Australia Covid-19 , HR, workforce and communications

The longer-term shift to hybrid working: Implications for local government

Summary

  • This briefing looks at the Productivity Commission’s recently-released Working from Home research paper (the Paper, hereafter) which explores the shift to working from home (WFH), and contemplates how WFH (and remote work more generally) is likely to evolve.
  • It looks at the benefits and costs of partial or fully remote work, along with the workforce implications thereof.
  • The initial shift to WFH was a swift and necessary response to COVID-19 that is anticipated to have a lasting impact on how we work, with expectations around hybrid and fully remote work continuing to evolve. This will have implications for local governments as employers.
  • Employers will need to experiment to find a model that suits them and their employees, with the Paper predicting that ultimately employees will seek employment that aligns with their flexible work preferences.
  • This briefing will be of interest to CEOs, human resources managers, and those interested in local government workforce issues more broadly.

Briefing in full

The Productivity Commission’s recently released research paper Working from Home looks at the shift that has seen working from home come to the fore, and anticipates how it might continue to evolve. The paper finds that the shift to working from home is “broadly a beneficial evolution in the way we work”, and that even in the face of a significant and sudden change, our firms, our cities, and our regulatory frameworks have significant capacity to adapt.

It is unlikely that working from home will return to pre-pandemic levels due to a combination of factors such as the overall success of the shift to working from home, the lessons learnt through the process, technology improvements, the shifts in attitudes about working from home, and the understanding that many employees value the ability to work from home to the extent that they are willing to change jobs or accept lower wages in order to continue working from home.

Prior to COVID-19, approximately 8 per cent of employed people worked about two per cent of total hours from home. If half of all workers who could do so worked remotely half the time, this would be close to 7 per cent of all hours worked. Even if all workers who can work from home did so on a hybrid basis (one day a week for part-time workers, and two days a week for full-time workers) only 13 per cent of hours would be done remotely. While this is a significant shift, it does not represent a fundamental or revolutionary breach with the past: the physical workplace will remain the main place of work.

Typically, those who can work from home are in higher income jobs, with the potential to work from home increasing for people with higher income and educational attainment

In considering the potential long-term evolution of remote work, the Paper identifies three scenarios:

  1. Levels of remote work continue to rise, supported by technological advances and improved remote work practices as a result of experimentation. Technology could also enable a broader range of jobs to be done remotely and in turn, more firms move to remote or hybrid models.
  2. A ‘steady state’ of remote work, where hybrid arrangements are increasingly considered the norm. It is noted that while hybrid arrangements can be costly, there may be pressure from employees to adopt them – satisfying workers’ desire for flexibility and employers’ desire to have some in-person work.
  3. ‘Measured retreat’, with levels of working from home falling over time as the hybrid model proves too difficult to mange, and firms choose to go either fully remote or fully centralised, forcing workers to make a hard choice. This scenario allows for the realisation that human capital development and career advancement benefit from the physical presence of a central workplace, along with an acknowledgment of the potential wellbeing implications of WFH.

The initial shift to work from home was a forced experiment in response to a global pandemic. As we started to see post-lockdown in Melbourne last year, and have seen in cities overseas, this shift will be followed by individual firms experimenting to find a model that works for them, at the same time as the take on the implicit lessons learnt across the economy as a whole about what does and doesn’t work. The Paper notes that the evolutionary process of learning and adaptation is likely to continue for some time.

Costs and benefits of working from home for workers

Workers benefit more than firms from working from home, saving time and money by not commuting, and as such employees want to work from home more so than employers. Yet it is firms that must determine the work from home policies.

The extent of the potential costs and benefits for workers, as shown in figure 1, will differ between employees and firms. The longer-term implications of some the potential costs will likely differ based on factors such as the experience level of employees, and the processes and supports put in place by firms to address employee isolation, reduced networking opportunities, and to ensure access to training, development, and promotion opportunities for remote staff.

These impacts, along with real or perceived relative job effectiveness, have the potential to affect career prospects. Workplace policies and practices that effectively address these challenges will be critical. The Paper observes that the idea that workers who spend less (or no) time in the office will be penalized, whether real or perceived, may deter some workers from working from home.

