How Working Remotely Saves Money For Everyone
How Working Remotely Saves Money For Everyone
However, when it comes to who spends more, it's no competition. Companies spend a lot to keep employees in-house. Consequently, they can also save a substantial amount by switching to remote. Just how much savings are we talking about?
In this article, we're taking a closer look at some expenses that can be slashed (or outright eliminated) by moving to remote work.
Direct cost savings of remote work
Offices, corporate headquarters and meeting places are expensive to maintain. Add in the ongoing costs for utilities and office supplies, and the total adds up quickly. Let's break these costs down a bit, shall we?
1. Real estate, utilities, maintenance, and cleaning
Real estate-related business costs have increased significantly in the past five years. For example, in 2018, the average office workstation cost anywhere from $1,683 to $18,000 per employee per year. Those costs are even higher today with inflation, soaring energy prices and increased space requirements due to Covid-19.
Social distancing concerns require larger workspaces and more distance in seating areas, shared spaces, and walkways. Real estate consultants – like JLL – have recommended increasing the average square footage per employee by 50%, and many businesses have followed this advice. In 2018, the average employee workstation was 40 to 50 square feet. In 2020, the average space per employee was 196 square feet.
Here's a quick cost estimation of what it would take to provide an employee with 196 square feet of space in two different markets:
- Office space in the United States now costs an average of $38.06 per square foot or $7,459.06 for each employee with 196 feet of space.
- Office space in the expensive central business district of New South Wales, Australia, costs an average of $1,323 per square meter or $122.9 per square foot. That's a hefty $24,088.4 to give each employee 196 feet of space.
Those aren't the only real estate expenses businesses are on the hook for. You have to add utilities (often a tenth of the lease), building maintenance and sanitation to the budget, too.
2. Office equipment and supplies
You're also on the hook for furnishing, equipment and supplies. Office equipment includes everything from furniture and cabinets to printers, computers and more. Of course, you also have to purchase these semi-regularly as they wear down or stop working over time.
Consumable office products like pens, paper, folders, mailing supplies, notebooks, legal pads, staples, printer ink, toner and more are regular line items. A spend management consultant found typical business clients spend around $200 per employee per year just on office supplies.
Businesses also can't skimp on sanitation products like soap, standard cleaning supplies, wipes and hand sanitizer stations. So it's easy to see how this stuff adds up.
3. Food, catering, and parties
Most businesses offer break room refreshments, periodic conference catering, in-office parties and occasional outings.
Providing employees with beverages and refreshments can be extremely costly. Even those little packets of sugar, creamer and coffee add up. For example, an employee who drinks $2.50 of coffee daily will cost $650 in a 260-day or 52-week work year.
Water isn't free, either. One estimate puts the average cost of office water service at $125 per month for a business with 10 to 20 employees.
4. Utilization waste
Underutilized office space equals wasted money. For example, one consultancy found big businesses in England and Wales waste £10 billion per year in underutilized office space. Another estimate has the average 100-employee US business spends $300,000 a year in unused office space costs.
Part of this is due to inefficient space management. Office design has to be carefully managed to balance spatial considerations with productivity. One space management analyst puts ideal usage targets at 70-90% for workstations and 40-60% for meeting spaces.
However, there's no way to get a 100% office utilization rate. Not only that, but there are lost productivity costs directly related to in-office work, too.
5. Productivity costs
Employees waste a significant amount of time in workplaces where they need to find and settle into desks, find collaboration spaces, set up meetings, travel to different rooms, check-in, greet business visitors, etc.
40% of professional workers in large organizations waste 30 minutes a day searching for space to collaborate. That's said to represent 30 full-time jobs per year. Plus, the company itself wastes resources on reception, physical audiovisual equipment, visitor check-ins for conferences and other needs.
This waste is virtually eliminated with remote work.
3 costs of enabling remote work
Remote work isn't completely cost-free. Let's look at some of the costs of going remote so that you can compare the two options fairly.
1. Software, solutions and tools
A team working remotely needs different tools and solutions than one in the office. That includes software for enhanced collaboration and communication. You also may need to equip your remote team members with computers and other devices.
An organization with remote employees has different cybersecurity risks, threats and needs than one with an on-premises team. Therefore, part of the transition into a remote work-friendly business environment means doubling down on security investments.
It's why cybersecurity spending is going up. Forrester found 80% of security leaders are planning to increase network and data security spending, with 75% increasing spend on cloud security and vulnerability management. Of course, these costs may diminish as the cybersecurity landscape remodels itself and remote work-based security models mature. But for now, this is one area that enterprises can't afford to skip.
3. Employee wellness support
Working remotely can make employees more vulnerable to feelings of isolation, loneliness and stress. So businesses must respond appropriately. In fact, mental health is still one of the biggest remote work challenges.
Unique ways to save even more when switching to remote
We'll look at the hard numbers in a minute, but first, it's essential that we look at some of the more unique ways working remotely can save companies money. Remote work allows businesses to be far more agile and operationally unrestricted. As a result, companies that fully take advantage of these unique capabilities are seeing even greater remote work costs savings.
Location-based pay rates
Some companies cut pay rates for remote workers living in areas with a lower cost of living. Silicon Valley giants were among the first to do this. Facebook, Twitter and Stripe announced lower pay for employees relocating from the expensive San Francisco Bay area.
The legalities around this are nebulous. Experts have stated that companies can't force remote-working employees to take salary cuts based on where they live. However, employers have more leeway in hiring new workers at lower, location-based wages.
Remote as a benefit
Remote work is highly attractive. Some employees are willing to trade a higher salary for remote work privileges. A survey showed that 65% of workers whose jobs could be done remotely were willing to take a 5% pay cut to stay home. In other words, just by offering remote as an option, you might be able to lower your salary baselines.
A thriving, high-performing workforce
Remote work done right adds directly to the bottom line simply because employees thrive on it. Studies consistently show that remote workers are more productive and engaged. They're healthier, happier and more satisfied with their jobs. Retention rates go up while turnover and attrition rates decrease.
Businesses gain measurable performance increases while saving on recruiting, hiring and training new employees.
Eliminate employee relocation costs
Companies willing to let employees work remotely can attract talent without paying for relocation costs. Average American corporate relocation packages range from $19,309 to $24,216 for renters and $72,627 to $97,166 for homeowners. So, when you don't have to pay for relocation and instead let the qualified talent stay where they are, you benefit from massive savings.
Leveraging international talent
Businesses can use remote work to leverage international talent. There are skilled, educated and competent workers available for hire all around the world. As a result, you can hire global talent in lower-cost areas to save money without sacrificing quality.
The hard numbers: the costs savings of remote work
Companies save thousands of dollars with remote work, even for employees working remotely part-time. Various consultancies estimate that businesses can save:
• $11,000 a year per employee working remotely at least two to three days per week.
• Large companies can save an average of $11.3 million with part-time remote work.
• US businesses overall can save around $500 billion a year.
The cost savings of remote work entails office space, utilities, snacks, beverages and other equipment. Further savings come from decreased attrition, improved performance and higher productivity.