Impacts of Remote Work: Five Hidden Costs Employers May Overlook 

By Pat Clark
Chief Financial Officer
SpaceIQ

Many states have begun loosening restrictions as the COVID-19 pandemic wanes. Employers are now grappling with the decision of what the future of their offices will look like – and how much it will cost to adapt to a new business normal.

In the past year, companies observed how remote work impacted their internal operations, employee productivity, and overall business performance. Now, when paired with a practical cost/benefit plan, these observations can help companies determine the best path forward: bring all employees back, go with an all-remote workforce, or create a hybrid of the two.

Understanding employees’ workplace needs

Our employees’ well-being has always been a priority, regardless of the pandemic. As we look at transition plans, understanding employee needs and maximizing their engagement is at the forefront of our decision-making. For some SpaceIQ employees, a work-from-home setup is a dream. Others are counting down the days until they can return to a physical office. Many fall somewhere in between – hoping for flexible options to alternate working remotely and in a physical office space.

Managing expectations for a return-to-work plan should be No. 1 for companies seeking to ensure the safety of their employees. Globally, employees have shown that remote work is viable and even preferable for productivity and engagement. Of the estimated 48 million full-time employees in the U.S. who hold a remote-work-compatible job, 82 percent say they would like to work remotely at least weekly. The challenge lies in developing a budget-appropriate plan that offers opportunities to work remotely while resuming uninterrupted operations in a physical office.

Five hidden costs of remote work

Companies often overlook the hidden costs of remote work that should be addressed when considering a work-from-home or hybrid environment. Additionally, these costs can increase with the fiscal requirements of maintaining a physical location.

1. Developing a centralized network infrastructure

Beyond the use of laptops, cables, and monitors, office technology harbors additional costs for communication. Using platforms such as Slack or Microsoft Teams has become more critical than ever for businesses that have reduced face-to-face interactions. Companies that continue to leverage these platforms need to consider the maintenance and security of their network infrastructure.

2. Understanding the soft and hard costs

Nurturing an internal culture with remote workers is critical for employee engagement. The hard costs of remote work are easily calculable, but soft costs surrounding employee connection, team-building activities, or all-hands meetings may be more challenging to pinpoint. Remote work will require additional effort to keep employees connected. For example, our Human Resources and Marketing teams collaborated and coordinated a global gift distribution for employees in Q4 2020. SpaceIQ CMO Nai Kanell led the effort and explained, “It was no small feat and expensive, but it was worth every penny. We want people to know personally, ‘Hey, we’re one team working together regardless of location. We care about you.’”

3. Maintaining data integrity and security after turnover

Data integrity is a critical issue for virtually every company.  One data loss survey conducted by TechRepublic indicated that 95% of the participating organizations say they suffered data loss in 2020. Remote work has led to an increased reliance on email, which increases the potential of unintentional sharing of sensitive information. Moreover, 60% of survey participants reported working in a shared home office or communal spaces where distractions are unavoidable. In addition to confidentiality concerns, distracted employees are more likely to make errors that result in the loss of sensitive company and/or customer data. Increasing employees’ focus on the criticality of maintaining data security through on-going communication and training is critical.

Additionally, companies need to plan well in advance regarding how they will protect their confidential data when employees leave the company. When an employee leaves an organization, companies should take immediate action to collect equipment and protect sensitive information. Many companies choose centralized system control to enable immediate termination of employees’ access to confidential information and company applications, reducing the likelihood of data loss.

4. Budgeting for the costs associated with relocating employees

Many employees chose to relocate during the pandemic.  It is critical that employers know where employees are moving to ensure that the company is not unknowingly becoming liable for income taxes, property taxes, and employment taxes in new states.  Also, where employees choose to live could impact their tax bill if it is somewhere other than where they were working before the pandemic.  Employers and employees should expect that depleted state budgets might prompt states to go on the offensive when it comes to collecting tax revenue from employers and their  employees working remotely, even if it is only temporary. Generally, under the federal Fair Labor Standards Act (FLSA), employers are not required to reimburse employees for work-related expenses incurred working remotely. Even if your state does not require your company to foot the bill for remote work expenses, companies may want to offer reimbursement for the cost of internet, ergonomic equipment, or technology purchases. These can be marketed as company perks but will add to the bottom-line impact of supporting remote work.

5. Adapting operations for geography

For managers with teams now in multiple time zones, shuffling meeting times and juggling schedules is part of the reality of a geographically dispersed team. The amount of time it takes to coordinate moments for team collaboration can place an additional strain on managers who are already struggling to meet day-to-day demands, develop team culture, and adhere to company-wide policies. Organizations that rely on managers to balance these different facets of remote work should be aware of burnout and turnover that may affect their leadership teams.

Remote work options also is pushing many employees to relocate to new cities and countries. A 2020 DSJ Global survey revealed 69% of those polled would move to a different location for a better job. This choice can create complex issues for employers. Business registration in multiple states or countries can be costly and time-consuming. Local tax and labor laws aren’t consistent across borders. Unemployment and workers’ compensation insurance coverage typically is governed by the state where the employee works, not where the company is headquartered. If your business covers relocation expenses, plan to spend upward of $97,000 for current employees and $72,000 for new hires.

Additionally, recruitment is another element that may require additional investment. Kanell says, “We are spending a lot more money on recruiting than we did in the past. We also need to be more flexible in terms of where people can work from. This flexibility entails business registration in the multiple states where we have found top talent to join our team.” Going through the registration process requires administrative costs and time, along with gaining an understanding of the local pay rates for that talent.

Remote work and the agile office

Regardless of the framework businesses choose, remote work has evolved from a loose trend to commonly sought benefit by employees. The post-COVID workplace will be focused on longer term, agile workplace development. Last year has shown us that more companies are going to be embracing a hybrid structure versus the “normal” office that so many of us have grown accustomed to. There is no “normal.”

The benefits of having a remote structure and the need for recognizing the potential additional costs are clearly present, but we also have to remember: It’s not all or nothing. Employers are considering the productivity benefits of staying remote while also understanding the need to keep employees safe in a collaborative, in-person environment.

Companies can embrace better workplace agility by understanding both the financial costs and the employee productivity and job satisfaction implications of remote work.

Keep reading: Boost Team Collaboration with 10 Remote Working Tools