An employee is leaving but have an outstanidng amount on their cyce to work agreement (salary sacrifice scheme).
Would the balance be deductible from their net pay, i.e. not giving them the benefit of the tax saving?
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Essentially yes, but you need to look at the terms of the salary sacrifice agreement to be sure.
For example it could say just give back the cycle and stop paying, but most employers will want to collect the remaining cost of the cycle upon termination of employment and this payment is not a reduced monthly salary, but another part of the agreement, so paid back without the benefit of any tax saving.
Don't forget that there will be VAT due on the payments received and a taxable BIK if the ex-employee elects to keep the cycle.
Cyclescheme is one of the larger providers:-
https://help.cyclescheme.co.uk/article/50-what-happens-if-i-leave-employ...If you leave employment or are made redundant during the Hire Period any outstanding salary sacrifice repayments will be taken from your final salary, from NET rather than GROSS pay i.e. without any further tax exemptions.
It seems evident to me that there is a common misconception here. The question/scenario refers to "an outstanding amount", but surely this implies that this is not a genuine salary sacrifice arrangement but some disguised deduction. The reality is that there is no reducing outstanding balance for the cycle.