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The real cost of returning to the office

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What would you say to the opportunity to quickly and easily save up to £8,200+ per employee every year? That is the conundrum businesses face as they consider the return to office.

2nd Mar 2022
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Saving over £8,000 per employee would have a pretty significant impact on your bottom line, right? Well, the good news is you are probably already doing this: US-based research shows that a typical employer saves this amount for every person in their organisation that works remotely for half of the time.

On the flipside, employees stand to spend an additional €100 (£83) per week on travel, clothing and food if they return to the office full-time.

The pros and cons of remote working

For various valid reasons, the return-to-office (RTO) decision is something that, for many companies, keeps getting kicked down the road. Most recently any plans to start the new year back at the office were scuppered by the Omicron variant of Covid-19, with March as the next planned deadline. Health and safety aside, it is a complex decision to make and needs to balance professional and personal considerations that differ from employee to employee and business to business.

For instance, there is overwhelming support for remote working from people who enjoy the time they gain from skipping their commute, and their increased standard of living thanks to an improved work-life balance and time to spend with friends and family and on leisure activities.

 

On the other hand, remote working doesn’t suit everyone. Some roles require a physical presence, or the individual might not thrive in isolation and need the social aspect of an office space to perform well. Practically, not everyone has access to or can afford an effective remote working environment, with a comfortable, private and secure place to work and stable broadband access. When it comes to the latter, full remote working tends to disproportionately negatively impact junior staff members and lower earners.

There certainly is no one-size-fits-all answer, and unless there’s an overwhelming reason to return to the office, many companies are still weighing their options after almost three years in limbo.

Right now, that means there is an opportunity to consider what the outcome of this decision means from a forecasting, planning and budgeting point of view, and to weigh in on the decision with hard facts to cut through some of the received wisdom and cognitive entrenchment that might be clouding the debate.

Considering that your people and your rent are your largest fixed expenses every year, let’s start there.

Your people

If your organisation is doubling down on a strict RTO policy, you are going to need to plan for additional recruitment fees and training, as well as allowing for dips in productivity as you replace the people who inevitably resign. What’s more, these leavers are likely to be your top-performers who now have the choice to work with remote-work orientated companies anywhere in the world.

This also means that when you start hiring their replacements, you’ll be up against a global marketplace, not just local businesses. Top talent has a choice of who to work for and the potential for generous salaries at companies that will allow them to continue working remotely. You will need to pay a premium to convince the top performers that live locally to join you in your office.

On the other hand, if your organisation has included a remote work option, you could save on salaries while still hiring top talent. If you’re based in a location that typically pays a premium, you could hire people from anywhere in the world, pay them more than what they would earn locally, but less than what you'd have to pay at home. 

Your space

Obviously your RTO decision will have a significant impact on your office space requirements. Whether you choose to be remote-first, or select a flavour of hybrid working, your office space and other property and facility costs will be impacted. It’s unlikely you will need the same amount of office space and its configuration will need to change. Managers’ offices and individual desks might give way to hot desks, break-out rooms, and well-equipped video conferencing spaces.

And not to be under-estimated is how you encourage people to return, either full-time or on a hybrid basis. At the minimum, you'll need decent connectivity, an attractive and comfortable space with decent facilities, good coffee and whatever else it is that is important to your people. For instance, during the South African summer, an air-conditioned office is a huge drawcard.

And finally, as it seems likely that we will be living with Covid-19 for some time yet, sanitation and personal protection are going to remain important.

Do bear in mind though, that it will be well-worth reinvesting some of these savings in bringing people together in real life if you choose a hybrid or fully remote route. Research shows that virtual happy hours and all-hands meetings are some of the most challenging to do remotely, so this could be well worth the investment.

How your company tackles RTO is going to be one of the most existential decisions you collectively make and implement. While each company is different, it does seem that a properly implemented hybrid model might be the most appropriate for our next normal. Yes, this takes careful planning and a significant mindset shift – especially in traditional businesses – but the advantages are there.

The good news is that with some forethought and work, this could be extremely beneficial to your bottom line. And to your people.

Replies (10)

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paddle steamer
By DJKL
02nd Mar 2022 14:22

The £8k pa saving to me looks a tad off, maybe it is accurate for those with expensive offices but it certainly does not figure re smaller employers.

If I allow 100sq ft per office employee (10ft by 10ft) which pre pandemic in a lot of cases was generous, and allow 50% uplift re circulation space/toilets/kitchens, that is 150 sq ft. per employee.

I rent offices often at £12 per sq ft, so 150 x12= £1,800, if I allow rates ( may get 100%relief )at say 45%, that adds £810, share of heat and light say £250, insurance say £150, that still only totals just over £3,000 per employee per annum.

Where the £8k comes from is not clear and not sure many smaller employers would recognise that sort of cost per employee per annum re each office desk.

