How remote working has improved quality of life and cost savings
While remote working has been around since the early 1970s, the COVID-19 pandemic pushed it to be one of the most talked about concepts in 2020. Aided by connectivity and technology, corporates were compelled to adopt remote working for the continuation of business activities, as the world went into lockdown and restricted movement. A year down the road, both employers and employees are slowly navigating their way back to work, amidst caution and vaccination rollouts. However, numerous surveys and analyses across the globe show the overall improvement remote working has brought to the lives of employees and the cost benefits to both employers and employees.
Evolution of remote working
Remote work, also known as teleworking, first emerged in California in the early 1970s, with employees in the IT industry using technology to work remotely. The concept resulted in employment not being confined to designated hours or a specific space such as an office, and over time, has been a way of encouraging people to earn an income while being physically present anywhere in the world; either in the comfort of your home, or by the beaches of Bali. Over the years, the increasing connectivity across the globe made it even easier for remote employment, with the concept relying heavily on the collaboration of trust, control, balance and autonomy.
Dimensions of remote working
In 2020, the emergence of the COVID-19 pandemic made remote working more of a necessity rather than an option, in order to align with health and safety protocols such as maintaining social distancing etc., and as a result of the lockdowns imposed in many countries. The International Labour Organisation (ILO) estimated that prior to the COVID-19 pandemic, around 8% of the global workforce worked from home permanently (i.e. approximately 260 million workers). This included self-employed owners of businesses, freelancers, and industrial outworkers as well.
However, COVID-19 compelled the more widespread adoption of remote work across the globe. Apple has announced that the majority of its members are unlikely to be back in office before June 2021. According to a survey done by FlexJobs (a service offered for job seekers), some of the other companies who will be continuing to work remotely till mid 2021 are Facebook, Mastercard, PayPal and Microsoft. Infosys, a company providing information technology related services, plans to have 33%-50% of its workforce working remotely on a permanent basis. There are also companies that have allowed their employees to work remotely indefinitely, such as Twitter and Shopify.
How ready are countries for remote working?
The pandemic led to a significant rise in “digital nomads” – i.e. people who travel constantly, doing a 100% of their work remotely, from the location they are in at any given time. In the US, alone, the number of digital nomads increased by 49% YoY in 2020, with 42% of them being millennials. According to the Digital Nomad Index 2020, developed countries such as Canada, the UK, Romania, Sweden and Denmark were the top five countries for remote work, based on their broadband speeds, monthly rent, happiness index and remote job vacancies.
Top 10 countries named as the best countries to work from home in 2020
The top 15 industries offering remote work in 2019
According to an analysis by McKinsey & Company in 2019, in advanced economies such as UK, financial services contribute a large share of the economy. As such, the workforce is able to work without a loss of productivity one third of the time. This is a similar trend evident in other advanced economies as well. However, in emerging economies such as India (where ~43% of the total labour force is engaged in agriculture), occupations that contribute a higher portion to the economy are generally labour-intensive, such as manufacturing and agriculture. Hence, the potential for engaging in remote work is far lesser than advanced economies and drops from 12%-26%. In China, around 200 million people were allowed to work remotely by their organisations, i.e. around 26% of the working population.
Country wise potential share of time spent working remotely
A survey on the readiness of 42 countries for ‘remote work’ in the Harvard Business Review in April 2020, evaluated the countries based on three indices: 1) the robustness of key platforms, 2) the availability of digital payment options to enable transactions, and 3) the resilience of internet related infrastructure to respond to traffic. The survey results showed that advanced economies, which are better equipped with robust digital platforms, are better prepared for remote work than developing economies with unsteady digital platforms.
Strong digital platform availability and connectivity drives remote working opportunities
How does remote work improve quality of life?
Quality of life is a subjective measure or a non-financial component which is related to how satisfied one is with his/her job and life overall. The factors that could contribute to improve one’s quality of life will largely depend on an individual’s perspective and circumstances, and these often include factors such as, job satisfaction, time available to spend with family, health, financial security and safety. When focusing on quality of life in relation to work, one would mainly look at the availability of time and money to engage in activities they enjoy doing and as a result, both salary and quality of life are considered when determining whether to stay in a job or take a new job. This is, in particular, the case for those engaged in the services sector.
For example, commuting to work would help to save money from living in popular job centres. However, that would also result in one not having sufficient time to spend with their loved ones or for their hobbies, as a significant portion of time is spent stuck in traffic jams or travelling. Remote working options help solve this problem by providing employees with greater flexibility to decide their work schedules.
