Allowing employees to work remotely at least some of the week offers a range of useful benefits for employers, from reduced overhead costs to better employee retention. It also benefits employees and employers alike through reduced commuting costs and increased productivity.
In 2023, around a third of U.S. workers with remote-compatible jobs worked from home fully, a remote work trend set to grow significantly beyond pre-pandemic levels. So, let’s look at the benefits of remote work for employers and how it offers cost-saving benefits for businesses.
8 Ways Remote Work Can Save Businesses Money
According to Global Workplace Analytics, nearly 60% of employers say saving money is a significant benefit of allowing employees to work from home. Remote work may not be available for all employees in all industries, but for those that can incorporate flexibility or even full remote working, you could look forward to the following monetary benefits of remote work:
1. Reduced Overhead Costs
Arguably, one of the biggest benefits of allowing employees to work remotely is the reduction of overhead costs for the business. On-site employees require an office space that needs to be rented or purchased and maintained. There are also numerous utility bills and office supplies that don’t come cheap.
Allowing your workforce to work from home can lead to plenty of savings due to eliminating these costs. Research from Global Workplace Analytics reveals a potential savings of over $11,000 a year for each half-time remote worker. Even if your small business doesn’t save that much, any amount is a huge win.
The numbers are even more impressive when looking at specific companies that have implemented remote working policies. For example, IBM said it slashed its real estate costs by $50 million while Sun Microsystems saves $68 million a year in real estate costs.
2. Increased Employee Retention
When you consider the major benefits that working from home offers to employees, such as more family time and reduced expenditures, it’s no surprise that many employees prioritize jobs that let them work remotely ahead of other factors.
A McKinsey survey found that a flexible working arrangement is the third-most common motivator for people seeking a new job—only behind better pay and career opportunities. Over a fifth of respondents said it’s their biggest motivator.
Not only that, but an Owl Labs survey on the State of Hybrid Work in 2023 found that over a quarter of full-time office workers changed jobs compared to only 17% of hybrid and remote workers. This means your remote workers will be more likely to stay loyal to your company, leading to less turnover and rehiring for you.
Costs associated with recruitment, onboarding and training can be reduced, which can often be quite high for smaller businesses. SHRM’s (Society for Human Resource Management) benchmarking report averages the hiring cost per employee at $4,683—a literal high price to pay to find a new employee. And don’t forget that happy employees also contribute to a more productive and stable working environment.
3. Reduced Commuting
Commuting to and from the office can represent one of the busiest and most stressful parts of the day, and it’s not even part of the actual workday! Research shows that 92% of employees are concerned with high fuel costs, with 80% specifically mentioning commuting costs as a negative aspect. Sixty-one percent of employees who don’t currently work remotely even say they’re willing to give up some pay to be able to do so.
A recent report by Coast, a fleet management software company, says that the average U.S. car commuter will spend $170 on commuting each month—or $2,043 each year. That’s a lot of bucks to save each year as a remote worker.
Remote working can significantly reduce car maintenance costs, lower insurance costs due to driving fewer miles per day and eliminate train, taxi or subway costs. And outside of the monetary savings, it allows employees to replace the commute with extra sleep, a more relaxed and nutritious breakfast or even time spent with the family.
The combination of reduced stress and the potential financial boost can translate to happier and more productive employees, indirectly benefiting the business.
4. Wider Talent Pool
Perhaps one of the more overlooked benefits of a business offering remote working roles is the massively expanded talent pool. When not bound by commuting restrictions, you’ll open up your business to a broader and potentially even more cost-effective pool of potential future employees.
A ZipRecruiter survey found that access to a broader talent pool was the third best remote work benefit recognized by employers. By recruiting outside of high-cost urban centers, small businesses can have access to talent that might be cheaper to hire while still providing high-quality work.
5. Increased Productivity
Remote workers sometimes get a bad rap for being lazy or unproductive, but studies show the opposite to be true. Working from home can give employees fewer distractions and a more comfortable working environment. Data from Global Workplace Analytics shows that over two-thirds of employers saw increased productivity among remote workers.
Companies have a variety of ways to measure productivity, and many major businesses have reported that their remote workers showed better numbers. Best Buy, BT Group (formerly British Telecom) and Dow Chemical are among those reporting that their remote workers are 35% to 40% more productive, while Sun Microsystems suggests that 60% of the time saved on commuting is being spent performing work for the company.
