Recently, more than any time before, the concept of working from home has been widely applied both on a local and global level and in companies across different industries. The most popular phrases nowadays are “I have a call”, “Is everyone online?” instead of “I have a meeting” and “Is everyone present?”. COVID-19 has sentenced us all to involuntary house arrest and working from home has become the new normal.
Measures such as curfew, limiting or stopping public transport and many others imposed that companies apply work from home practices with the ultimate purpose of maintaining business operations and productivity of staff.
Yet it seems that working from home came to stay and will not vanish anytime soon, even after COVID 19 and governmental lock down measures are abandoned. A recent blog by Twitter written by the Vice President for People stated the following on May 12, 2020: “So if our employees are in a role and situation that enables them to work from home and they want to continue to do so forever, we will make that happen.”
Having said that, executive management and board of directors should be more perceptive to the potential financial implications expected from the new approach for doing business. As of now, the below can be foreseen:
1- IT Infrastructure & Data Privacy: The first cost factor that will be directly impacted by Working from Home policies and practices is that of information technology and data privacy. It is with no doubt that companies will have to give more emphasis on the following key relevant aspects:
a. Subscribe in and upgrade of teleconferencing software
b. Increase server capacity & cloud infrastructure services
c. Install and update antivirus programs
d. Apply other data protection practices
“Digital productivity and collaboration tool providers such as Microsoft and Zoom are witnessing massive upticks in usage across China, Italy, and the US because of corona virus. Therefore, there will be continuous growth in the demand for cloud infrastructure services and spending on specialized software, communications equipment, and telecom services”, as per the report titled “COVID-19 Impact on Cloud Computing Market” by MarketsandMarket. The report further mentions that the cloud market is expected to increase from USD 233 billion to USD 295 billion in 2021.
2- Saving on Transportation Costs:
In many countries, labor laws mandate that companies should pay employees a fixed transportation allowance for each working day. As an example, the daily transportation allowance in Lebanon is LBP 8,000. Given the working from home policies, companies will have a direct significant drop in this cost element. In addition, providing company vehicles to executives may no longer be justified, in comparison to pre-COVID 19. This will also lead to a decrease in the maintenance, fuel, registration, vehicle insurance and many other associated costs. Other transportation costs, which are usually reimbursed by the companies, will witness a significant drop given the increasing reliance on teleconferencing and other technology supported platforms.
3- Saving on Business Trips:
In addition to local transportation costs, it is without a doubt that the number of international business trips will significantly drop not only due to current lock down restrictions but also due to the increased awareness within companies that a significant portion of these trips can actually be substituted by teleconferencing, as stated in a recent article published by Forbes on April 15, 2020 written by Dan Reed. The article quotes Ben Baldanza, former CEO of Spirit Airlines, stating “the estimate of a 5% to 10% permanent loss of business travel is as good as any estimate he’s seen or heard of.” The article further states that “business people are learning during this period of severe travel restrictions that some business travel can, in fact, be replaced by today’s excellent teleconferencing technology.”
4- Data and Mobile Allowance:
Given the increasing reliance on telephone and internet-based communication between team members, companies are expected to increase their expenditure on data and mobile related allowances. All face to face meetings/discussions will be replaced by new options that will require data/mobile usage. Companies that did not use to provide data/mobile allowance may have to do so going forward.
Vacation Days: Previously (as in prior to COVID 19 and all the associated implications), vacation entitlement was governed by the applicable labor law and company policies in place. In HR policies, it is common to find phrases such as “An employee is entitled for 30 days of paid annual leave, accrued on a monthly basis”. These eligibility requirements may change soon. Governments and accordingly companies may reconsider the vacation policies in place given the new factor of increasing hours spent by employees working from home.
Insurance Cost: Some insurance costs usually paid by companies will decrease due to the decreasing working hours on site (for example workman compensation insurance coverage) while in other scenarios the insurance cost may increase. As of now, many insurance policies do not cover pandemics. “Most insurers learned the lessons from the SARS outbreak of 2003 and introduced exclusion clauses for communicable diseases and epidemics/pandemics into most non-life products such as business interruption and travel insurance” as per a recent article posted on KPMG’s website and titled “Do Insurers have COVID 19 Covered?”. Yet governments may mandate insurance companies to cover pandemics or more specifically COVID 19 related expenses, which will subsequently lead to an increase in insurance costs incurred by companies.
The above is what can be thought of as of today as potential financial implication companies should further understand and analyze. It is still too early to conclude that this list is comprehensive as new changes may still arise soon.
COVID 19 changed the way we express affection, the way we travel, the way we eat and will sure change the way we work and do business. It is time for all business professionals to understand that major changes are already happening and they should embrace it and start adapting accordingly. As Bill Clinton once mentioned: “The price of doing the same old thing is far higher than the price of change.”