What working from home does to your career – and bank balance

Has the working-from-home revolution been worth it?
Has the working-from-home revolution been worth it?

Remote working has been hailed as a solution to the intensity and stress of modern careers, freeing up time for hobbies, picking children up from school, or just sticking on the laundry.

Despite a push by some bosses to get workers back in the office, around 90pc of firms are now offering hybrid working terms for employees, and Britons are taking full advantage.

The UK has been dubbed the working-from-home capital of Europe. UK workers spend an average of 1.5 days a week at home, according to data from the IFO Institute – significantly more than workers in Germany, who average one day per week from home, and France, where the average is 0.6 days.

For many, the working from home revolution is a blessing and one of the few upsides of the pandemic.

But when you take into account the potential impact on pay rises and career prospects, the decision to swap a suit for a tracksuit isn’t quite so simple.

Here, Telegraph Money helps you weigh up the pros and cons of the WFH revolution.


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How home working affects your earnings potential

Perhaps unsurprisingly, if you want to earn the big bucks then evidence suggests you’re better off going into the office.

Some firms explicitly link employee pay to whether they turn up to the office to work.

Google has long been trying to encourage staff back to the office, most recently warning that office attendance would be included as part of their performance review.

Incurring a penalty for avoiding the office is nothing new. A decade-long study by the Office for National Statistics (ONS) found that employees who mainly worked from home were 39pc less likely to receive a bonus.

This was despite the fact that remote workers clocked up an average of six hours’ unpaid overtime a week, compared with 3.6 hours for those always in the workplace.

While this research was carried out between 2010 and 2021, before the working-from-home trend had become entrenched, more recent studies point to a willingness from employees to take a lower wage if the job involves home working.

Globally, on average workers value the benefits of working from home for two to three days a week the same as an 8pc pay rise, implying that some would take a pay cut to keep the perks. Global Workplace Analytics found that 36pc of workers would prioritise the promise of remote work over a pay rise, while 37pc would accept a 10pc pay cut in order to work from home.

The findings suggest that home-working perks have become the new pay rise.

While a tight labour market post-Covid has handed bargaining power to employees, the temptation to make the most of staying at home is being leveraged by firms in the form of lower wages.

One 2022 study by Stanford University and the University of Chicago found that 40pc of the American executives surveyed had expanded home-working opportunities at their firm specifically to counter upward pressure on wages.

The reduction in salary offered for roles that involved home working, compared with those that didn’t, amounted to 2pc on average.

Both the employer and employee stand to gain from this arrangement, according to Nick Bloom, professor of economics at Stanford University.

He said: “Moving to hybrid [working] is definitely very valuable to employees – avoiding a commute, having more time with family, moving to a cheaper neighbourhood.

“Who gets the gain? It’s probably split. Wages probably haven’t risen as much as they otherwise might if hybrid working had not caught on, but they won’t be down by 8pc.”

Being a remote worker also exposes you to global salary competition, putting downward pressure on your pay.

“If the company is set up for remote work, you can pay people lower wages because you can hire them all over the country, or internationally – from rural Wales or Eastern Europe or Brazil or the Philippines,” Mr Bloom added.

“So if you’re a company it’s hugely appealing to take payroll, IT support, data entry, call centres, and have them fully remote.”

Finn Bartram, HR expert at online publication People Managing People, calls this wage-saving “a form of arbitrage”.

He said: “Firms can hire remote workers in places that are less expensive to live, and pay them less. It’s an effective way employers can leverage remote working.”

Does not being in the office harm promotion prospects?

In some circumstances, working from home can put a dent in your career prospects.

As home working has morphed from an occasional dispensation to the expected norm, senior management in big firms has turned publicly frosty on the practice.

Big hitters such as Amazon, JP Morgan, Disney, and even the video-conferencing platform Zoom, now require their workers to return to the office at least part-time.

While bosses have cited concerns that employees aren’t as productive when they work from home, one argument put forward by the top brass is that they’re doing staff a favour.

Arvind Krishna, IBM’s CEO, warned in May that while his firm’s 260,000 employees didn’t have to return to the office, their career prospects would be damaged if they didn’t.

Working from home, he said, made promotion “not impossible, but probably a lot tougher” – especially for managers.

Promotion should be linked to performance, but the question of whether home working improves productivity is hotly debated.

According to a survey of academic papers by WFH Research, a shift from fully in-person to fully remote working reduced productivity by an average of 10pc.

By contrast, moving from fully in-person to hybrid working appeared to have little effect on productivity.

Fully remote working is the “real problem” and the studies are “all over the place”, according to Mr Bloom.

“Moving to hybrid working – the classic vanilla flavour is Mondays and Fridays at home, Tuesdays, Wednesdays, Thursdays in the office – there isn’t much impact on promotion or productivity.

“But moving to fully remote, there’s a range of evidence and it depends how well it’s managed. But the average is probably negative for pay and promotion.”

How much being away from the office affects promotion prospects depends on the philosophy of the organisation, Mr Bartram said.

“If firms have performance-management processes in place, and are truly committed to remote working, then there shouldn’t be a problem.

“But proximity bias is a hard one to overcome. If someone is in the office day in, day out, versus someone who is at home sat at their computer, you just naturally have more interactions with [the person in the office], and you start to subconsciously favour them.”

This gets to the heart of the impact home working has on career prospects. If all employees work remotely, or everyone is in the office, then there is no issue. But if some go into the office and others don’t, there is more potential for bias to kick in.

A study of 16,000 call-centre workers conducted by Mr Bloom and Stanford Business School found that those randomly selected to work from home four days a week were 13pc more efficient, 50pc less likely to quit, but also 50pc less likely to get promoted.

