The focus for the future will be cost, efficiency and productivity. World class companies are already realising the financial benefits of flexible working, are you? We will explain how you can realise £10,000 cost saving per employee.
In this article we will explain
Commercial property costs and trends
Data published by instant offices shows a range of office costs per employee per month for London compared to the rest of the UK.
Figure 1 – Cost per employee per region per month
The monthly cost of UK office space is between £150 for Leeds and £1500 London. The cost depends upon the commercial property location and available amenities.
Figure 2 – UK real estate prime office rents by City
Reading is the most expensive location for prime office rents outside of London. Average price per square metre is £463.75 per month.
The London prime office market led both the UK and European ranking. Monthly prime rents are as high as £1,244.54 per square metre in the West End and £801.81 per square metre in London City.
UK standards suggest an average of 11 cubic metres, or 5 square metres, as the minimum space required per person in an office, but this is just a guide1.
The cost per metre when multiplied by the minimum space requirement of 5 square metres provides the total property cost per employee per month.
The average UK commercial property cost by City provides a range of £1,475.25 to £5,621.29 per month.
This is an excellent baseline to begin to start developing a business case to identify the cost savings associated with moving to a remote working structure.
Figure 4 – UK real estate prime rents annualised by City
Adhering to the minimum space requirements stated above, annual costs would range from £17,702 to £67,455.45 per employee per annum.
Commercial property trends
Commercial property rental trends were analysed to identify any significant changes to the trends and to understand more about what the trends tell us.
BNP Paribas data2 shows the number of short-term leases (from 1-4 years) has increased by 5% in the last year.
Longer-term lease periods between 5 and 14 years have decreased a combined 7% in 2019.
This trend is true across all sectors. Retail, commercial and industrial leases decreased last year. We believe this trend will continue and if the COVID-19 outbreak causes further ambiguity then this trend may increase.
Vacancy rates after lease expiration is also increasing. This data up to 2018 indicates a trend for higher vacancy rates and it will be interesting to see this chart updated for 2019/2020.
Summary of commercial property costs and trends
The costs of commercial property per employee per annum are high. Costs increase each year by 2.5%. This increases the financial strain on all organisations regardless of sector and size.
Employers recognise this trend. Organisations are agreeing shorter lease terms and vacating expensive buildings. With cash flows severely impacted in recent months most tenants must be considering either requesting a concession on their lease terms or terminating their lease agreements.
The commercial property market, who for some time, have been pushed to look at their traditional lease structures must be challenged to propose a concession on rent or accept early termination of lease agreements.
How will you continue to decrease costs, provide value to your clients and increase profits with commercial property rents continuing to increase?
Remote and flexible working, COVID-19 and the future of the workplace.
Does flexible working mean working from home or having a home office?
Working from home or remote working is an essential part of flexible working but flexible working is not only about the location you are working from.
Types of flexible working
Flexible working includes several changes to working a 9 to 5 office environment. This can include but is not limited to
The key principle to flexible working is to work towards an output not hours worked per week
What changes would employees like to their working arrangements?
The information below3 shows how employees would like to change their working arrangements with their employer.
Are employees legally entitled to work from home?
Section 80F of the Employment Rights Act 19964 gives employees the legal right to request a change for any reason. This can be to request a change of location, to full-time or part-time work, job-share, work from home, or a change of working days or hours.
As an employer you should have policies in place to accommodate employees who request remote working.
As an employee who needs to know their remote working legal requirements, ACAS publish a guide5 on how to request and manage your discussions with your employer.
Does remote working really…work?
The following information from the CIPD shows the percentage of employees who have remote access to flexible working arrangements.
Senior managers and board members had more access than did non managerial employees.
This trend was also true for the type of working arrangements made available to employees with Board level and senior manager consistently using their alternative working arrangements.
Businesses should investigate a hybrid of office and flexible working practices and make this available to all employees.
Employees can choose the best working condition and locations for them whilst experiencing comparable benefits, flexibility, and the location that best fits their needs.
How does the UK compare for remote working?
The answer is, it depends upon location. The chart below8 shows the percentage of people working remotely for 2.5 days a week or more.
After the COVID-19 pandemic passes, it is expected there will be a cultural shift towards working from home as a norm and many employees will want to do this, at the very least for part of the week9.
Different countries have different approaches to flexible working arrangements. In some, the right to work from home is provided by law; in others it is entirely up to an employer-employee agreement.
German employment laws are among the most developed in the world and strongly pro-employee.
Yet, there is no legal entitlement as such to work from home, except where employees cannot reasonably be expected to attend the workplace, for example due to their physical condition or in order to care for an elderly relative (but not children).