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Replying to DJKL:
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By Hugo Fair
02nd Mar 2022 18:07

Similarly, "employees stand to spend an additional €100 (£83) per week on travel, clothing and food if they return to the office full-time" ... not the employees I know or encounter.

It doesn't help that the figures are quoted as being from U.S. research (so will involve very different social factors to us) - but the article doesn't even say when the research was carried out ... or across what types of industry ... or in what types of locations.

In my experience the reluctance to give up WFH is almost entirely being driven by employees (for whom, in many cases, costs are not the dominant factor ... things like not spending 2 hours/day commuting are a much higher draw).

Conversely, most businesses see few of the cost savings envisaged in the article, because they are tied into lengthy rental/lease agreements and have to invest in additional equipment/infrastructure to support effective home-working as a homogenous whole.

Why do you think that businesses like banks are so keen to move away from WFH (clue they can't afford to re-develop all their systems, like voice recognition etc, to work as a distributed rather than centralised systems)!

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By AlistairHindmarsh
03rd Mar 2022 09:58

The cost is not the main factor. The main factors for the employee includes not wasting time commuting and being able to concentrate on work away from the office with Managers and Meetings. For the Employers they gain a happier workforce and people who go above and beyond normal hours. No-one minds doing the occasional extra half an hour or hour when they are not faced with a hour long commute home at the end of the day.
However people do need a central place to be and to meet others in social interactions. Hybridisation of work is the answer, working both from home and the office
Some points to consider
1. Toyota has announced a permanent change to office Staff work where they work 3 days at home, 2 days in the office regardless of COVID.
2. A major reason we had offices before was because of the telephone and the exchanges that needed to be set up with switchboard operators, so you had to have people close to each other, it also helped the flow of paperwork. For the last 20-30 years this has been less and less a valid case. You can talk to anyone anywhere via a screen, transport documents by a variety of ways. We need to rethink this old 20th Century outlook.
3. People skiving - they do it in the office anyway, WFH isn't going to make any difference, in fact its easier to track their work as you can make them report back to you.
4. Managers - the people driving Return to Office. The issue for some of them is it shows just how little they actually do, some of them are paid for basically walking around telling people to do things they already do.. and having meetings all the time that don't actually seem to do anything - I'm sure everyone has worked for one of those types before. How much money could you save if you laid all them off and left mainly the workers?

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Replying to AlistairHindmarsh:
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By tedbuck
03rd Mar 2022 10:31

There is one example of the effects of WFH which should serve to sound the warning sirens - it is called HMRC. They have been WFH and delays have gone up threefold, efficiency and capability have gone down about threefold.

And looking at the Civil Service generally, DVLA and the like, you would have to think that WFH may not be such a good idea. Of course they do have an advantage - the taxpayer coughs up for them to sit at home with our data lying around while they drink their tea. A commercial enterprise wouldn't have the luxury of a bottomless pit of taxpayer's money to waste.

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By moneymanager
03rd Mar 2022 12:15

For years business has had to contend with H&S ergonomics, workspace design, chair safety, now we have people supplied with a desk etc if they are lucky but their living space is no larger than before, the encroachment on family space is collosal, few will have a dedicated space let alone a room and service standards inevitably fall, just one example.

More critically though, people are not mere "human resources" as if they are mere button pusher but social animals, back in the earlier days of lockdown I had protracted conversations with a VAT specialist, a single woman, feeling extremely isolated, and facing incredibly stressfull tax-payer situations with no immediate colleague support, many roles won't see that, not immediately, but I know managers in HR who are extremely worried about the maintenance of mental health and the enduring value of skills learned by the serendipitous and near immediate exchange, all lost if you rely on "virtual events", know the priceof everything, by all means, just don't lose the value in the process.

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By User deleted
03rd Mar 2022 14:50

Most of the firms I work for rent their offices from the partners' pension schemes. I wonder how that factors into any decisions.

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By Vallery Lee
04th Mar 2022 09:06

Interesting!

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Kevin Philips IDU
By Kevin Phillips
04th Mar 2022 10:12

Great debate. the article was designed not to push one way or the other but to create discussion and explore the issue from different perspectives, which is certainly happening.

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By neiltonks
04th Mar 2022 14:02

I remember when I first got involved in "information technology" as it was then called, company pension schemes were few and far between. Then they got a higher profile and a few technology companies started offering one as a benefit in order to attract staff. That number increased and eventually a tipping-point was reached where a pension was expected by the workforce and it became nigh-on impossible to recruit staff without offering one.

I suspect a similar thing will happen with WFH or hybrid working, certainly in sectors such as technology where the work can basically be done from anywhere.

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Replying to neiltonks:
paddle steamer
By DJKL
07th Mar 2022 14:03

I am the reverse, company schemes were everywhere in the 80s, mainly final salary ones . My first ever audit was six schemes for employees of a quoted entity. As years have passed there were imho fewer private sector schemes, or maybe that was just the size of my clients.

These days the number of employees with just AE pensions is alarming in the extreme, a lot of people will likely never be able to afford to retire.

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