WFH, hybrid or in-office? The winner is...

In August 2024, Simon Draper, secretary of the New South Wales Premier’s Department in Australia, issued a surprise directive to the state’s 430,000 public servants: hybrid work arrangements for the government sector’s employees were largely coming to an end.

The new mandate was issued for “all staff to work principally at an approved workplace, office or related-work site”, and attendance was to be spread across “all days of the working week”.

Ways of working were upended by the COVID-19 pandemic, with office workers across the globe forced to work remotely due to public safety requirements. As the health risks subsided, a hybrid mode of work emerged as the new normal for office workers, enabled by widespread adoption of videoconferencing and file-sharing technology.

However, as the recent NSW Government directive illustrates, the push to get workers back into the office more frequently continues, and organisations are trying different approaches.

While companies like Intel have moved to a hybrid-first model in response to workforce preferences, Australian energy giant Origin now requires all office-based employees to spend at least 40 per cent of their time in the office and has linked compliance with office attendance rules to annual performance reviews and bonuses.

While research shows that workers are generally in favour of hybrid work, how does it stack up from a financial perspective? What are the costs and benefits of different ways of working and which mode is more financially favourable when considering factors like productivity, recruitment and retention, environmental costs and employee wellbeing?

Data from McCrindle shows 45 per cent of Australians follow the hybrid model of work. In Singapore, fewer than one in 10 leaders expect employees to be on-site 100 per cent of the time, according to a Work 3.0 study from the Center for Creative Leadership, and from 1 December 2024, all employers in the city state are required to fairly consider formal requests for flexible work arrangements.

In Hong Kong, 76 per cent of employees have adopted a hybrid working model, according to data from PwC. In fact, results from a Bloomberg Intelligence survey suggest workers in Hong Kong like hybrid work so much that more than a quarter would ask for at least a 6 per cent pay increase in exchange for working in the office full time.

While hybrid work is a preference for most knowledge workers, it is also proving a winning formula for productivity and employee retention.

 

"If a manager tells candidates that they cannot work from home, candidates are very likely to say, ‘Okay, that’s a pity, I’m not interested in this job.’"

 

A 2024 study from Stanford economist Nicholas Bloom reveals that employees who work from home two days a week are just as productive, likely to get promoted and far less prone to quit than their fully office-based peers.

The study focused on 1600 workers at Trip.com, one of the world’s largest online travel agencies. In addition to the positive productivity measure, resignations at Trip.com dropped by 33 per cent among workers who shifted from working full time in the office to a hybrid model.

Women, non-managers and employees with long commutes were the least likely to quit their jobs when their commute to the office was reduced to three days a week.

Data from Hubstaff shows the cost of employee turnover can stretch to approximately 50 per cent of an employee’s salary. There is also the impact on employee morale and productivity, and replacing employees can be tough in a tight recruitment market.

Professor Karin Sanders, senior deputy dean, research and enterprise, UNSW Business School, notes that employees currently have the “labour market on their side”.

“If a manager tells candidates that they cannot work from home, candidates are very likely to say, ‘Okay, that’s a pity, I’m not interested in this job.’”

Hybrid work can also have a positive impact on employee wellbeing and reduce absenteeism. A recent survey from International Workplace Group found that hybrid workers exercise almost 90 minutes a week longer than before the pandemic.

They are also enjoying healthier diets and getting an extra 71 hours of sleep a year due to less time spent commuting. Almost 50 per cent have also experienced less work-related stress and 46 per cent have more time to relax and unwind after work.

Associate professor John Hopkins, innovation fellow and associate professor of supply chain management for Swinburne’s School of Business, Law and Entrepreneurship, says any benefit for an employee is a benefit for an employer.

“If people are happier at work, they’re more likely to stay,” says Hopkins, who has been researching flexible and remote work trends for the past decade.

Remote work: a boon for the digital workforce

Data from the World Economic Forum estimates that by 2030, global digital jobs that can be performed remotely will grow by approximately 25 per cent to more than 90 million roles. These roles will include software developers, finance managers and financial risk specialists.

Bryan Whitefield, management consultant and author of books including Team Think and Risky Business, says a benefit of fully remote work is that employers can draw from a wider talent pool.

