Using Gusto’s platform data, we are able to move beyond surveys and see the flexibility transformation underway in real-time. The results are unambiguous. Increasingly workers expect to come into the office less and work from home more. Overall, the data shows that:
- Workers are voting with their feet – and hybrid is what they’ve predominantly chosen: Workers who previously lived close to their workplaces are moving farther away. In fact, the median distance between an employees home and work location has net increased by 6% since the start of the pandemic. The trend indicates that most workers expect to come into the office sometimes, but do not expect to be required to come in most days per week.
- Remote work is also becoming a norm: Workers are increasingly choosing to go fully remote; since 2021, the number of fully remote workers has increased by 240%. It’s happening across states too, with every state experiencing at least a 10% year-on-year increase in the share of fully WFH workers. It’s no wonder that almost six in 10 companies now have at least one remote worker, many across state lines.
- Women are leading the charge: According to payroll data, women disproportionately picked up remote work across all industries. As an example, the share of women WFH in Retail surpassed the share of men in 2021, the first time in Gusto history.
- Hybrid + remote work is not only good for employees, it’s good for business: Many workers have placed flexibility and work-life balance at the top of their decision criteria when choosing to accept a job offer – A recent Gusto analysis shows that 35% of workers believed location flexibility to be the primary deciding factor to accept their last job offer – and that number soars to 48% of workers when it comes to their consideration to accept a job offer in the future. Additionally, Gusto data shows that being a fully remote worker correlates to as much as a 13% decrease in the odds of quitting within three months of hire, saving businesses thousands of dollars per worker annually in turnover costs. For example, in a scenario analysis, offering fully remote work could save a business up to $84,000 per year in replacement and productivity costs, per technical worker.
Our recent conversation dives into the state of remote and hybrid work and what businesses should know.
The consideration space for workers is evolving to include geographic flexibility as a primary pillar of their work experience. While pay is still the top issue for most workers, more people consider location flexibility to be more important than the availability of benefits when considering another job. Workers expect more autonomy in their work location and HR practitioners, managers, and executives looking to attract and retain talent should consider tools, practices, and policies that facilitate this flexibility as part of their overall workforce strategy.
There is a disconnect between workers and employers on this issue. In research by Slack, three in four executives wanted to return to the offices three days per week or more, compared to one in three employees. And, 44% of executives said they wanted to come back into the office every day, compared to just 17% of employees. In Gusto’s recently monthly pulse survey of workers, 85% want at least one day out-of-the-office, and 80% of them want at least two days per week out of office.
Hybrid, flexible, and remote work models present difficulties for organizations to oversee and coordinate work, and require new tools and techniques to build culture, create opportunities for professional development, and overall promote a great work experience that keeps employees engaged and productive. Many have doubts about whether this can even be effectively accomplished.
It’s why companies large and small are making different decisions about how to structure their workplace. Some companies are sticking to in-person work, with the expectation that workers will come into an office all or almost all of the time. Others are embracing fully remote work, telling employees they can work from anywhere. Even within the same industry, companies have different orientations towards the possibility of remote or truly hybrid workplaces.
New companies seem more amenable to fully remote or hybrid-native workplaces. In Gusto’s 2022 survey of new businesses, 35% had hired fully remote (15%) or hybrid (20%) teams since their start. In some industries that are more conducive to remote work in general, this share is nearly double the average, with 35% of companies hiring all-hybrid and 25% hiring all-remote teams from the beginning. New companies may have an advantage in building cultures and workplace practices that rely more heavily on communication and collaboration across distances, rather than retrofitting practices and habits built for a mostly in-person workplace. They may also have a leg-up in the competition for talent as a result.
Hybrid and remote working are key dimensions of talent attraction
The research company Gartner forecasts 53% of the US workforce will work from home at least one day per week in 2022. Knowledge workers will work remotely even more of the time, and this will influence decisions about where to live, and whom to work for. In a talent-scarce future, HR practitioners, company executives, and people managers must recognize that flexibility is a key aspect of the work experience for many workers. Company decisions about how, when, and whether to allow this flexibility will impact the talent pool that companies can expect to draw from as they seek to grow.
In a forthcoming survey of employees on Gusto’s platform, 35% of workers responded that work-life balance and flexibility was the defining factor for them in whether or not to accept their last job offer, above those who said that total compensation was the defining factor. 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. An additional 16% said they would not have applied because the job was in a location that was too far to commute. 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.