“It was particularly problematic when you were working on a different schedule from the rest of your team,” Mr Bloom said.

“You’re completely fine if your entire team is hybrid and working at home two days a week, but if the rest of the team is coming in on four days, you’re going to lose out on promotions.”

The findings chime with the decade-long ONS research, which also found that employees who mainly worked from home were less than half as likely to be promoted.

Professor Carl Frey, associate professor of AI and work at the Oxford Internet Institute, said that while the evidence is “mixed”, it “speaks to what many of us intuitively know, which is that building relationships is important [for promotion].”

He added: “If everyone works from home, and it’s evenly distributed, then it’s a different situation. It needs to be seen in the context of the work practices of the team you’re in, or the company as a whole.”

“And today, with more people working from home, those effects might be somewhat moderated.”

It also depends what stage of your career you’re at.

Mr Bloom said: “What you see is the biggest success stories from fully remote workers tend to be aged 30 to 35-plus, and they’re well up the learning curve in their firm.

“The ones who seem to be struggling more are those who are younger or new to the role. It’s harder to learn and get mentored, and that affects promotion prospects.”

Working from home, and your mental and physical health

Cutting out the stress and faff of trudging into the office, and instead answering emails from the sofa and going for a run at lunch – it’s no wonder home-workers value the benefits. There are undoubtedly substantial benefits to be had for your mental and physical health.

In a study by Nobel Prize-winning behavioural economist Daniel Kahneman, working was found to be the second-most disliked activity by hour undertaken. The only activity that topped it was commuting.

“Allowing people to reduce their commute, not surprisingly, makes them happier,” Mr Bloom said.

“About 30pc of people want to be fully remote, about 50pc want hybrid, and 20pc want to be fully in-person. If people get what they want, that seems to maximise mental health.

“It’s certainly true that mental health suffered a lot during lockdown. That’s because people were forced to work from home and not given a choice.

“By 2024, choice is the best way to improve mental health. Typically, people are the best judges of what they want, this might be having a bit more time at home with the kids or avoiding very long commutes.”

However, it’s not an open and shut case when establishing whether home working always improves mental wellbeing.

Workers cooped up in their homes all day have reported feeling lonely and isolated, while the erosion of barriers between work and personal time has meant many end up working longer hours.

A post-lockdown survey of 8,301 professionals and employers found that 52pc reported working for longer when working remotely than pre-pandemic.

Of these, 25pc reported working more than 10 extra hours a week, while another 41pc said they put in between five and 10 extra hours a week.

The survey also found that 40pc of those polled worked during their annual leave over the last 12 months, rising to 52pc for workers at mid-management level.

Remote and hybrid workers have been found to experience higher rates of mental health issues.

Fully remote and hybrid work are associated with an increased likelihood of anxiety and depression symptoms – 40pc and 38pc respectively – compared with in-person work (35pc), according to analysis by the Integrated Benefits Institute, a US nonprofit research organisation.

A separate study by MindGym, the behavioural change consultancy, and the Longevity Forum, a non-profit, found uninterrupted remote working has the potential to erode energy levels and alter the way the brain works, increasing the risk of illnesses such as Alzheimer’s.

The physical-health benefits of working from home are also up for discussion.

Public Health Wales found that working from home had mixed effects; while a higher proportion of home-workers reported worse diets and reductions in daily physical activity, more than a quarter said their diets and levels of physical activity had improved.

Can home working really save you money?

For workers whose pay rises have failed to keep up with the rapidly rising cost of living, remote working has offered a lucrative opportunity to raise incomes in real terms by clawing back cash spent on commuting to and living near the office.

Mr Bartram said: “You can move to a cheaper neighbourhood with a lower cost of living. You can fork out less on childcare. No commute means you don’t have to put petrol in your car or buy train tickets.

“And if you’re spending £10 on lunch every day, over the course of a year that’s quite a large saving – probably a holiday.”

Travel represents a major saving. Real Business Rescue calculated that the average employee in Britain spends £126 a month commuting, or over £1,500 a year.

Totting up the savings from home-cooked lunches, no childminders and reduced rail fares, homeworkers were found to save £256 a month on average, totalling £3,068 a year per worker, according to research from Aldermore Bank.

But the big saving from working from home, according to Mr Bloom, is that it allows you to move to a cheaper area.

“People aren’t leaving cities altogether and going to northern Scotland, they’re moving out to the suburbs because they only have to commute three days a week, rather than five. That’s the major selling point,” he said.

But on the other side of the ledger, there are energy bills. Uswitch has calculated that someone working from home will use 75pc more gas and 25pc more electricity than a person who works from the office.

At current gas and electricity unit prices, this works out at an annual energy bill that’s £833 higher than a daily office worker.

“Not commuting also saves a lot of money – that’s a big saver,” Mr Bloom said. “But there’s a major offset against that which is heating and lighting, air conditioning.”

If you’re self-employed, you have an ace up your sleeve when it comes to claiming back costs.

While the pandemic loophole which allowed employees to claim tax relief for home working has now been closed, Britain’s 4.4 million self-employed workers can offset many household expenses against their tax bill.

The only exception is employees who are forced to work from home because there’s no office to work from.

The flat-rate tax relief depends on your tax band, and it can save you more than £300 a year in tax.

If you want to claim specific expenses, you’re allowed to take a proportion of some of your home-running costs used for work purposes. This reduces your profit and therefore means you’ll pay less tax.

You may be able to claim a proportion of costs for outgoings such as council tax, mortgage interest, rent, energy bills and internet and phone use.

But are savings on train fares and more time to jog at lunchtime worth a pay cut and potentially missed promotions? That’s something only you can decide.


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