Figure 1: Potential costs and benefits of working from home for workers | Source: Productivity Commission Working from Home research paper, 2021

The costs of commuting, as shown in terms of mean commuting time in figure 2, indicate that in Sydney, Melbourne, and Brisbane, there are significant time savings attributable to WFH.

Figure 2: Mean commuting times by state. Source: Productivity commission Working from home research paper, 2021

The benefit of avoiding a commute is likely to be greater for those less able to participate in work outside the home. This could include carers, parents of young children (who can have difficulties finding alternative childcare options), and some people with disability, along with people living in remote or regional areas.  The impact on gender balance is noted in the Paper, with more women than men in jobs that can be done remotely, and evidence from the US indicating that the option to WFH has increased female employment due to reduced commuting times.

A 2020 survey looking at the beneficial aspects of working from home found that no commute was ranked as the most beneficial, followed by flexible schedule, being better able to complete work, and lastly, more time with family.

Implications for employers of the shift to working from home

The management activities and workplace culture required to support effective WFH or a hybrid model are vastly different to a traditional office-based model. It is likely to require more scheduled communication and in role where outputs are not easily measured, such as ‘knowledge’ jobs, the focus is likely to shift to work delivered rather than time spent on tasks. This is described in the paper as “a greater focus on outcomes, as opposed to inputs … it is less about when and where you work but more about the value and outcomes that you deliver.” (Bennett, 2021). This is likely to have flow-on costs to in terms of the systems required to monitor productivity and wellbeing remotely, and to train employees in new ways of working.

Workplace culture – the norms and practices communicated through informal interactions – may suffer as a result of a move to a hybrid or WFH model. To create opportunities for social interaction and a sense of affiliation, many employers are looking at a models that require employees to attend the office on designated days.

Employer’s considerations of potential costs and benefits of working from home are shown in figure 3, and discussed in the following sections. 

Figure 3: Employer’s considerations of potential costs and benefits of working from home | Source: Productivity Commission Working from home research paper, 2021

The impact of remote work on productivity

The extent to which workers are more or less productive has been a large part of the WFH discussion and was a barrier to WFH for many workplaces prior to the COVID-19 pandemic. The Paper notes that the evidence on how working from home affects productivity in practice is mixed. As shown in the figure below, employers and employees reported mixed levels of staff productivity when WFH. It is anticipated that productivity in this context is not static – as employers and employees adapt, they will become more effective at working from home. Productivity working from home is likely to vary across industries, organisations and works and that factors such as tasks required, investment in WFH capability, and individual characteristics and circumstances will all influence productivity.

Figure 4: Employees and employers views about productivity when working from home | Source: Beck and Hensher (2021), as in Productivity Commission Working from Home research paper, 2021. 

Over time. improved technology and business practices are likely to make WFH easier and more effective. The Paper finds that while the impact at the individual worker level is unclear, it is plausible that at the economy-wide level, productivity will not be adversely affected to any material degree by a sustained increase in working from home, and could generally rise.

Attracting and retaining staff

Employers may choose to implement remote working arrangements to attract and retain staff who prefer to work remotely some or all of the time. The Paper cites research that suggests 27-39 per cent of employees would prefer to WFH two or three days a week (Mattey et al. 2020b; NSW IPC 2020 as in PC 2021 p.29).

Offering remote working arrangements is described as a new job attribute. The Report includes anecdotal evidence (Weber, 2021) that some people are already leaving their jobs to pursue the flexibility offered by remote work or because they are reluctant to be in the office while COVID-19 is circulating.

The paper observes that firms will experiment with hybrid models as they balance the benefits of working from home with those of working in the office. Over time, by observing their own and others’ experiences, firms will adjust their WFH policies. If fully-remote work attracts high-quality workers it is likely more firms will offer these arrangements, or alternatively find that they pay higher wages for office-based work.

It is anticipated that workers will seek jobs that match their remote working preferences, and that over time – as both firms and workers learn how to work more effectively from home – the productivity and wages of those who work from home are likely to improve.