Beyond surveys, payroll data shows this transformation is underway
Workers are voting with their feet
Workers who previously lived close to their workplaces are moving farther away. In fact, the median distance between an employees home and work location has net increased by 6% since the start of the pandemic. And, workers that previously lived very far from their workplaces are coming closer to their workplaces. In the first case, this demonstrates that workers expect to be farther away from their offices, and to go into their offices less frequently while spending more time in their homes and local communities during their working hours. In the latter case, long-distance workers (those who lived in a different region of the country) are opting for employment that permits remote work but that is closer to home to enable more frequent travel into the office, as well as workers who moved far away during the pandemic lockdowns but who are now returning to urban areas to be nearer for commuting purposes. Overall, the dual trend indicates that most workers expect to come into the office sometimes, but do not expect to be required to come in most days per week.
Figure: Median distance to workplace has increased since the pandemic
Workers picked up fully remote work during the Great Resignation
The share of workers who are classified as fully work-from-home has seen a dramatic increase since mid-2021, from 2.4% to 7% of the Gusto workforce, as workers during the Great Resignation have picked up jobs that are partially or fully remote (work-from-home, or WFH).
The fastest growing segment of workers are those whose work address is also their home address, those that are permanently classified as work-from-home (WFH). Though still a small share of the total workforce, the share of active employees on Gusto’s platform who are classified as WFH or are more than 100 miles away has increased 240% since January 2020, from 2.5% to 7.9%, with the largest increase in 2021, during the Great Resignation.
Companies are more likely than ever to have a worker very far away for fully remote
It is becoming increasingly common for at least some part of companies’ workforce to be fully remote. Sixty percent of all companies we studied had at least one worker who lived more than 100 miles away, up from 50% in July 2021, a nearly 20% increase across the board. Companies with 10-24 and 25-49 workers saw larger relative increases on this extensive margin relative to larger companies. The share of companies 10-50 with employees more than 100 miles from work went from 49 to 56%, an increase of 18% since July 2021. Comparatively, the share of larger companies with a worker living more than 100 miles away increased from 79% to 84%, an increase of 6%.
Bigger companies, conversely, saw more increases on the intensive margin – the share of workers within companies that live more than 100 miles away, from 6% to 11%. For companies with 10-24 and 25-59 employees, this number went from 5% to 7%.
Table: As companies become bigger, the workforce becomes more remote at both extensive and intensive margins
|Company Size||Share of companies with remote workforce (> 100 mi)||Average share of workforce that is remote||Average number of remote employees|
Figure: Moderate increase in the share of companies that have employees > 100 miles away (extensive margin)
Figure: Big increase in the share of workers who live more than 100 mi away (intensive margin)
What this shows is that many companies are finding themselves with workers across state lines. About 43% and 60% of companies with 10-24 and 25-50 EEs, respectively, have employees out of state. For 50+ employee companies, the share is 76%.
Figure: Share of companies with workers across multiple-states
For companies that have out of state employees, the average number of states covered is 2.3 for 10-24 person companies, and 3.8 for 25-50 person companies. This number nearly doubles for 50+ employee companies, to 7.7 states.
Figure: Average number of states for companies with multi-state workforce
Employees aren’t the only folks across distances. About one in four companies with 10-24 EEs, and almost one in three with 25-49 EEs used a contractor from out of state. Unsurprisingly, larger companies have even higher rates of cross-state utilization, with two in five companies having a multi-state contractor force.
Figure: Share of companies with an out-of-state contractor
All industries are experiencing the flexibility transformation. Some industries are more amenable to promoting remote work than others. Industries such as technology, professional services, finance, and communications have seen substantial increases in the share of workers who are classified as WFH. Yet, all industries are seeing increases in the share of workers who are WFH, even those that are strongly dependent on in-person work.
Figure: All industries share of WFH increased
This transformation is happening across the country. Every state saw at least a 10% year-on-year increase in the share of fully WFH workers among companies we studied. States with previously small shares of fully remote workers saw the largest gains, with North Dakota leading all 50 states in the share increase of employees in the state classified as WFH according to Gusto data. Even states that started out with relatively high shares of WFH workers, like Maine with almost 1 in 7 Gusto workers in 2021, saw significant increases. Now, one in five customer employees in Maine is classified as WFH. Overall the states that saw the largest increases were those with low costs of living and lower levels of WFH status prior to 2021. States known for their outdoor adventure activities already had a relatively higher share of WFH employees, but still saw significant increases – such as Oregon, Nevada, and Michigan.
