Does Working From Home Save Companies Money?

Why remote work saves employers money

Benefits and perks for remote employees are well-documented and highly sought after. However, business owners may find that the arrangement actually saves their companies money. For example, Sun Microsystems reported that telecommuting had saved them $68 million in annual real estate costs; Dow Chemical and Nortel also saved over 30 percent on costs unrelated to real estate.

Research from the U.S. Bureau of Labor Statistics found that a one percentage-point increase in remote work adoption was associated with a 0.08 percentage-point increase in total factor productivity across 61 private sector industries. The study found that industries with higher remote work adoption experienced significant reductions in unit costs, particularly non-labor costs like office buildings, materials and services.

Jonathan Goldberg, CEO and founder of Kimberfire, agreed that remote work can bring significant financial benefits. “One key area of savings is the reduced need for physical office space,” Goldberg told us. “This frees up capital that can be reinvested into areas like technology and employee development, which ultimately drive growth.”

Here are some concrete ways remote work saves businesses money:

• Rent and utilities: If most of your team works from home, your office space needs and overhead costs won’t be as significant.
• Relocation costs: Many companies pay for key employees to relocate. However, relocation isn’t necessary if the employee can remain in the same place and work remotely.
• Cleaning services: With minimal staff onsite, your cleaning services bill will likely decline significantly.
• Security costs: When your office space is minimal or nonexistent, you could eliminate or reduce the cost of security guards and other business security systems.
• Food costs: Businesses sometimes provide highly rated water delivery, cafeteria and coffee services, or refreshments during meetings. You’ll eliminate these costs and the cost of paper goods if you have remote employees.
• Office equipment costs: With fewer employees coming to an office, you need less office furniture and computer equipment and fewer supplies.
• Tax costs: Three factors determine a company’s tax burden: payroll, sales and property. Making changes to accommodate remote workers could reduce your tax burden.

How remote work boosts productivity

While allowing employees to work from home requires trust, your business could benefit from increased productivity. For example, recent research from Great Place To Work analyzing 1.3 million employees found that employees at companies supporting remote or hybrid work showed productivity levels nearly 42 percent higher than typical workplaces.

Consider that the office environment affects productivity. Remote workers can create an ideal environment free from noise and distractions. Additionally, stress can impact productivity; remote workers don’t have to deal with the stress of commuting. This means they can focus on the task ahead instead of taking time to calm down after tackling the morning rush hour.

Retention, morale and workforce stability

It’s no secret that employees welcome remote work options — according to recent research by Owl Labs, a flexible work environment is essential to employees. Enabling telecommuting and other flextime arrangements makes your company a more attractive place to work for existing employees and new recruits. For example, parents with child care responsibilities will appreciate the flexibility, while other workers can enjoy an improved work-life balance. Happy, appreciative workers will likely stay — reducing employee turnover and boosting engagement.

Remote work policies can also reduce workplace absenteeism as employees respond to the benefits of greater flexibility. Flexible scheduling allows team members to fit their work around personal obligations that would otherwise necessitate time off.

A flexible work schedule may also lead to healthier employees. Remote workers tend to bounce back more quickly from illness. Plus, there’s no risk of one cough or cold traveling through your entire workforce ― reducing employee sick days overall. Additionally, some under-the-weather employees will feel well enough to get some work done if they can do so from home.

This all supports the fact that remote work has a positive impact on retention, morale and overall workforce stability.

Access to a broader talent pool

Remote work enables companies to hire from anywhere, significantly expanding their talent pool beyond local candidates. This geographic flexibility allows businesses to find the best talent regardless of location, often at competitive rates from regions with lower costs of living. “We have a huge talent pool that would otherwise be unavailable to us, and it trims overhead,” said Jason Wingate, CEO of Emerald Ocean Ltd.

Additionally, remote work arrangements can improve workforce diversity by removing geographic barriers that might prevent qualified candidates from different backgrounds and locations from applying for positions. Companies can build more inclusive teams by tapping into talent from diverse metropolitan areas, rural communities and international markets.