Impact on capital costs

Firms may reduce capital costs as a result of moving to hybrid work by requiring less office space although in the short term it is likely that organisations are locked into long-term office leases and they may also be hesitant to reduce office capacity while employees and employers are still experimenting with just how hybrid working will work over the long term.

A shift to hybrid work may also increase capital expenditure as a result of investing in equipment for workers home offices and the need to invest in and maintain the digital infrastructure required to enable remote working.

The role of regulation in the shift to working from home

The Paper looks at the need for governments to monitor regulations to ensure that they are safe, fair, as well as flexible and efficient. It finds that Australia’s work health and safety (WHS) laws appear to been able to support the shift to home-based work, with relevant case law suggesting that current laws are “reasonable and do not impose undue costs”. A scheduled review of WHS laws in 2023 will provide an opportunity for governments to review the legislation to ensure that it aligns with changing work practices.

Work from home arrangements will occur at the firm level via individual contracts. Under the

Fair Work Act 2009 (Cth) some employees have a right to request home-based work based on their individual circumstances, such as parents of young children, carers, people with a disability, older workers, and people experiencing family violence. The Paper notes that “modern awards, enterprise agreements, workplace policies and some state legislation give broader groups of workers the right to request, and some improved access to, home-based work”. The ability to modify modern awards to allow increased flexibility in response to the pandemic is seen as an indication that the workplace system is able to adapt.

‘Health’ under the WHS Act includes ‘psychological health’, and the Paper notes that responsibility for employers to address stress and burnout risks is well established in case law. The ability to ‘switch off’ and the impact of the blurred lines between work and home can have detrimental effects on stress levels, personal relationships, work productivity, along with the risk of burnout.

Currently, the onus is on employers to set clear expectations – however, there is also a role for employees to set and maintain boundaries between home and work life. The Paper explores the ‘Working from Home Charter’ proposed by the Australian Council of Trade Unions (ACTU), which suggests that legal and reasonable limits on working time are needed, including the ‘right to disconnect’ from work emails, telephone calls, and other forms of work-related contact.

Implications for health and wellbeing

For some the shift to WFH may lead to improved physical and mental health, due to the extra flexibility and time in their day from doing away with the commute. For others, it may have negative physical and mental health impacts due to a reduction in incidental exercise, isolation, and the blurring of boundaries between work and home.

Creating opportunities for interaction and relationship building are even more important in hybrid or fully remote working circumstances, to overcome the risk of loneliness or mental ill health in employees. For employees, establishing supportive practices and policies will be a critical component of supporting WFH.

The evidence around the impact of working from home on work-life and work-family balance are mixed. It is noted that there are also gendered differences in how work-family conflict is experienced, and that working from home is not associated with a fairer distribution of unpaid work.

The report notes that the forced experiment of working from home while also under stay-at-home orders has meant employees typically had limited opportunities to socialize, and that children could not attend school (and in some cases, childcare), with implications for employee wellbeing. As such it is difficult to predict the wellbeing impacts of WFH over the longer term.

As the ‘second wave’ of experimenting with WFH unfolds, the paper points to three factors that can help mitigate some of the negative impacts of WFH:

  1. Learning from the different approaches trialled by different firms will also include lessons about how to support employee wellbeing.
  2. Frequency – the proportion of work done from home.
  3. Choice – the ability of employees to exercise choice and autonomy over their working arrangements is considered an important factor when it comes to productivity, job satisfaction, and hybrid working.

Comment

When it comes to recruitment and retention, the findings from the Productivity Commission’s Research Paper align with broader sentiments around the need for employers to place a greater emphasis on mental health and wellbeing, redefining productivity (a focus on results rather than hours worked), creating a workplace culture that places an emphasis on connecting with employees, and creating opportunities to develop new skills.

To be an employer of choice and to be able to compete for and retain skilled staff, will require local governments to consider how they can support hybrid working.

Large parts of the local government workforce have shifted to working remotely and may well move to a hybrid model over the longer term. With many roles in local government unable to be done remotely, balancing these different needs may prove challenging and individual councils will need finding the model that works for their organisation.

 

For more information on this briefing contact LGiU Australia by emailing mzierke@sgsep.com.au