Table: States by gains in WFH
|Rank||State||Share WFH||Share WFH 1 Year Ago||Percent Change|
Flexibility works for women
Women have seen disproportionate gains in their WFH share, even in industries that depend heavily on in-person work, such as Retail and Personal Services. For industries that tend to have more remote-able jobs, women are taking advantage of WFH arrangements at rates much higher than those of men. Companies looking to incorporate the skills of talented women must consider WFH and hybrid flexibility, as women are disproportionately demonstrating that they value this as part of their work experience.
The graphs below show the share of each group (male or female) who are classified as WFH in selected industries. For some industries, such as Retail, 2021 became the first time that women were more likely to work from home than men.
Figure: Professional Services
Figure: Personal Services
Remote work is associated with lower attrition
The share of fully remote work has increased substantially since 2021, but what impact has that had on companies’ bottom line?
Using Gusto platform data, we studied over 100,000 individuals who were hired since 2020. Overall, being classified as a remote worker correlates to as much as a 13% decrease in the odds of quitting, across all sectors. In a scenario analysis, this could save a business up to $84,000 per year in replacement and productivity costs, per technical worker, for example. The below graphs capture additional examples of potential losses dependent on worker type and experience.
Scenario 1: Male, 30 years old, $40k/year, no health insurance, 2022, non-manager, retail industry, 25-49 company
|3 Months||70.2%||67.4%||-2.8 pp||-4.0%|
|6 Months||92.2%||91.5%||-0.7 pp||-0.07%|
Scenario 2: Female, 40 years old, $75k/year, health insurance, 2022, non-manager, professional services industry, 50-99 person company
|3 Months||38.5%||35.4%||-3.1 pp||-8.1%|
|6 Months||78.8%||77.5%||-1.3 pp||-1.6%|
Scenario 3: Male, 35 years old, $75k/year, health insurance, 2022, non-manager, technology industry, 10-24 person company
|3 Months||13.4%||11.9%||-1.5 pp||-11.1%|
|6 Months||49.1%||47.1%||-2.1 pp||-4.2%|
To further put these numbers into perspective, let’s calculate the cost of replacement per employee in each scenario. Estimates of the cost of employee turnover range from between $1,500 for low-wage hourly employees to up to 2x annual salary for hard to fill technical positions. The cost of recruitment, lost productivity, and training of new employees all contribute to the cost of turnover. In each scenario, we calculate the cost of turnover for 10 hires in the remote and non-remote scenario.
Scenario 1: Potential replacement cost: $5,000 – $20,000
|No Remote||Remote||Savings in three months|
|Low replacement cost||$35,100||$33,700||$1,400|
|High replacement cost||$140,400||$134,800||$5,600|
Scenario 2: Potential replacement cost: $15,000 – $60,000
|No Remote||Remote||Savings in three months|
|Low replacement cost||$57,750||$53,100||$4,650|
|High replacement cost||$231,000||$212,400||$18,600|
Scenario 3: Potential replacement cost: $50,000 – 140,000
|No Remote||Remote||Savings in three months|
|Low replacement cost||$67,000||$59,500||$7,500|
|High replacement cost||$187,600||$166,600||$21,000|
Companies’ and workers’ experience show us that hybrid and remote work is no longer the exception, it’s the expectation by workers. Their actions confirm this, and we can see this transformation underway using Gusto data.
Companies need a new playbook for how to balance worker desires for more autonomy and flexibility over their work locations and hours, against company interests in in-person collaboration and company cohesion in order to attract, retain, and engage the high-quality talent that will power their business. Workers are showing employers that they expect greater flexibility and are making location and employment decisions consistent with this expectation. Flexibility has become nearly as important as benefits offerings to prospective workers.
For companies with business models that rely on customer experience, product innovation, or service differentiation, the effort and quality of talent is critical to achieving growth and sustainability. In a forthcoming Gusto survey of HR practitioners, 72% believe a stellar employee is worth twice as much or more to their company than an average employee. If companies are unable to achieve this balance, we expect businesses will be handicapped when attracting high-quality talent that helps them grow their business. Ultimately, hybrid and remote work is not only good for employees. It’s good for business.