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Updated Apr 10, 2024

Does Working From Home Save Companies Money?

Letting full-time employees work remotely will make many happy. But can working from home also save companies money?

Baruch Silvermann, Community Member
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Table of Contents

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When the pandemic hit, many Americans with jobs that didn’t require face-to-face interaction were forced to work from home. This paradigm shift in how companies and employees managed operations created new norms and expectations. Many employees enjoyed ― and continue to embrace ― the freedom and flexibility of remote work plans

Business owners have other factors to consider. If allowing your team to work from home can help you reduce operational costs or give your company other competitive advantages, you have a win-win situation. Here’s what business owners should know when evaluating the benefits of allowing remote work. 

How working from home can save companies money 

Along with remote work’s benefits for workers, business owners may find that remote work saves their companies money. For example, Sun Microsystems identified telecommuting-prompted savings of $68 million yearly in real estate costs while Dow Chemical and Nortel saved over 30 percent on non-real estate costs.

According to Global Workplace Analytics, nearly 60 percent of employers identify cost savings as a significant telecommuting benefit. It estimates that for all remote-work-compatible 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 saves on rent and utilities: If most of your team works from home, your office space needs won’t be as significant, saving money on rent and utilities.
  • Remote work saves on relocation costs: Many companies pay for key employees to relocate. However, this isn’t necessary if the employee can remain in the same place and work remotely.
  • Remote work saves on cleaning services: With minimal staff onsite, your cleaning services bill will likely decline significantly.
  • Remote work saves on security costs: You could eliminate or reduce the cost of security guards and other business security systems when your office space is minimal or nonexistent.
  • Remote work saves on food costs: Businesses sometimes provide highly rated water delivery, cafeteria and coffee services or serve refreshments during meetings. You’ll eliminate these costs and the cost of paper goods if you have remote employees.
  • Remote work saves on office equipment costs: With fewer employees coming to an office, you need less office furniture and computer equipment and fewer supplies.
  • Remote work saves on 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.
TipBottom line
Remote work tools and platforms can help your team stay connected. Consider Slack for communication, Zoom for video calls and conferences and RemotePC for remote access and support.

Additional benefits of a remote workforce

While direct money 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 McKinsey’s 2022 American Opportunity Survey, 87 percent of employees will choose a remote work option when offered.

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. 

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

TipBottom line
If you're concerned about remote workers' productivity, consider using employee monitoring software to ensure employees remain engaged while working from home.

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. While businesses should always strive to provide fair, competitive compensation, 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, giving 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, which only adds to the benefit.

4. Telecommuting can reduce employee absenteeism.

Remote work policies can reduce employee 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, and there’s no risk of one cough or cold traveling through your entire workforce ― reducing employee sick days overall. Additionally, some employees will feel well enough to get some work done when they’re feeling under the weather if they can do so from home.

5. Telecommuting eliminates unnecessary meetings.

Most business owners appreciate that meetings can be a time suck and waste precious resources. Keeping everyone on track and organized is challenging, even with the most stringent agendas. 

Additionally, delays result from trying to coordinate people from multiple departments into one venue. With online meeting technology, you can still collaborate, but your meetings will likely be better planned and remain on message.

FYIDid you know
To improve meeting productivity ― virtual and in-person ― set strict time limits, distribute a meeting agenda and ensure actionable follow-up tasks.

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: 

  • Remote work isn’t 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 daycare 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.
  • Remote 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 adequately showcase their skills. These employees may require regular communication via email, chat, phone or even face-to-face meetings to 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 and could be a potential drawback for your company. You’ll need to provide security training for all employees, which will impact cost savings.
  • Remote work 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.
  • Remote work brings 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 has several directives for work-from-home employees, and 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.
  • Remote work may have 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.

The future of 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, the convergence of two megatrends 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 improve job satisfaction. 

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

Jennifer Dublino contributed to this article. 

Baruch Silvermann, Community Member
A little bit about myself: My name is Baruch Silvermann and I am the founder of The Smart Investor, a free online academy for investors. Over 50,000 readers come to our site every month to get advice and understand how to make better investing & personal finance decisions.
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