The shift back to office-based working has been a hot topic in recent years, with many businesses enforcing RTO policies. There are some undeniable benefits to working in person from an office. Collaboration can improve, spontaneous idea-sharing is easier, and some employees thrive in a social office environment. For those who struggle with isolation or find it difficult to separate work from home life, the office can also provide structure and a sense of community.

However, while RTO may benefit some employees and businesses, it comes with significant costs, not just in terms of maintaining an adequately sized physical office but also in attracting and retaining top talent.

In sectors like technology, where remote work has become the norm, enforcing RTO requirements can shrink the talent pool, drive up salaries, and increase hiring costs.

In this blog, we’ll explore the real cost of RTO for businesses and why a more flexible approach may be the smarter long-term strategy.

The Shift Back to RTO
The recent shift back to RTO has sparked considerable debate among employers and workers alike. Major firms, including Barclays and Lloyds Banking Group, have implemented RTO policies requiring employees to spend more time in the office, while others, such as Amazon, have instructed all employees back to the office for 5 days a week.

This shift has been met with resistance, particularly from professionals in the technology sector, who have grown accustomed to remote work. But what are the real costs associated with RTO?

The Cost of Higher Salaries
One of the most immediate costs of RTO is increased salary expectations. Candidates open to working from an office generally demand higher salaries to offset commuting expenses and the inconvenience of losing remote work flexibility.

For example, data from UK job boards indicate that software engineers based in key tech hubs, such as London or Manchester, expect salaries 15-20% higher than comparable remote roles. A mid-level software engineer willing to accept an in-office role in London will likely demand a salary of £85,000 per year, whereas the same role filled remotely from outside London might cost £70,000. This results in an additional cost of £15,000 per year per hire.

At Avanti, we’ve encountered this challenge firsthand. We've successfully helped clients fill hard-to-fill roles by sourcing remote workers with the desired skills at a lower salary than the client initially expected to pay for an on-site employee.

This leads us to the next issue with RTO policies: The shrinking candidate pool…

The Shrinking Candidate Pool
A smaller candidate pool is a significant downside of enforcing RTO. According to Hired's annual software engineering study, nearly 40% of software engineers will only consider remote roles. Even for hybrid positions, businesses requiring regular office attendance should account for location constraints. For example, a Manchester-based employer mandating three in-office days per week will struggle to attract candidates from further afield unless they offer substantially higher salaries or perks to offset travel and accommodation costs. Unless the employee chooses to relocate, this arrangement also raises concerns about long-term viability, which could impact retention.

This issue is even more acute if your business is not located in a tech hub such as London or Manchester. If you are based outside of a major hub and want a tech worker on site, the role will likely be ‘hard to fill’.

Cost of Recruitment and Time-to-Hire
A smaller candidate pool leads to longer recruitment times and higher sourcing costs. For mid-to-senior level hires, UK businesses typically pay around 20% of the candidate’s salary in recruitment agency fees, excluding the significant time investment required for interviews and onboarding. Enforcing RTO reduces the available candidate pool by at least five times, making it significantly more time-consuming and expensive to secure a suitable hire.

Additionally, extended hiring processes come with opportunity costs. The longer a position remains unfilled, the greater the productivity loss. For example, if a software engineer contributes £250,000 in annual value, a two-month hiring delay could result in £41,000 in lost productivity.

Employee Retention and Productivity Loss
RTO policies also lead to higher attrition rates. Employees who feel forced into an undesirable work arrangement are more likely to leave, increasing turnover costs. UK employers typically spend between £20,000 and £30,000 per hire in turnover costs, factoring in recruitment, training, and lost productivity during onboarding, and this can be considerably more for senior and specialist roles. Additionally, reduced job satisfaction can impact productivity. Studies from organisations such as the CIPD (Chartered Institute of Personnel and Development) indicate that employees who are dissatisfied with their working conditions experience up to a 20% drop in productivity, further compounding business costs.

Office Overheads
Enforcing RTO comes with significant costs in terms of office-related expenses such as rent, utilities, office supplies, and maintenance costs – which can add up quickly, especially in expensive cities like London and Manchester. For small businesses and startups that can operate effectively in a remote setup, removing these overheads can free up capital to invest in other areas. Larger businesses that have a requirement to maintain a physical office can still make savings in terms of adopting a hybrid approach, downsizing to smaller co-working spaces or adopting flexible office models to balance in-person collaboration with cost efficiency.

Conclusion
Businesses enforcing RTO must consider whether the benefits outweigh the costs. While some industries may thrive on in-office collaboration, the financial burden of higher salaries, reduced candidate pools, longer hiring times, employee attrition, and office-related costs can add up quickly. The key for employers is to carefully assess whether the trade-offs of RTO align with their business goals and workforce needs.

Get in touch!
At Avanti, we are proud of our service and our ability to source candidates for hard-to-fill roles. If you would like to discuss, please get in touch!