GitLab conducted a survey in 2019 using 3,000 professionals who were working remotely across the US, UK and Australia and found that the commute time saved by remote workers was spent with family, exercising or resting. However, there were around 34% of people who said they used this time to work more. A survey carried out on a sample of full-time employees in the US in 1Q 2020, revealed better-work life balance, improved productivity and the saving of time and cost of commuting to be the top three reasons they would choose remote work.
Top reasons to choose remote work
Further, a survey conducted on full-time employees from over 500 companies across North America and Europe, indicated that employees placed a high value on location flexibility, with 54% of employees willing to switch jobs just so they would obtain location flexibility.
Location independence is becoming increasingly valued in Asian countries such as Indonesia although they are still becoming familiar with remote working. In a research done by Fast Company in 2019, it was noted that South East Asians are still adopting to working remotely as they stereotype ‘a job’ to be one that operates ‘9-5’. In a city such as Jakarta where more than a million travel to work daily and is ranked on the 12th place as having the worst traffic in the world, remote work is an ideal solution as it increases employee productivity and improves quality of life, saving them USD 5 billion every year.
A survey done by IWG Global in 2019 using over 15,000 employees across 80 nations indicated that, on average, 75% of the companies were found to have introduced flexible working (which includes working remotely) to reduce commuting.
Countries that have introduced flexible working with the purpose of reducing commute times
What employees would sacrifice for greater location flexibility
Remote working also has a positive influence on the environment. An analysis conducted by Global Workplace Analytics indicates that working remotely will result in the reduction of Greenhouse gas emission by 54 million tonnes each year, equivalent to removing 10 million cars off the roads. The cost of 650 million barrels of oil, which is estimated to be USD 64 billion, would also be saved as a result of working remotely.
In the survey, around 54% of SME employers agreed that remote work improves work life balance, while 48% believed it reduced the carbon footprint. While it was noted that some companies might choose to completely switch to remote working, others might adapt to a hybrid version, working at least 1-2 days of the week remotely.
How does remote work improve cost savings for employees and organisations?
A survey done by Global Workplace Analytics indicated that six out of 10 employees agreed that cost savings is one of the major benefits of remote working.
A report compiled by PwC Netherlands in 2020 on the cost and benefits of working from home in the Netherlands state that, increasing the time worked from home by one day per week results in a net benefit of EUR 3.9 billion annually – in terms of cost savings for employees and companies. As a result, the payroll cost drops by 1% in total in Netherlands. The research also identifies cost savings to employees by telecommuting in the Netherlands to be EUR 1.2 billion per annum. This was found to be equivalent to half of the childcare costs incurred per annum in the country.
In a different example, a traditional employee living in the US usually purchases three out of five lunches per week, according to the World Economic Forum data. It was found that an American employee would be saving USD 32.50 on food for one week if he/she worked remotely. This would also have increased health benefits as employees would be able to make healthy meals at home instead of consuming unhealthy fast food.
Bloomberg noted that in 2020, popular banks such as Barclays PLC plans to save on rent by reducing expenses on real estate in countries such as the US, UK and India. The bank is already reducing the number of branches across the UK, as the COVID-19 pandemic resulted in increased demand for remote work. Around 75% of the bank’s employees (out of 80,000 odd employees) have been working from home since the pandemic. It was further noted that Lloyds Banking Group PLC is also following a similar strategy since the pandemic hit the world as remote work is now accepted widely.
The move to reduce residential rent costs has been observed in companies in the US as well. A drop in the rent cost had been observed in San Francisco, known to be the tech hub in the US, by 35% to USD 2,100 per month since the COVID-19 outbreak and lockdowns being imposed. Most workers are now given the flexibility to work remotely, hence, they are leaving areas closer to the tech hubs as they are not expected or needed to come into an office. As a result, the cost of a bedroom has dropped to $2,716 per month, a drop of 27% as per data released by Realtor.com in the US. This has resulted in the most expensive cities to live in the US now being more affordable.
Apart from real estate costs, Global Workplace Analytics notes that remote working increases savings through lower employee attrition, payroll costs etc.
Cost savings to employers
SMEs have also managed to experience cost savings due to remote work which was introduced due to the Covid-19 pandemic. A survey done to identify cost savings of remote working experienced by the SMEs operating in the UK by Hitachi Capital (using 250 SMEs in July 2020), indicated that the biggest savings to employees were on food and beverage, employee travel and cleaning services (as shown below).