Prior to Covid-19, 12% of Germans worked from home. During the current pandemic the number of homeworkers has risen to 25%. This has made it possible to test the efficacy of homeworking on a large scale. The result? Success.
Flexible working has been embedded in Finland’s working culture for decades, stemming from a deep-rooted culture of trust, equality and pragmatism.
Finland adopted flexible working laws through its Working Hours Act in 1996. This allowed employees, among others, to start or end their working day three hours earlier or later than the standard.
By 2011, 92% of employers in Finland were allowing employees to adapt their working hours, making it the lead country with the most flexible working schedules in the world.
While the rest of the world is catching on, Finland is taking further steps to stay ahead of the curve. It has recently amended its legislation to allow even more flexibility. The Working Hours Act 2020, in effect from January of this year, allows employees to decide not only their working hours but also their place of work.
The UK by comparison sadly is in the relegation zone when it comes to offering alternatives. With less than 45% of employees taking advantage compared to an average of 55% for other countries.
Do employees really want a home office?
A survey conducted by WildGoose7 highlighted the differences of opinion between flexible workers and non-flexible workers.
The trend for both flexible and non-flexible workers is the same. Both groups claim it is very important with the flexible working group stating it was essential.
Less than 6% of flexible workers stated it was not important to them and this was lower for the flexible working group.
In the same survey 69.62% of respondents said it helps them to maintain a good work life balance.
53.16% said it was reassuring to know that urgent changes can be managed in discussion with their employer.
43.04% said that working from home makes them feel valued.
39.24% stated it helped them to reduce stress and manage their mental health.
Only 7.59% said it did not interest them.
How do employees feel when they are working remotely?
We know that 60% of all employees have access to alternative working arrangements but only 45% of full-time employees do. We can also see that although the arrangements may be available, they are not being used.
Both flexible and non-flexible workers value the access they have and can quantify the personal and health benefits available to them through the scheme.
But how do employees feel when they are working from home?
A separate recent survey of 6,000 office workers across the UK, Germany, France and the Netherlands6 found the following.
62% of interviewees claimed remote working increased productivity compare to only 31% who claimed productivity had decreased.
For those who claimed productivity had taken a hit, a quarter claimed it was becuase their organisation had not supported them.
So, is remote working a necessity?
There are now five generations in the workplace. One dramatic shift is that the “millennial generation” or “Gen Z” as they are known are becoming the majority of employees in the workplace and already make up 50% of the workforce.
There are almost 17 million millenials in the UK, making up over a quarter of the total population and coming second in numbers only to the baby boomer generation.
Generation Z or millennials, born between 1981 and 1996 will make up 75% of the workforce by 2025.
Research10 also found that millennials are the most likely to want the option to work from home, with 70% wishing they were offered it, compared to less than half (47%) of over 55s.
The evidence is quite compelling. Millennials will contribute 75% of the workforce in less than 5 years. 100% of the millennial generation consider flexible working to be essential compared to 50% of those born between 1986 and 1999.
64% of the future workforce move consider moving roles for that flexibility.
If there was any doubt that remote & flexible working was essential, then this should provide enough evidence.
Summary of flexible working, COVID-19 and the future of the workplace.
COVID-19 has raised the awareness of legislation for flexible working and has proven that flexible working can be effective. The use of a home office has now become “the new normal” and employers should help their employees establish a safe and comfortable home office working environment.
With the introduction of flexible working legislation, opportunities for flexible working exist but need to be more widely adopted.
For those who use flexible working conditions the benefits translate in to improved work life balance, productivity gains for the employer and greater emotional health and wellness for the employee.
With 75% of the workforce made up of millennials in less than 5 years, who demand flexibility from their employer, there is no option but for Chief Executive and Commercial officers to review their flexible working policies.
This is critical for both employee health and wellbeing, skills retention and to be able to attract the best talent.
The UK sites at the bottom of the flexible adoption world league table. Chief Executives must look at the benefits stated above for flexible working but also the opportunity to have access a wider employment pool for employers to choose from.
As we have seen in the example of Finland and their progressive flexible working legislation, does the employee even need to be in the country if they are achieving the outcomes the business needs to drive it forward.
What are the issues with remote working and working from home?
Many of the reported disadvantages of home working include reduced productivity levels and lack of employee engagement. It can be argued that many organisations are used to managing employees, not on the output of their work, but on the time spent on a given activity.
As an employer you need to agree clear outcomes. Individuals and teams can then agree the best way to meet the outcome.
Many of the reported issues with employee engagement are related to whether an individual “feels” the need to be physically present with their team. More introverted employees may relish flexible working, extroverts crave the companionship an office environment can offer.