“I’ve long been in favour of innovation in resourcing teams, and prior to the pandemic, there was much less innovation in how teams were formed and how skill sets were sought out,” he says. “Remote and hybrid work allows businesses to resource in different ways.”

Collaboration tools like Slack and Trello enable teams to work together from remote locations and employers can track remote employees’ work hours and productivity via tools like ActivTrak and Teramind.

Remote work can also improve financial wellbeing, with data from Cisco showing Australian workers have saved an average of A$10,000 a year by working from home since the pandemic.

More than 80 per cent ranked savings on fuel and/or commuting among their top three areas of savings, followed by spending less on food and entertainment.

 

"Rather than having a mandated number of days, I think employees should be encouraged to come to the office when there’s a specific purpose for them to be there – where there’s a valid reason and where there’s a particular activity that they’re going to be working on that works better in a face-to-face mode."

 

Environmental benefits are another consideration. A study by Cornell and Microsoft shows remote workers could have a 54 per cent lower carbon footprint compared to onsite workers, while hybrid workers with two to four workdays at home can reduce greenhouse gas emissions by 11 to 29 per cent.

The study also shows that office energy use is the main contributor to the carbon footprint of onsite and hybrid workers, while non-commute-related travel becomes more significant as the number of remote workdays increases.

At an organisational level, there is opportunity for businesses to consider how to creatively rethink their own office energy consumption. For example, if there are only a few people in the office on a given day, perhaps there is no need to light, heat or cool a whole floor.

While remote work presents financial benefits, it also comes at a cost. Data from Gartner shows only 24 per cent of hybrid and remote knowledge workers report feeling connected to their organisation’s culture.

Sanders adds that informal learning can be more difficult to achieve remotely, especially among newcomers.

“Having one or two days in the office has value, especially for newcomers. It’s good to have some time in the office because they need to learn a lot and we have seen that that is difficult if it is all online.”

While knowledge workers may prefer the hybrid model, return-to-office mandates are on the rise. Research from Morgan McKinley shows more than 90 per cent of firms in Hong Kong are urging their workers to increase their office presence, compared to 61 per cent in Singapore and 65 per cent in Australia.

This presents good news for the commercial real estate sector, with a 2023 study by McKinsey estimating that remote work could wipe US$800 billion (A$1.2 trillion) from the value of office buildings in major cities by 2030. It also presents an opportunity for re-zoning and mixed use of offices to potentially offset housing shortages.

Many leaders believe that maintaining a strong culture requires all employees to be in the same workplace; however, Whitefield says leaders can overcome culture barriers if they are willing to work at it.

“Some leaders are probably saying, ‘I’m a bit over working at it’, but you’ve got to counter that with the benefit to the employee of working two, two-and-a-half, or even three days a week from home, and the benefits that that in turn brings to organisations.

I think the better leaders have been willing to weigh that up and put in the hard yards to maintain culture and innovation without having everyone working in the office every day.”

While there are costs and benefits for each way of working, Hopkins stresses that hybrid work is here to stay.

“Most people have formed new behaviours, new ways of working and new routines, and that flexibility is embedded in their lives and their work,” he says.

“Rather than having a mandated number of days, I think employees should be encouraged to come to the office when there’s a specific purpose for them to be there – where there’s a valid reason and where there’s a particular activity that they’re going to be working on that works better face-to-face.

“There’s always going to be high-profile examples of companies that want their employees back in the office again,” Hopkins adds. “But we’ve got to remember that we’re five years since the start of the pandemic and working from home at least for part of the week isn’t a novelty anymore.”

Property sector feels the pinch

The move to hybrid and fully remote working models has had a significant impact on commercial real estate in cities across the globe.

In countries like Australia, the overall national vacancy rate fell slightly in August 2024 to 14.6 per cent, but it remains above the historical average.

Matthew Kandelaars, group executive of policy and advocacy, Property Council of Australia, says much of the commercial vacancy rate has been supply driven rather than demand driven.

“When we were all required to work from home throughout the pandemic lockdowns, a lot of commercial office stock was already under development, particularly in Melbourne and Sydney, and obviously these are long-tail projects that take five to 10 years from conception through to completion,” he says.

Kandelaars says there is a marked difference between vacancy rates in premium-grade office stock in capital cities compared to older office stock.

“We’re in a phase where employers and our major cities need to earn the commute more than ever before.”