The ability to hire remotely also means businesses can fill specialized roles more quickly, as they’re not limited to the talent available within commuting distance of their physical offices.

Long-term strategic and environmental benefits

Remote work delivers significant long-term cost savings beyond immediate operational expenses. Companies that embrace remote work can maintain smaller physical footprints, reducing long-term real estate commitments and associated maintenance costs.

Environmental benefits also translate to cost savings and corporate responsibility goals. A study reported by the Proceedings of the National Academy of Sciences of the United States (PNAS) revealed that remote workers could cut greenhouse gas emissions by up to 58 percent by avoiding daily commutes, helping companies meet sustainability targets while reducing their carbon footprint.

Remote work also provides business resilience during disruptions. Companies with established remote work capabilities proved more adaptable during the pandemic and can better handle future challenges like natural disasters, transportation strikes or other unexpected events that might disrupt traditional office operations.

Balancing remote and hybrid work models

According to recent data from Robert Half, 88 percent of employers now provide some hybrid work options. Meanwhile, Gallup research indicates that six in 10 employees with remote-appropriate jobs prefer a hybrid position. This suggests that hybrid models may offer the optimal balance for many organizations.

Hybrid work arrangements allow companies to maintain some in-person collaboration while still capturing many of the cost savings and productivity benefits of remote work. Owl Lab research shows that hybrid workers save around $42 per day when working remotely rather than from the office, contributing to both employee satisfaction and reduced operational costs for employers.

The costs and drawbacks of remote work

Remote work may save money, but it incurs some costs ― at least initially. For example, you may need to make infrastructure changes to support remote workers and prepare for remote technical support issues. While many solutions exist, you must factor these costs into your budget. You also must consider the software and tools your team will need for efficient remote work, including video conference software and communication tools.

Aside from costs, you may face the following drawbacks when enacting a remote work policy:

• It’s not a good fit for everyone. Teleworkers must have the skills to succeed as remote workers, including being self-directed and comfortable working with remote technology. Additionally, they must realize that working from home isn’t a replacement for day care unless work can be scheduled around their child’s needs. They must have a defined space for their home office and be able to work without distractions.
• Telecommuting employees may have career progression fears. Some employees may fear telecommuting will impact their professional development and career progression. They may feel overlooked without a chance to showcase their skills adequately. These employees may require regular communication via email, chat, phone or even face-to-face meetings. Such communications will reassure them that out of sight doesn’t mean out of mind.
• Remote work has data security issues. Security vulnerabilities are a genuine concern for remote and hybrid teams. You’ll need to provide cybersecurity training for all employees and invest in tools such as VPNs, endpoint protection and multifactor authentication — all of which can impact your overall cost savings.
• It brings collaboration concerns. Some businesses require energy in the room to fuel effective collaboration. If your company works this way, distance could inhibit your collaborative processes. Goldberg agreed that maintaining a strong sense of cohesion can be challenging with remote workers. “To overcome this, we’ve focused heavily on implementing technology that supports collaboration while also scheduling regular in-person meetings to keep the culture alive,” Goldberg said.
• Teleworkers bring Occupational Safety and Health Administration (OSHA) and employment law concerns. There may be employer liability concerns with incidents like accidents in a remote worker’s home. OSHA compliance requires following several directives for work-from-home employees; you’ll still be responsible for ensuring a safe, healthful workplace. There could be issues if you’re aware of dangerous conditions in your workers’ homes. For example, if your employee works in their basement and the stairs leading to this space are unsafe, this can create legal issues you must explore.
• Local issues may impact remote work. Some homeowner associations and communities prohibit home offices. There are also clauses in home insurance policies that do not permit working from home. Before agreeing to a remote working arrangement, you must ensure your employees are fully aware of these potential issues.
• There may be tax implications. While you may be able to cut costs, there are some potential tax implications associated with remote workers. For example, some cities, such as New York, impose taxes on remote workers whether they work in the city or not. If a worker lives in Connecticut, the business may owe taxes to both states.

Skye Schooley and Jennifer Dublino contributed to the reporting and writing in this article. Source interviews were conducted for a previous version of this article.