately?
Does your payroll department retrieve data from the portal export?
Do you report parental leave and long-term sick leave in a timely manner via the Lease a Bike portal?
Do your employees know that salary conversion slightly reduces their pension entitlement?
Our author
Anna Veldtrup
Anna Veldtrup has been a team leader in the Customer Service and Claims Management department at Lease a Bike since 2024, and she and her team work every day to ensure the highest level of customer satisfaction and smooth operations. She loves nothing more than riding her gravel bike in nature.