What businesses will--and won't--give their work from home employees in 2021

Remote worker  >  A man works from home with his dog
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Love it, like it, or lump it, in 2021 we're still going to be working from home. And, in 2022, 2023, and on and on. It's not just the coronavirus pandemic, which is driving it though. Covid-19 just enormously speeded up a trend that had been building for decades. What will that mean for us? Let's look.

First, this really is happening. According to the US Census Bureau, over half of the labor force in major American cities are working from home. Of those, by a Gallup survey count, two-thirds of at-home workers want to keep working from home because they prefer it or are concerned about catching Covid-19.

Brendan McErlain, Red Hat's VP of Portfolio Product Marketing. sees an even bigger increase coming. "In our just-released  Global Tech Outlook, we found that more than half of companies say that there will be a 25-75% increase in the next 12 months. When looking at North America, about one in three predict a 50-100% increase in remote work."

It's not just big cities seeing this trend. According to the Federal Reserve Bank of Dallas, across the United States, 24.2% of workers were working entirely from home in August.

As IWG, formerly Regus, a glocal commercial real-estate company, pointed out, we've been slowly moving to remote work since 1973, "when the OPEC oil crisis and gridlock brought the USA to a standstill." In that same year, Jack Nilles, a former NASA engineer, came up with the concepts of telecommuting.

Nilles and his colleagues wrote in the ur-text of telework, The Telecommunications-Transportation Tradeoff, "either the jobs of the employees must be redesigned so that they can still be self-contained at each individual location, or a sufficiently sophisticated telecommunications and information storage system must be developed to allow the information transfer to occur as effectively as if the employees were centrally collocated." Sounds familiar, doesn't it?

Their concern was with reducing traffic and the energy consumption that came with the work commute. Today, that still matters to us and we wrap our concerns under the title climate change. But, what's driving this movement now is the need to keep businesses running under the burden of a pandemic and, far less visibly, big business's desire to cut commercial real estate costs.

Even before the virus changed our lives, Regus noted office space has been shrinking since 1990. Why? Because more and more employees wanted flexible working hours. Companies also want to cut their office space costs starting after the 2008 global recession. It's very telling that Regus's new tagline is no longer about commercial real estate, instead it's "Serviced Office Space, Coworking & Virtual Offices."

This change isn't just marketing. It reflects the sea-change in office real estate. As Moe Vela, a remote workplace consultant with TransparentBusiness, said in an NPR interview, employers save an "average of $11,000 per employee per year" when their staffers work at home. That's real money.

That doesn't mean, however, that employees will see that money. Here's what executives are planning for their work from home employees as it becomes the new normal.

Work remote, get a pay cut

Nobody likes to talk about how much they're paid and companies, looking for top staffers at the best price possible, like it even less. That said, in a  comprehensive BusinessWeek report, the real estate and technology company Redfin revealed that it was setting tiers for its new working from home.

Using data from the Economic Research Institute, which compiles information on US wages and the cost of living, Redfin set up three pay tiers for employees. For those who worked in Seattle, RedFin's HQ, or other expensive cities, such as Los Angeles, New York City, or San Francisco, their pay rates would remain the same. But, if you lived in a mid-tier city--such as Austin, TX, Chicago, or Philadelphia--you'd get a 10% to 15% reduction in cash compensation. If you moved to a low-tier location--for example, Atlanta--, you'd be paid still 20% less.

Redfin is far from the only company adopting this model. Facebook, Twitter, and VMware are all moving in this direction. Some businesses have long used variations of it, but working from home has made it a front-burner issue. 

VMware, for example, according to a Bloomberg report, will let you permanently work from home, but if you moved from VMware's Palo Alto, California headquarters to Denver, you'd have to take an 18% pay cut. Los Angeles or San Diego? Say good-bye to 8% of your annual pay.

Employees are, understandably, unhappy with this. According to technology job site Dice’s ongoing COVID-19 Sentiment Survey, 76%, many of whom have been working from home for months now, won't accept any pay cut. 3% would accept a 15% cut, but barely 1 percent would put up with a 25% cut.

Not every company is taking this Scrooge-like approach. Kelsey Chan, co-founder of CocoSign, an e-signature company, thinks, "Reducing the rate would not be fair to the employee especially if he is creating similar value to the company like before. Companies shouldn’t risk demotivating employees."

Deepu Prakash, SVP, Process & Technology Innovation at  Fingent, a medium-sized custom software development company, agreed. "The fact that they are working remotely does not diminish the value they bring to the organization. I don’t see why the location of the employee has to factor in."

The growth of the Zoom town

Even with compensation decreases in some companies, many workers are done with living in high-cost business centers such as Manhattan and Silicon Valley. For example, Palo Alto's cost of living is 67.9% higher than the national average. So, it's no wonder that even with a pay cut people are moving to "Zoom towns," such as Bend, Oregon, where the cost of living is 37.1% cheaper; Asheville, North Carolina, 65.2% cheaper; or Butte, Montana 73.4% less expensive.

In 2019, these smaller cities relied on tourists and vacationers. Now, these scenic towns, so long as they have good internet, are becoming the new homes for technology-enabled employees.

