Work has changed a lot in the past few years. Where once we begrudgingly rolled out of bed and trudged our way to the office, we now take our sweet time – the office is just a few steps away from the bed, after all.
We no longer fret about rush hour traffic. We take lunch breaks in front of our own TVs, and attend Zoom meetings in our pajama bottoms.
Truly, a glorious age is upon us: the age of remote work.
The genie is out of the bottle, and most experts predict it’s not going back in. Economist Nick Bunker put it rather boldly – full-time office work “is dead,” he says.
But company finance teams find themselves faced with a difficult question: “Is remote work actually best for our bottom line?”
To figure this out, it’s necessary to weigh the pros and cons – which probably go deeper than you think.
The Pros of Remote Work
First, it’s true there’s a lot to be said for remote work. Some potential benefits include:
- Higher productivity
- Greater employee retention
- Cost savings
- Larger hiring pool
- Lower absenteeism
Let’s take a look at each.
Remote Workers Are Happier and More Productive
To absolutely no one’s surprise, it turns out people like to work from the comfort of their own homes! Studies confirm as much: morale and productivity are generally higher among remote workers.
In one study, 88% of employees agreed that being given the option to work from home increased their job satisfaction. 56% also reported mental health benefits, greater physical activity, and a better work-life balance.
As for productivity, a study out of Stanford found that working from home increased productivity by 13%.
Furthermore, 77% of employees with hybrid jobs – meaning they could work from home at least some of the time – were more productive than when they had only been on-site, and were able to get more done in less time.
So bury those fears that your staff will spend all day playing the new Zelda game rather than working – it’s not going to happen.
Remote Work: A Must-Have In Retaining Employees
As any savvy business person knows, it’s more expensive to hire new employees than keep existing ones. That’s why employee retention should be one of a company’s top priorities. When employees are happier, they’re more likely to stay on – we know, surprising. But that brings us to the relevant point: research shows employees are happier if they have the flexibility that comes with remote work.
One study showed that companies that offered the option to work at home experienced 25% lower turnover rates. This comes on the heels of changing expectations. Ever since 2020, when we saw that remote work was a viable option, employees expect that they’ll at least have the option to work from home.
According to a Harris poll, 76% of employees said they wanted their jobs to be flexible in terms of location and schedule. As some employers try to get workers back on-site, plenty have quit rather than head back to the office. In yet another study from April, 2022, 64% of workers said they would consider quitting their jobs if they had to go back, or had already quit.
This mentality especially seems to be the case for younger workers, who are used to getting things done with technology. That being said, older generations also often want to reap the quality of life benefits of remote work.
Remote work brings with it less chance of absenteeism – there’s less reason to take off if a person can build their own schedule. Consider the number of sick days employees take each year, and what they’re costing in terms of productivity. When working remotely, people might even put in a few hours if sick, since they can simply go back to bed if they feel the need. You also won’t have to worry about them getting the rest of the office ill, leading to a loss of productivity all around.
With more flexibility, people won’t feel the need to take time off for doctors’ appointments, or to take care of their kids. Again, all this connects back to the improved work-life balance reported by people who work remotely.
A World of Talent
Don’t forget that, if you allow remote work, your potential hiring pool increases as you can hire from around the world. No longer limited by geographic constraints, you have access to a global talent pool, giving you the opportunity to find the best fit for your company – even if they live 5,000 miles away.
Cost Savings Galore
Remote work comes with a lot of cost savings for the company. Some are obvious – think office space. If you usually provide lunch or coffee, you essentially pass these costs on to employees. The same goes for the cost of furniture and equipment (incidentally, employees may be able to write these off as work-related expenses on their taxes).
One study showed that switching to remote work can save companies $10,600 per employee each year.
Of course, employees benefit, too, and not only by being able to work from home. Since they’re saving so much money annually on commute costs, they’re actually getting the equivalent of a pay raise (according to a study from 2022, the average American spends $4,500 each year just on commuting to work).
Cutting out the commute benefits the company, too – another win-win. When employees have to commute, they expect higher pay – fair enough. In November 2022, though, the Bureau of Labor Statistics revealed that employees would work from home instead of getting a pay raise.
