Remote work was an option for some businesses pre-pandemic. But the onset of COVID-19 made it a necessary reality. A remote team has many benefits, such as increasing the talent pool, attracting different points of view, and reducing competition within the company.
But more often than not, the growth of a remote team is driven by lower costs. Recruiting and retaining talent remotely takes a lot of resources and effort. If the employers intend to do this independently, they must be prepared for a significant investment of time and mental resources.
This article elaborates on the various hidden costs of having a remote team, some of which are often overlooked. Armed with these, employers can determine the ideal way to grow their business.
The elements of building a remote team
When building a remote workspace, employers need a lot of extra time, effort, and money to create a global presence. Businesses need to invest these resources across all areas of the company to ensure they are up and running. Some essential areas involve managing payroll, maintaining documentation, or recruiting talent.
Business leaders often outsource such responsibilities to spare themselves everyday worries and pay attention to more critical managerial duties within the company. There is nothing strange or wrong about doing so. On the contrary, the ability to delegate effectively is one of the key skills of a successful business leader.
Some commonly outsourced functions of a business are:
- HR - HR partners usually deal with employee-related issues. They solve employee relations, workflow planning, performance management, and labor law issues.
- Payroll and benefits - Depending on the company's regions, these partners help process global payroll and control the benefits packages employers offer their employees.
- Recruitment - Recruiters are engaged in identifying the best-performing remote employees. These partners constantly look for new employees to add to the company based on open job roles and requirements.
- IT Infrastructure - Corporate real estate partners can help employers find the right location to set up an office and manage the property. It is also worth considering that remote teams want to work in the office at least 1-2 days a week.
- Business operations - Every market has its business mode. Under this regime, the company will need to operate to comply with the local laws and regulations. It depends on the country, state, province, or city. This requires dedicated support from consultants and partners in banking, insurance, taxation, and accounting.
There is no unified way to organize a perfectly functional and efficient remote workspace. But some ways, over time, turn out to be more expensive and time-consuming. Having such partners can help break down all the elements of remote work and decide how to approach it in your future company.
Three key cost metrics to evaluate remote work
There are three key business prices for remote work. Considering these three, companies can evaluate whether telecommuting will be worth the benefits.
Recent studies have shown that employees spend 40% of their time at their desks, which means having large offices can leave a vast amount of empty space. On the other hand, employees can do more with less space when companies get a little creative.
For this reason, almost 70% of company executives plan to reduce their office space in favor of fully remote or hybrid workplaces. Working remotely can significantly reduce companies' costs, especially those with multiple offices.
Another area where employers have seen the benefits of working remotely is improving employee productivity. Working remotely reduces distractions in the workplace, and employees feel happier and more engaged.
Talent acquisition and retention
Remote work can help employers retain current employees and hire talent that was not available in the past due to limited geography. In contrast, more than 40% of employers are experiencing a workforce shortage.
Thus, expanding the search can help find the best candidates who were previously outside the company's location. This will significantly improve recruitment. Remote work also provides geographic, socio-economic, and cultural diversity in the talent search.
Hidden costs of remote teams
Clearly, remote work is cost-effective for both the employer and the employee. However, there are always some hidden pitfalls of working from home for both parties. While for employees, these pitfalls are more related to psychological matters like loneliness and workplace fatigue, for employers, it is to do with the cost efficiency of their business. Employers must consider the total cost of remote work to support working from home and still enjoy its benefits without considerable financial losses.
Let's look at the seven most widespread hidden costs employers tend to underestimate. Considering them can help you gauge what the actual cost of a remote work format might look like.
Developing a centralized network infrastructure
Office technology is closely associated with additional communication costs beyond simple office staff. For companies that have moved to a remote work format, using platforms like Slack or Microsoft Teams has become more critical and necessary than ever before.
To securely continue to use these platforms, employers need to ensure that their network infrastructure is maintained and secure. Furthermore, your company is more susceptible to security breaches when remote team members work away from the office.
Setting up a home office
For homeworkers to get closer to an office setting, they will probably need special equipment or workspace upgrades. In terms of technology, this may require the acquisition of a more modern computer or a smartphone to ensure effective teamwork.
Employees may also need peripherals such as speakers, webcams, or headphones. Moreover, the employee may require the right office furniture, such as a desk, a decent chair, or even good lighting in the workplace. As a result, employees will probably need at least one element of those mentioned before, and naturally, they will expect the employer to cover the costs at least partially.
Understanding the soft and hard costs
A well-developed internal culture is crucial for employee engagement in remote work. This ensures that as employees continue to work remotely, their levels of engagement and productivity do not deter.
According to Gallup, disengaged employees cost you 34% of their salary or $3,400 for every $10,000 they make. Thus, all the indirect costs of employee engagement, team meetings, or team-building events can be even more complex and costly.
Pro-tip: Staying in touch with remote employees will require extra effort and resources. Furthermore, building a positive work culture is just as crucial as providing leading-edge collaboration tools.
Maintaining data integrity and security
Data integrity is a critical issue for every company. According to a study by TechRepublic, 95% of companies in 2020 suffered from data loss. In addition, due to the increased email usage that telecommuting has brought, the chances of sensitive information being passed on unintentionally have increased.
Also, during the study, 60% of participants reported working in common areas or in a home office where many distractions exist. Because of this, distracted employees were more prone to making mistakes that could lead to losing confidential company or customer data.
It is also essential for companies to plan to protect sensitive data after employees leave the company. When an employee leaves, a company must immediately seize office equipment and protect confidential information.
Thus, many companies use centralized system management to limit employee access to confidential information and corporate applications quickly. It also reduces the chance of data loss.
Budgeting for the costs associated with relocating
During the pandemic, many employees moved to other cities or states. Therefore, employers need to know exactly where their employees are moving. Knowing where one’s employee’s are relocating can ensure that the organization is aware of the new tax norms of the place.
In addition, employees' tax bills may be affected by their new location. Employers are not required to reimburse employees for work-related expenses incurred while working remotely under the Federal Fair Labor Standards Act (FLSA).
However, companies can still choose to reimburse the cost of internet connectivity or ergonomic equipment, even if the state where the employee lives do not require the company to pay the price of telecommuting.
Adapting operations for geography
Having a geographically dispersed team means optimizing meeting times and work schedules to suit everyone’s needs. The onus of this would fall on the manager to coordinate timings and creating hours for collaborative work amongst the team.
Additionally, managers would also need to develop a team culture that’s receptive of every employee’s needs, working hours and burnout rates. This ensures that there’s a culture that enables employees to feel safe and know that the organization cares about their well-being.
Organizing meetings and events
Another expense is the organization of large meetings and events for which employers need to assemble a team. Such meetings accelerate overcoming problems that cannot be solved in the online working environment.
Also, such events will delight employees and increase their involvement in the corporate culture. But no employee wants to wear a suit, attend meetings, and immediately return home. Therefore, the employer must organize employee holidays, find a good hotel, and organize events. This will also significantly increase employees' loyalty to the employer.
Those who hope to avoid these costs by conducting virtual events should remember that quality virtual event costs range from $5,000 to $15,000, depending on the scope.
Remote work has become integral to our daily lives, employment structure, and economy. This style of work offers many benefits for both employers and employees. However, employers cannot run away from it because it brings new risks.
Companies must confront these risks with wisdom and care and have the proper advanced tools. In addition, managers need to invest in the resources and performance of companies. It is also vital to create a culture and camaraderie within the company for employees to work together.