These employees are now free to work from home and enjoy a commute of 30 seconds from their bedroom to their living room instead of 30 minutes on Silicon Valley's 101 or El Camino Real. They're also finding it attractive that instead of spending a million dollars for a small condo in the San Francisco Bay area, they can get a large house in Annapolis Maryland off the Chesapeake Bay.

Of course, with increased demand comes higher prices. While these small cities are far from being expensive--by big-city standards--Zoom towns' burst of popularity is already leading to higher real estate prices and urban congestion.

The new work from home benefits

When the pandemic first hit, many companies sent their workers home with best wishes and quickly cobbled together a "How To Work From Home" list for their home computer. That didn't work that well.

These are companies, as McErlain put it, who "are putting their heads down and weathering the storm. They are operating on reduced IT staff and limited on-site interaction, but are seeing no slow down in terms of demands on their departments. They want technology that can work for them right now within the confines of their current IT strategy."

That's not easy. Many other companies, McErlain said, are "fully embracing edge and remote work. These customers are taking this time to fully invest in edge architectures like Kubernetes, cluster automation, and minimal footprint operating systems. Our goal with these customers is to enable their operations but not dictate what workloads they’re going to run on them. Whether that be desktop-as-a-service or any other SaaS configuration. We are instead giving them edge technologies that can support whatever solutions mix they need."

That's on the strategic level. On the day-to-day tactical level, many companies are now paying for a variety of services such as home internet, Virtual Private Networks (VPNs)s, security software, and equipment.

After all, as George Birrell CPA and founder of TaxHub, a virtual tax and book-keeping business, said, "Companies should help their staff to continue to do business. They are, after all, the main component that keeps your business going. Whether you decide that the way you help them comes in the form of providing work laptops, internet connection, or anything else is up to you. The way I see it, it’s best to discuss what your staff’s priorities are. Have a discussion with them and see what they’d like to be compensated for. You’ll be able to see what the general consensus is on certain work equipment and more, and they’ll be able to voice their concerns. I’ve always found being open and transparent to be the best method. My staff trust me, and I trust them."

More specifically, Carla Diaz, co-founder of Broadband Search, "thinks paying for employees’ internet, VPNs, etc., is a very important aspect of running a remote business because those are essentially business expenses. I like to think of it as 'if it’s essential to business, I should try to help my employees where I can.'" That said, Diaz continued, "I say 'where I can' because some options are just not feasible. For example, paying for laptops for every staff member gets very expensive. The things we prioritize for staff are internet costs and VPNs because we need them to have a stable internet connection and remain secure when doing their work."

Paying for the internet is becoming commonplace. Heinrich Long, a privacy expert at Restore Privacy, a company specializing in providing users with the information and tools they need to restore and preserve their online privacy, said, "We pay for the internet and supply a VPN. We’re a company concerned with internet privacy and security, so we do everything in our power to ensure that people are able to work in a secure environment - for their sake, and ours."

Company-provided computers and smartphones, while commonly provided by larger companies, are less common in smaller businesses. For example, Long confessed, "For now, everyone’s supplying their own, but we really want to move to a model where we supply all these things."

Some businesses, like Parkash's Fingent, cannibalized their offices. "We offered every employee the option to choose either a laptop or their work machines to take home before initiating remote work throughout our organization. Those who needed the extra computational power, where a laptop wouldn’t cut it, chose to take home their work machines."

Others, like Daniel Cooper, Managing Director at Lolly, a digital transformation company said, "We offer an allowance for home office setup of up to $1000 every three years. The exact amount depends on the employee's needs. The allowance covers ergonomic furniture as well as peripheral devices."

Lolly isn't the only one to do this. Twitter, Shopify, and Basecamp are all giving their new teleworkers $1,000 to set up their home offices. Altogether, according to a recent Aon, a professional services company survey over 20% of companies are now willing to help employees’ pay for their home-office equipment.

Some staffers are now asking for help paying for their office space in their homes. Most companies won't do this except for their top brass. But some, such as Cooper, admitted, "We offer a coworking space stipend of $200 per month for employees who would rather use a coworking space."

This may change. For instance, Switzerland's Federal Supreme Court has ruled if an employee is required to work from home, the company must pay some of the rent. As companies continue moving to permanent work from home arrangements, this may become an issue elsewhere. The logic is the company is saving money from not renting commercial real estate while requiring the worker to maintain a de facto company office space.

The new office

The shape of the new office is still being set.

As business consulting company McKinsey & Co put it there are arguments both for and against continuing to work from home, and "both sides of the argument are probably right. Every organization and culture is different, and so are the circumstances of every individual employee. Many have enjoyed this new experience; others are fatigued by it. Sometimes, the same people have experienced different emotions and levels of happiness or unhappiness at different times. The productivity of the employees who do many kinds of jobs has increased; for others, it has declined. Many forms of virtual collaboration are working well; others are not. Some people are getting mentorship and participating in casual, unplanned, and important conversations with colleagues; others are missing out."

The one thing we can say for certain many people now working at home will never return to centralized offices on a daily basis. The Coronavirus has brought permanent change to both our lives and our work. Where we go from here is up to us both as executives and as workers.