Reduced Operational Costs for Companies

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Updated March 23, 2023

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Real estate is not cheap—in tech hubs like the Bay Area, New York, and Seattle, the costs of office space and housing are increasingly a major barrier to entry for smaller companies and startups. According to The Square Foot’s office space calculator, a 200-square foot allocation per employee costs as follows per year:

Table: Annual Real Estate Costs Per Employee

CityCost per employee
New York$14,800
San Francisco$13,032
Washington, D.C.$10,522
Los Angeles$6,702

Source: 2019 data from The Square Foot

Global Workplace Analytics cites a number of significant operational savings from remote work:*

  • IBM slashed real estate costs by $50M.

  • McKesson saves $2M a year in real estate costs.

  • Nortel estimates that they save $100K per employee they don’t have to relocate.

  • Average real estate savings for companies with full-time remote work can be upwards of $10K per employee annually.

Depending on where your company is (if you have an HQ) and what your compensation approach is, you could also potentially save money on salaries—perhaps significantly more than by eliminating office space. If you aren’t paying San Francisco-based rates (especially for technical roles), you stand to save a substantial amount by working with employees distributed in far less expensive regions.

controversyRegional vs. global compensation is controversial. You may wish to reduce costs by offering locally adjusted salaries instead of a single globally fixed option, but there are philosophical, moral, and logistical tradeoffs when considering different compensation strategies. We cover this in detail in Compensation for Remote Employees.

Competitive Hiring Advantages

Hiring is one of the biggest pain points for companies, especially startups looking to scale rapidly. The majority of companies we spoke with pointed to hiring as one of the primary reasons they’ve embraced remote work. One of the clearest benefits of remote teams to companies is a global talent pool that is not restricted to highly competitive, expensive urban tech hubs.

importantHiring a single employee can cost between $4K-$7K (and often more for highly technical or specialized roles), and can take upwards of two months.* Hiring remotely opens up a world of candidates, greatly reducing the time and costs companies incur to find talent. Fully distributed companies take 33% less time to hire a new employee (4.5 weeks vs. 7 weeks).

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