Savings made by SMEs from remote working
Remote work is not without its downsides
While there are obvious benefits to both employees and employers from remote work, the concept is not without its downsides. Isolation, fatigue, burnout and loss of company culture are some of the key issues stemming from remote work. The Covid-19 pandemic has made remote working even tougher on parents with school going children, as they are now tasked with both working and overlooking online schooling during the same hours.
Some of the key downsides of remote work
While organisations are attempting to solve some of these issues, implementation of solutions such as developing boundaries between work and personal time, clocking off at a particular time of day, and flexible work hours are based on trust between employees and managers. It also requires companies providing a platform for employees to openly discuss some of these concerns. The July 2020 survey carried out by FlexJobs and Mental Health America (MHA) noted that 56% of respondents noted that their HR departments did not encourage conversations about burnout. As noted by Stanford researchers, if organisations do not take appropriate action, there will be long-term implications to health of employees, and consequently higher attrition rates.
The future of remote working
A year down the road since the pandemic started in 2020, what is the future of remote working from where we stand now?
In a survey conducted by PwC USA in January 2021 (a follow up to the survey in Jun 2020) noted that 83% of employers now say the shift to remote work has been successful for their company, compared to 73% from the June 2020 survey. However, among the survey participants, there was no consensus on the optimal balance of work days at home versus in the office. Around 55% of the employees would prefer to be remote at least three days a week once pandemic concerns recede — little change from the 59% who said the same in June 2020. For their part, while most executives expect options for remote work, they are also worried about the impact: around 68% noted that a typical employee should be in the office at least three days a week to maintain a distinct company culture.
Employers expect to be back in office faster than the employees; however, employees will continue to expect more flexibility
Further, a survey was conducted by PwC in September 2020 to understand remote working policies of global organisations by evaluating 300 global companies. Around 53% of companies already had remote working policies in place, while 50% of the remaining companies had plans on implementing a remote working policy by the end of 2020. It was noted that companies decided on remote working arrangements based on three main factors: 1) the health and safety of employees (75% of companies), 2) enhancing the employee experience (65%), and 3) attracting and retaining talented employees (60%). About 21% of respondents were expecting a hybrid approach, which involved a mix of remote working and going to office.
The pandemic has also pushed the popularity of freelance platforms. With many workers across the globe being laid off due to pandemic led conditions, freelance platforms have provided these workers with an option to continue working. Further, these platforms are now used by organisations to reduce payroll costs, by recruiting professionals for specific projects only so that they are not considered permanent employees of the company. Some of the most popular freelancing platforms in 2021 as listed by the G2 website are Upwork, Fiverr, Freelancer, Skyword360 and Dribble hiring.
Features of freelancing platforms
As the number of remote workers increase, including the rising number of digital nomads, demand for co-working spaces have also been on the rise. Post-lockdowns, many employees sort out co-working spaces as a third-option outside of home and the traditional office space. As per the 2020 Global Coworking Growth Study by CoworkingResources and Coworker.com, the number of global co-working spaces are expected to surpass 40,000 by 2024 globally with nearly 5.0 million people working from these spaces.
Number of co-working spaces expected to surpass 40,000 by 2024
In our view, these estimates reflect not only the growth that the industry has experienced over the past few years, but also the dramatic increase in flexible and remote work practices adopted by businesses worldwide. In addition, cost per desk has also declined by a global average of ~2.0% YoY in 2020, making co-working spaces increasingly affordable.
Prices of hot desking slowly declining
As per the CoworkingResources study, there has been an increase in space utilisation requests not just by individual freelancers, but also private companies, who look for longer-term contracts and meeting room bookings etc. Demand is expected to mainly come from larger organisations and enterprises looking to decentralize their workforces into smaller branch offices and remote teams into private flex offices.
In our view, the pandemic has dramatically changed the way both employers and employees view work-life balance, and the ways in which employees can remain productive and improve their quality of life. While the corporate world slowly continues to navigate these changes amidst an ongoing pandemic and vaccination distribution, we believe that despite the best efforts of corporates to have employees back in work early as possible, some of the structural changes that have taken place in the way we work are here to stay.
Amanda Wickramasekera is a financial analyst with over four years of experience in audit and deal advisory. She is currently reading for her Masters at the Postgraduate Institute of Management (PIM), and is also a member of the Association of Chartered Certified Accountants (ACCA) and a passed finalist of the Chartered Institute of Management Accountants (CIMA). She is currently a part of the ReMAtics team, a freelance platform specialising in financial research, modelling, writing and analytics.