Business

Is Running a Fully Remote Company Cost-Effective?

4 Mins read

COVID-19 altered life as most knew it, but few places were as affected as the workplace. Suddenly, the traditional office was not just a stifling beehive of nondescript cells but a potential source of illness and, in some cases, death. 

Most workplaces shut down or at least significantly altered how they did business to combat that. But now, companies are examining whether working from home is a net gain for business or a loss of productivity. 

Here are a few things to think about if you’re trying to decide if an entirely remote workforce is cost-effective for your company.

The cost of running an office

Most companies transitioning to a fully integrated work environment can see immediate savings by lowering business costs. 

Lowering costs in this situation means utilities are less, cleaning services are no longer required, maintenance for office equipment diminishes or disappears, and the square footage of any headquarters can shrink, improving the cost of employees per square foot.

Commercial leasing

If you have a lease on office space, you won’t see immediate savings, but planning a move to a smaller area means delayed savings. A fully remote workforce means transitioning more and more to a virtual office, including a virtual address for correspondence

A remote workforce could, in some companies, replace the need for any office, although that type of situation is rare. 

Utilities

A smaller primary office or no office means utilities get lowered significantly. An owner would have to work out how to handle utility costs at their homes with employees. The savings for larger companies that utilize a lot of office space could be significant.

Cleaning services

No office means cleaning services are no longer needed. A company can use shared office space or even rent out space for larger meetings, but the costs of maintaining an office get lowered as a regular expense.

Office equipment

A business may still need to supply office equipment, but having so much equipment available on demand would no longer be required. Using an office services store for copying, developing presentation materials, and more can mean huge savings for companies that rely on internal processes and equipment to make materials.

Employee retention

Most employees that transitioned to working remotely are overwhelmingly happy with the situation. Happy employees tend to stay longer in a job. One of the most expensive aspects of managing employees is onboarding and training them. What that means is that tiny companies have reduced training costs.

The downside is that some employees like having an office to go to, and many managers feel they’re more productive if they can get some face time with their employees. To offset that, many companies are allowing for a compromise. 

That compromise can be employees working remotely part-time, coming into the office when necessary, coming into the office a set number of days, or managers deciding based on discussions with the employee whether an in-person check-in is appropriate. With employees that have office-specific duties, remote work isn’t a possibility without significant changes.

Improved productivity

An offset of improved employee morale is increased productivity. A study by Stanford University researchers found that employees that work from home were happier and, because of that, more productive. 

For skeptical employers, several employee monitoring software packages help them keep tabs on what an employer is working on and how much time they spend on that client, task, or project.

While the monitoring software is an additional expense for most companies, the costs get offset by increased employee productivity of happier employees. Just ensure your employees have all the necessary tools to perform at their best.

Reduced payroll

If employees choose between working from home with a pay decrease and working in an office with no salary change, they will often opt for the former. While many employees would balk at being told that if an employer gives them a choice, most will jump at the chance even if it means less take-home pay.

The key to capturing savings is to give employees a choice between working from home for less and working in an office. 

Less absenteeism

Another byproduct of working from home is that employee absenteeism reduces as productivity improves. Absenteeism goes down because employees can pick when to work and when to attend to personal matters. The greater leeway means employees are more available for actual work versus having to spend time at the office and be absent to attend to personal issues.

Not only does this play into the happier employees means more excellent savings scenario, but it also means that employees are more available to get work done, which increases revenue. 

Employees that work from home are generally healthier, as they have less stress and more time for physical activity. Less time commuting to work often means more time spent looking after one’s wellbeing. Healthier employees miss less work, which also reduces costs.

Does all this equal cost-effective?

Whether remote work is cost effective depends mainly on how the company makes money off its employees’ work, whether customer service suffers because of a remote work environment, and what costs exist with remote or office-bound staff.

There’s no telling if a remote workforce is cost-effective for a company. What is indisputable is that there are savings to be had if the remote transition is managed correctly. A cost-effective arrangement reduces expenses, yes, but also has increased revenue to offset any transition expenses and creates profit. 

Expenses associated with remote work include:

  • Computers and other home office equipment
  • Office Supplies
  • Possible tax implications
  • Increased management and administrative costs

Until those expenses are added per employee and compared against company revenue, it’s impossible to judge cost-effectiveness.

Final thoughts

There’s no question a fully remote company will save money, at least in office space, utilities, and the cost of doing business. However, whether that equates to a cost-effective arrangement depends on multiple variables. There’s an indication, though, that employees are happier working from home and often more productive.

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