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Introduction
It’s no secret that the field of human resources (HR) has changed dramatically. New technologies and a changing talent landscape continue to alter the practice of recruitment and talent attraction. The arrival of the pandemic brought a seismic shift forcing HR practitioners to become public health experts and, almost overnight, many became responsible for transforming their organizations into hybrid- and remote-ready workplaces. As the role of the HR practitioner expands beyond their typical operations like payroll, recruitment, and culture, a host of new challenges and opportunities have arisen as a “new normal” takes shape for businesses of all sizes. It is crucial that we better understand this shift’s impact on HR practitioners—especially for growing and mid-market companies looking to build and maintain strong workforces that drive their businesses forward.
Gusto surveyed more than 800 HR practitioners and 700 employees from growing companies on its platform of over 200,000 businesses, to get at exactly this. The following report details what is top-of-mind for HR practitioners now, the challenges they face, and their impact on the businesses they support.
We found that:
Remote and hybrid work presents many new opportunities, but also new challenges relating to compliance and culture: Remote and hybrid work arrangements have significantly affected the workload of HR teams trying to keep their company compliant with state and local laws as they hire workers in new markets. 50% of HR practitioners have seen the number of states their workforces reside increase since the pandemic. As a result, 70% indicated that the difficulty of complying with tax and employment laws has increased due to more employees working across state lines; 30% said the difficulty of complying increased “substantially.” Culture has also become more complicated – with nearly three quarters of HR practitioners reporting that maintaining and promoting culture at a remote/hybrid company is moderately to extremely challenging.
A majority of companies are seeing an increase in remote or hybrid employees: Companies are increasingly offering flexible working options to keep pace with employee demand for flexibility. Seventy percent of HR practitioners said the number of hybrid workers has increased since the pandemic and 52% work at companies that offer hybrid work arrangements to at least some employees.
Flexibility has become the #1 decision factor for candidates accepting and declining job offers: As HR leaders strategize to stay competitive for talent in a tight labor market, one of the biggest factors in the decision to take a job is flexibility. Of workers who declined their last offer, 45% said flexibility or work-life balance was the most important factor that led to their rejecting the offer. Additionally, 48% of workers said that the ability to work from home some or all of the time would be a major or the most important factor in determining whether to accept a job offer in the future.
Expanding beyond local talent markets leads to increased skills and less turnover: Thirty-four percent of companies that provide remote and hybrid workplaces said the skills and experience of new hires has improved, and 27% reported that productivity of staff increased as a result. Companies that offer remote work are also seeing benefits in reduced employee turnover.
| Methodology: For this study, Gusto surveyed over 800 HR administrators of companies with 10-50 employees from its platform between April and May, 2022, and over 700 workers at similar-sized companies during the same time period. Responses are re-weighted to be representative across US industries. |
The Changing HR Craft
As the workforce evolves, the role of HR practitioners must also change to meet the new needs of their company and employees. Over the last year, HR leaders reported the most workforce related changes were the number of workers across multiple states and the number of workers in flexible or non-standard working schedules. Roughly 51% of HR practitioners reported an increase in the number of workers across state lines, and 42% of HR practitioners are experiencing an increase in the number of workers in their company on flexible or non-standard working schedules. These changes increase the workload of HR practitioners due to the complexity of managing the many nuances of compliance and employment regulations for different states and workers’ schedules.
Despite the complexities of hybrid and remote work, most HR practitioners still feel very or extremely confident in their ability to perform duties that are seen as essential to the HR function including establishing a company culture, and understanding how team morale impacts the business success.
To better understand the priorities of HR practitioners, we asked them to rank a set of HR functions in order from most important to least important. The top three most valuable HR functions as ranked by survey respondents are: building a good culture, reducing risk through employment and tax compliance, and managing day-to-day administrative tasks to free time for others. Over half of all responses placed these three in the top three of their rankings highlight the importance of these skills to the success of HR leaders in the current work environment.
HR practitioners know that building culture and managing day-to day processes are among the most valuable skills they offer to their businesses. However, delivering on this value has become more complex as the shift towards flexible working arrangements, including remote and hybrid work, requires an increased focus from HR leaders on facilitating engagement, commitment, and retention among workers.
Hybrid and remote work are here to stay, but make the HR role more complex
Hybrid and flexible work has quickly become the norm, not the exception
The rise of flexible working arrangements was fueled in large part by the pandemic but shows no sign of slowing down. Seventy percent of HR practitioners said the number of hybrid workers had increased since the pandemic and 52% work at companies that offer hybrid work arrangements to at least some employees. A hybrid work arrangement occurs when an employee works some portion of their hours or days at a company location, and some portion at a non-company location, such as a home office. While more companies are offering hybrid options, how employees utilize the flexibility varies. Of companies that offer hybrid work arrangements to their employees, less than half of their workforces use hybrid arrangements in most companies (66%); about 34% have a workforce that is half-hybrid or more.
Sixty-four percent of respondents indicated that fully remote work was available to at least some of their employees. Of those who allow hybrid or remote work arrangements, 58% said that the number of workers under a full remote work arrangement had increased since the pandemic began in 2020. About four in ten HR practitioners said the increase in remote workers has made their job harder.