As many companies are experiencing wage-growth pressures in the face of inflation, this is a good bonus for their financial situation at large.
The Cons of Remote Work
Alright, we’ve made remote work sound pretty great with all these perks, but you knew it wouldn’t be all sunshine and rainbows: what are the costs of remote work?
Investing in Infrastructure
The first thing is going to be infrastructure – making the switch from on-site to remote work necessitates investment in software. This will include communication platforms and conferencing tools. Employees might also need to be trained in their use, but that’s a somewhat boring task they probably won’t mind too much if the payoff is working from home. Fortunately, software and training is mostly a one-time, upfront cost.
With employees working from different locations, ensuring the security of sensitive data and maintaining cybersecurity is also a top priority. You’ll need to consider the risks. It’s crucial to provide security training and establish protocols so that remote workers know how to protect against potential breaches and cyberattacks. This training should be regularly reinforced as new threats emerge.
Even though employees are working from home, legal obligations still apply. Employers need to consider how occupational health and safety regulations, such as those outlined by OSHA, apply to remote work. If an employee sustains an injury while working from home, the company may be held liable.
Remote work can also have tax implications. Depending on the region, companies may be required to pay taxes even if their employees are working remotely. If employees are working in different states or countries, it may introduce complex tax obligations and potential double taxation. Be sure to check the rules for your area, and any far-away areas employees might be working in.
In spite of all this technology that connects us, it’s easy for employees to feel a sense of disconnection at home. Managers must check in with them regularly in order to promote a sense of engagement and facilitate feedback.
It’s important to be in close contact with employees, not just to coordinate work, but to help them feel “seen.” They may, for example, worry that their efforts are going unnoticed and they won’t be able to advance in their careers.
Quantifying the Pros and Cons
A lot of this you’ll already know. Almost all companies have now been operating on at least a hybrid remote working model since Covid. The key for finance teams now is to assess how this is impacting the bottom line.
To do this, you can quantify how much each of these above pros and cons are impacting your company, per employee, on an average basis.
For example, you could calculate the level of absenteeism when your company was working in the office to how it looks now. You simply look at the average number of days off your employees have taken off, and multiply that by the average employee cost for that day.
This will give you an average cost saving (or cost increase) based on remote work.
Another metric to measure would be your employee turnover rate. Does your workplace match the studies, which show that retention improves? If so, how many fewer employees do you have to hire on average each year?
These figures can be easily quantified, and you should be able to pull a black and white number as to the benefit or downside of your retention with remote work.
You can follow this process for many of your employment metrics both pre and post-remote work. Has your average salary decreased through access to a wider employment pool? Has productivity increased? Are your savings on office space fully offset by increased tech costs?
Have there been security failures that have cost your company significant cash? Do your sales team hit the same numbers? Does your technical team make more errors?
Running all of these numbers will start to build a picture of whether the financial benefits of remote work stack up for your organization. The important thing is not just to look at this issue from one angle. You need to quantify each individual metric as best you can, and then weigh them all up together.
For example, perhaps your average number of sales per employee has actually gone down slightly, but your increased retention rate in the sales team and lower office costs means that, overall, your sales team is actually more profitable than it was before.
Is Remote Work Right For You?
Well, we can’t answer that for you, but we can help you find out: Trovata specializes in helping you dig deep into your finances with automated cash flow forecasts, machine learning, and user-defined tags, helping you track the specific inflows and outflows that come with remote work.
In a complicated equation where you have to consider the price of employee retention, differences in salary between remote and on-site work, and office rent, you need to get into the nitty-gritty.
Finally, remember each workplace is different. Employees are different, and industries are different. To make blanket statements like “remote work is better” or “on-site” work is better” isn’t possible – at least, we wouldn’t be being honest if we did! Each business has to find out how their employees work best.
It’s also important to consider the effects on employee morale, and think about how that will affect productivity
Ultimately, it’s good to know that this isn’t a black-and-white choice between traditional, on-site work and new, trendy remote work. There’s a middle ground called hybrid work – here, employees can enjoy the best of both worlds, toggling between the comfort of their homes and the camaraderie of the office.
And if you find some folks experiencing a massive drop in productivity while working remotely, don’t hesitate to nudge them back into the office space. It’s all about finding that delicate balance.
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