Work From Home: Who Should Pay For Home Office Costs?

Published on November 3, 2020 - By Jo Meunier (née Disney)

• One remote work challenge that’s currently in the spotlight is, who should cover the cost of working from home? 
• New research from Global Workplace Analytics and Design Public Group (released in October 2020) found that 82% of employers believe the organization should absorb the cost of a home office set-up for employees that work from home full-time.
• Elements that need to be considered when making the decision include local cost of living, legal aspects, and employee attitudes around remote work. 

For better or worse, we’ve become accustomed to remote work over the past 7 months.

However, while some companies embraced distributed working years ago, others are still scrambling to adjust. This presents numerous challenges ranging from cybersecurity threats at home to keeping tabs on employee health and wellness.

One challenge that’s currently in the spotlight is, who should cover the cost of working from home? The employer or the employee?

Prior to the pandemic, some employees would have gladly taken a pay cut in order to work more flexibly, which was seen as a privilege rather than a necessity. Last year’s State of Remote Work report by Owl Labs found that 20% of survey respondents would take a pay cut of more than 10% in order to work remotely.

Now, it’s a different story.

Since the pandemic started, employees have been forced to work from home whether they want to or not. Is it fair to ask them to absorb the costs of working from home when it’s their only or main workplace option?

Or on the flip side, given that they are saving on the cost of commuting, should employees chip in a little? After all, the new State Of Remote Work 2020 Report by Owl Labs found that people are saving almost $500 per month on expenses while working from home.

However, the same report also found that at least one in five people are working more hours per week during the pandemic.

This is where things become a little grey.

In addition to gaining extra productivity from their workforce, some employers are now saving money on office utilities such as heating, water and lighting. Others have renegotiated or handed back their office lease, which cuts office rental costs.

So, should the employer foot the home office bill like any other office space?

Typical home office costs:

Opinions — and laws — are mixed.

On the legal side, Alexandra Mizzi, legal director at law firm Howard Kennedy said in an interview with Wired: “In general, employers are not obliged to subsidise the costs of working from home or travel.”

But there are exceptions. While employers may not have to pay for home energy bills, they do have a legal obligation to maintain your health and safety.

“The employer must assess any risks to health and safety and take steps to reduce those – which might well include providing a suitable desk and chair if the employee’s set-up is liable to cause backache or vision problems,” added Mizzi.

Local cost of living

Then there’s the salary impact.

Some companies such as tech giant Facebook are set to allow long-term remote work, and are also considering adjusting its staff salaries and compensation based on local cost of living. So employees that live and work in more affordable areas compared to the lofty expense of Silicon Valley may see a drop in salary.

Greg Shepard, CEO and founder of BOSS Capital Partners, believes this is the wrong approach. While cutting salaries might save employers money, “it’s a short-sighted approach” as companies should hire the best workers on the market — including new hires and mid-level employees — and pay them accordingly, regardless of where they’re based.

“Companies that do so will find it easier to attract and retain top talent at all levels, and workers’ morale, loyalty, and productivity will be higher as a result.”

Attitudes are changing

Despite the potential for saving money, many employers still feel responsible for the financial impact of their employees’ home offices.

New research from Global Workplace Analytics and Design Public Group (released in October 2020) found that 82% of employers believe the organization should absorb the cost of a home office set-up for employees that work from home full-time.

Its report, The Future of Home Office Cost Sharing, found that organisations also feel responsible for part-time work from home — although not as many. 61% feel responsible when employees work from home 3 days per week, and 23% for 1 day per week.

“Before COVID, employees who worked from home generally saw it as a privilege and didn’t expect their employer to cover their home office expenses,” says Kate Lister, president of Global Workplace Analytics. “The survey shows that sentiment has shifted during the pandemic.”

These decisions could lead to significant changes in how companies procure and distribute technology and furniture, manage safety risk, and how they attract and retain talent.

Work from home – or near home?

This shift in sentiment could well prolong the work from home trend.

Indeed, the report found that nearly 25% of organisations expect 75%+ of their workforce to work from home 3+ days/week post-COVID. Twenty-two percent are still undecided.

If staff are able to work at home and have their costs covered, while also saving money on commuting, they may well be happy to keep up the work from home policy for as long as possible.

But is it the right decision long-term?

There are many factors to consider. But ultimately, it should be about choice.

While having the option to work from home part-time can be enormously beneficial in terms of cost savings and family commitments, it also has a number of serious drawbacks.

In just 7 months, we’ve already seen worrying research related to degradation of mental health, physical health problems over insufficient workstations and space, a lack of boundary between work and life leading to stress and burnout, and the erosion of company culture.

Many people are still working from the kitchen table, and can’t focus on their work due to home distractions, children and pets. It is unfair to expect employees to continue working from home under these conditions, and far more constructive — both for the company and its employees — to offer a work near home option rather than enforcing home-based work.

The option to work near home in a regional coworking space provides a more positive and productive experience.

Furthermore, workspaces in rural or suburban areas are typically more affordable than city centre and CBD locations, which promotes cost-cutting by enabling the company to reduce traditional real estate and distribute teams across regional spaces.

But of course the real benefit of flexibility isn’t just about cutting office space and saving money. It’s about attracting and retaining talent, fostering loyalty, and supporting individual wellbeing.

Long-term, a work near home or ‘hub and spoke’ model means employers can offer a comfortable, ergonomic workplace with everything their workforce needs to work productively: including, perhaps most importantly, human interaction.

So instead of focusing on who pays for the cost of home broadband or a new office chair, the real question should be: is working from home actually working?

It worked for the past few months. But is it right for the next few years?