This makes it clear that remote work isn’t just a trend; it can represent a strategic move to boost employee productivity and deliver significant financial benefits for the company. With fewer distractions and more flexible working schedules, employees can complete work more efficiently and do more in less time. This can translate to cost savings, as businesses may require fewer employees to handle the same workload, and the reduced overheads can offer even more savings.
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6. Less Sick Time Used
Research from Global Workplace Analytics shows that the majority (75%) of employees who call in sick actually do so because of family issues, personal needs and stress. When unscheduled absences can cost employers around $1,800 per employee per year, the total cost can reach $300 billion a year for some companies.
However, reports suggest that remote workers generally continue working even when sick and return to work quicker after experiencing medical issues. Not only that, being remote means they don’t pass on infections to other employees, helping businesses avoid the financial strain of widespread illness among staff.
7. Flexible Tax Benefits
Having a remote workforce can also potentially offer businesses some tax benefits. Business owners who work remotely or have remote teams can claim deductions for home offices. This includes writing off equipment and supplies such as computers under IRS Section 179, as well as internet and utility costs. Not to mention, without an office building, they’ll avoid property taxes.
State tax implications can also vary, so it’s worth researching state-specific tax advantages or requirements tied to remote working to ensure your business remains compliant and maximizes your tax benefits. For example, Arizona allows workers to count for its Qualified Facility Tax Credit Program, while Wisconsin now includes hybrid and remote workers in its Business Tax Credit.
8. Cost-Efficient Scaling
Having a remote workforce allows your business to scale up significantly and more cost-effectively with a reduced need to invest in additional office space or equipment and the litany of other associated costs.
It means more resources can be focused and dedicated to growth and innovation—with startups such as Zapier and Buffer serving as excellent examples of successful scaling up using fully remote models. Remote work lets businesses rapidly expand their teams and capabilities while keeping overhead low, ensuring that growth is sustainable and more financially accessible.
Keep These Challenges of Remote Work in Mind
While there are numerous benefits to remote and flexible work, as with any work setup, there are some drawbacks and potential issues to consider. We’ve looked at some of the most common challenges of remote working and ways to navigate these for your business.
- Perceived lack of professionalism: Sometimes, the lack of a physical office can seem less credible to clients or business partners. For appearance’s sake, you might consider a virtual office service to maintain a professional address. And renting a co-working space can offer a useful physical location for meeting clients.
- Poor employee performance: While statistics show that productivity is not generally a wide issue, individuals who are not self-motivated or disciplined might struggle without direct supervision. Productivity tracking tools and regular check-ins can help maintain focus and accountability. Also evaluate your hiring practices to ensure you’re selecting workers with the ability to succeed in a remote environment.
- Communication barriers: Relying on digital platforms can occasionally lead to miscommunication, so we recommend investing in remote work software for internal communication. Encouraging employees to use video calls can help make interactions more personal. Ensure you have clear guidelines for communication, meeting practices and responsiveness.
- Collaboration challenges: The lack of a shared physical workspace can present a challenge to collaborative projects, so project management and task-sharing platforms such as Trello and Notion can be useful in helping remote employees work seamlessly together.
- Work-life balance: When employees use the same space for work and their personal life, it can be hard to separate the two, leading to stress and burnout. To help create a boundary, encourage your employees to stick to clear working hours in dedicated working spaces at home. You should also consider promoting mental health and well-being initiatives and regular breaks.
- Tech issues: Office workers won’t be strangers to tech issues, but these can become critical for remote workers, so ensure your employees have reliable internet connections and up-to-date equipment. You could provide them with the necessary tech yourself or offer stipends for employees to upgrade their own setups.
- Security and data privacy: Finally, having remote workers can, unfortunately, expose businesses to cybersecurity issues. We recommend implementing protocols such as VPNs and multifactor authentication as extra layers of security and providing mandatory training for employees.
Our Take on Saving Money With Remote Work
Overall, we think that remote work offers small business owners a quick, tangible way to get their business started or grow it without needing to invest in a building and office supplies. As we’ve discussed, you’ll get better employee retention, enhanced productivity and overall happier employees. These are important factors for a business owner who is focused on maximizing efficiency and minimizing costs while building a strong, loyal team.
These advantages can be particularly important for startups and digital businesses that don’t necessarily benefit greatly from a physical space. Embracing remote work can offer your business a competitive edge in today’s economy, providing you with a cost-effective way to scale up your operations while keeping costs low.