Going back to an earlier example of employee surveys conducted across UK, Germany, France and the Netherlands6, 1,860 of 6,000 (31%) respondents say their productivity levels had decreased.
24% claimed low productivity was because internal IT could not provide the support they needed and 10% claimed poor WI-FI or home network was an issue.
In the UK, only a third (32%) of respondents said they were completely confident that the working from home online security measures implemented by their employer would keep them safe from cyber-attacks.
Further examining employees concerns over flexible working as mentioned above these include
All of this must be compared to the positives of flexible working including
An employer could provide added benefits to their employees by paying for them to
This would satisfy the employee requirements for flexible working and support. If you wanted to attract and retain the best talent, why not offer a full flexible working solution?
But all of this comes at a cost and we started the article stating “Flexible working can save you £10,000 per employee!
How do I save £10,000 with remote & flexible working?
When you consider that business owners are paying property costs between £17,702 to £67,455.45 per employee per annum there must be a cost saving in flexible working.
If, as a commercial organisation you can allow half your employees to work flexibly for 2.5 days per week then it stands that you could halve your property costs. The space requirements are reduced by 50%. This simplistic view would deliver savings of £8,851 to £33,727 per annum.
This assumes you can break your lease with your landlord or not renew when the lease is due to expire. It also assumes you have an HR team who can manage the flexible working policy and you have supervisors and managers who can support and motivate teams in remote locations.
If an employer where to provide the technology benefits package to the employee as stated above. The employee could to choose their own hardware and office furniture and the employer could throw in a foosball table. And they would still be saving money.
Using the lower value of annualised property cost savings of £8,851 per annum per employee, you could
For organisations based in London savings of £33, 727 are achievable. For companies in the North of England savings in the region of £8,851 per annum can be delivered.
On average, across the UK, the annualised cost saving per employee is £13,899
In addition, as an employer you could eliminate the following costs to improve the ROI of the project.
The cost savings could be closer to £15,000 per annum per employee if a full remote working policy was to be put in place.
The cost to place an employee permanently in a home office, to guarantee full compliance with Health and Safety guidelines, ensure they have adequate network coverage and communications with co-workers. To provide all the hardware and furniture and fully support them across flexible working hours would be as little as £4,200 per year.
Do the benefits outweigh the costs?
The focus for the future will be cost, efficiency and productivity. World class companies are already realising the financial benefits of flexible working.
Flexible working will be an essential need for 75% of the workforce in less than 5 years.
If you no longer need a long-term lease, then exit it now. Move to permanent remote working and use smaller premises. The cost savings will increase cash flow and reduce overheads.
If you want to attract the best talent you can. With remote and flexible working, you have more access the talent pool.
Technology savvy millennials who are outcome focussed demand you offer this. To enable them, you need to offer right equipment and support to your employees.
Even at the lower end of property savings of £8,851 / annum, with a cost of £4,200 per annum for each employee you could have a virtual and fully connected workforce and still save £4,651 per annum.
For organisations based in London the business case speaks for itself saving £29,527 per annum per employee.
Even if you do offer flexible working, if cost saving, productivity gains, staff wellbeing and retention are your priorities then follow these simple steps to pioneer flexible working in your organisation.
When analysing this subject, we found it interesting to see that both market trends and employee demands demonstrate the importance of remote working arrangements within an organisation.
The COVID-19 pandemic has demonstrated that working from home, remote working and flexible working is achievable and more importantly sustainable.
Companies have more to do for their employees in ensuring employee satisfaction, connection and emotional health and wellbeing are being addressed.
Simple actions include helping with home office needs, home network and home Wi-Fi, ensuring the business has enough network and device security enabled and support covers the flexible hours adopted by your workforce.
The costs of commercial property per employee per annum are already high. Cost continue to increase putting more of a financial strain on your business. All organisations regardless of sector and size are suffering. Business owners are decreasing lease terms and property vacancy rates are rising.
You need to track employee engagement. You must develop a bespoke communication plan. The plan must work for extroverted and introverted employees alike.
If you cannot support flexible and remote working, then look to specialists in this area. 24% of survey respondents said employers were not providing enough support. 31% of respondents expressed concerns about digital and cyber security whilst remote working.
If you want to improve cash flow and reduce overheads, then flexible working is a great way of achieving this.
Remote working can deliver an annualised £5,000 cost saving per employee. You can decrease costs whilst increasing employee satisfaction, productivity and retention. Flexible working can also be used to attract the best available talent to sustain your business.
Altus Digital Services is digital consultancy and solutions provider who specialise in solving commercial and residential technology issues. We design and install corporate and residential home working solutions. If you would like to discuss anything within this article, please contact us