Does Working From Home Save Companies Money?

How working from home can save companies 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 identified telecommuting-prompted savings of $68 million yearly in real estate costs; Dow Chemical and Nortel reported saving over 30 percent on costs unrelated to real estate.

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

According to Global Workplace Analytics, nearly 60 percent of employers identify cost savings as a significant telecommuting benefit. It estimates that, for all applicable jobs, if everyone who wanted to work remotely did so just half of the time, the total money saved would be over $700 billion annually. This averages out to more than $11,000 per employee per year.

Here are some concrete ways remote work saves businesses money. Remote work can save on:

• 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.

Additional benefits of a remote workforce

While direct savings are crucial, other telecommuting benefits can save money in the long term.

1. Telecommuting can improve employee recruitment and retention.

It’s no secret that employees welcome remote work options. According to data from the FlexJobs 2024 State of the Job Search Report, 87 percent of job seekers rate remote work as a critical factor when assessing job listings — even above salary. Having a flexible schedule came in third at 72 percent.

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.

Additionally, when you permit telecommuting, your recruitment efforts are geographically unlimited. “We have a huge talent pool that would otherwise be unavailable to us, and it trims overhead,” noted Jason Wingate, CEO of Emerald Ocean Ltd.

2. Telecommuting increases productivity.

While allowing employees to work from home requires trust, your business could benefit from increased productivity. In a joint study from the University of Chicago and the Mexico Autonomous Institute of Technology, 40 percent of respondents found their work-from-home productivity better than their in-person productivity. Additionally, 60 percent said they were more productive at home than expected.

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.

3. Telecommuting reduces payroll costs.

According to the Bureau of Labor Statistics, many employees would prefer to work from home instead of getting a pay raise. Businesses should always strive to provide fair, competitive compensation. But, enacting a telecommuting plan lets you reward employees while keeping payroll costs down.

Additionally, Global Workspace Analytics estimates that employees who work from home full time save between $2,000 and $7,000 in transportation and work-related costs; these savings give them the equivalent of a raise. Many employees can also qualify for home office tax breaks. If the employee saves money on after-school programs or elder care, it only adds to the benefit.

4. Telecommuting can reduce employee absenteeism.

Remote work policies can 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.

5. Telecommuting eliminates unnecessary meetings.

Most business owners appreciate that meetings can waste precious time and resources. Keeping everyone on track and organized is challenging, even with the most stringent agendas. Additionally, delays often result from trying to coordinate people from multiple departments into one venue.

However, telecommuting can help reduce the number — and length — of meetings you schedule. With online meeting technology, you can still collaborate. But, your meetings will likely be better planned and remain on message.

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 issues can be easy to solve, but they must be addressed. They could, of course, be a potential drawback for your company. You’ll need to provide security training for all employees, which will impact 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 agrees 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 shared.
• 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.

Should your company transition to remote work?

Since working from home became a reality for millions of Americans, more potential employees view remote work as a crucial employee benefit. When you combine this attitude shift with the environmental benefits of working from home, it means everyone returning to the office is unlikely.

Many business owners should consider allowing all or some employees to work from home at least some of the time. Remote work can save your company money, improve productivity, reduce turnover and absenteeism, and boost job satisfaction.

Of course, the nature of your business may make remote work moot. However, if possible, letting employees work from home may contribute to its overall success.

Jennifer Dublino contributed to this article.