And yet, the data is clear: remote or hybrid working arrangements are here to stay. More than one-third of companies offer both types of arrangements to at least some of their workers.
Workers expect hybrid and remote flexibility when deciding to accept a role
Remote and hybrid work bring challenges for the HR craft, but we’ve seen in Gusto research that this is the new expectation by employees. Employees see flexibility on their terms as a major component of their work experience, and can rival whether or not a company offers benefits.
Prior Gusto research shows that companies that offer remote work can see reduced employee turnover; a remote worker has 13% lower odds of quitting in the first three months of a job.
In a survey of over 700 workers, we asked about the last time they accepted a job offer. Of workers who declined their last offer, 45% said flexibility or work-life balance was the most important factor that led to their rejecting the offer. While a lack of flexibility is the primary reason workers say “no” to companies, it’s also a leading reason workers say “yes” to a job offer, ranking higher than pay and career development opportunities.
Of those who are currently able to work remotely some or all of the time, 28% said they would not have applied to their current job if they couldn’t have worked remotely because flexibility is important to them. Forty-eight percent of workers said that the ability to work from home some or all of the time would be a major (38%) or the most important factor (10%) in determining whether to accept a job offer in the future. An additional 16% said they would not have applied because the job was in a location that was too far to commute.
Hybrid and remote work can yield better candidate matches
Companies that offer fully remote or hybrid work benefit from a larger pool of available talent. Offering remote or hybrid work gives companies the opportunity to recruit outside of their local talent area, giving them access to a larger labor market, which can help in finding a high-quality candidate for available positions.
When asked specifically about positions that can be done remotely or in a hybrid arrangement, companies that offer remote options are much more likely to recruit outside of the local region. Nearly 65% of companies that offer both remote and hybrid arrangements actively sourced candidates outside of their local area; and that share grows to 86% for remote-only companies. This suggests there is significant opportunity for companies that offer hybrid working options to optimize their talent attraction strategies by actively targeting candidates outside of their local region.
Among companies that are willing to consider candidates from outside of the local area, irrespective of the kinds of work arrangements they offer, 34% of companies said the skills and experience of new hires improved, and 27% reported that productivity of staff increased.
What is the cost for hiring beyond local? One in five indicated that overhead costs for staff increased, but one in six reported a decrease, suggesting a diversity of experiences with respect to overhead costs of remote and hybrid work. Yet, while initial cost for some increased, the greater value that employee can deliver is a tradeoff most companies would be glad to make.
Hybrid and remote work complicate the job for HR practitioners
Remote and hybrid work arrangements bring opportunities for workers, and talent gains for companies, but also challenges for HR practitioners. Those challenges increase substantially as the company grows. Because, as our data shows, when the company grows so does the likelihood that more of its workforce will be distributed across multiple locations. A company with 25-49 workers is 1.5x more likely to have workers spread across 4-10 states, and 7.3x more likely to have workers in 10 or more states. Fifty percent of respondents said the number of states their workforces reside in has increased since the pandemic.
Of HR practitioners who saw an increase in workers across multiple states, 70% indicated that the difficulty of complying with tax and employment laws has increased, with 30% categorizing the increase in difficulty as “substantial”. Overall, 27% of respondents indicated that the task of managing compliance across multiple jurisdictions was “Extremely” or “Very” challenging.
How many states does your company workforce reside in?
| Company Size | 1 | 2-3 | 4-10 | More than 10 |
| 10-24 | 37.3 | 34.3 | 26.2 | 2.3 |
| 25-49 | 26.4 | 16.9 | 40.0 | 16.7 |
There are many different challenges of managing remote and hybrid work. Of respondents who have remote or hybrid workers, the top concerns were compliance across multiple jurisdictions, and maintaining and promoting culture, with 38.5% of respondents indicating the former was “Very” or “Extremely” challenging, and 35% indicating the same for the latter. Only approximately one-quarter of HR practitioners said that promoting culture at a remote/hybrid company was only slightly or not challenging.
That these two issues are top of mind for HR practitioners is unsurprising, given HR practitioners’ focus on building culture and protecting the business. Culture, engagement and performance are more intertwined and important than ever. Recent research suggests poor culture can worsen turnover, and studies have long shown that high levels of engagement are closely related to employee performance. Seventy-one percent of companies with above-average levels of commitment also return above-average company results.
Employees value compensation and benefits, but also flexibility, team and company culture, and an ability to grow their careers. Put simply, an empowering workplace empowers employees to put their best efforts towards the success of the business. HR practitioners understand this innately.
Conclusion
The shift to remote and hybrid work will continue to change the relationship between companies and their employees. As stewards of the well-being of both the company and the employees, HR practitioners are uniquely positioned to ensure that this shift unlocks the most opportunity for both sides. Facilitating this shift successfully rests on companies prioritizing investment in training and tools that can help HR leaders adequately tackle their growing responsibilities. These investments in HR can have an enormous impact as companies look to grow and retain existing talent in a tight labor market.
