There’s news of a recession on its way, everything’s getting more expensive and you need to drastically reduce your business outgoings. The last thing you want to do is let team members go, so what can you do?
Andy Berman from Vowel recently met with the CFO of a multi-billion dollar tech startup who told him that “every smart CFO he knows is cutting office space to reduce burn instead of firing employees” right now.
But what do the numbers look like? Is it really more affordable, or is it just wishful thinking?
Employees or office space?
The average salary for a professional job in Central London is £52,500 (as of October 2022). Once you factor in pensions, National Insurance and benefits, the true cost of an employee is said to be around 1.5 times their salary.
On that basis, making one person on £52,500 redundant could save your business £78,750 a year. How does that compare to the cost of an office?
In Central London, the average cost for a private office is £80 per square foot. As a rule of thumb, there should be around 100 square foot per employee. Reducing your office by this amount would save your business £8,000 a year. Not quite as much as making someone redundant…
But let’s be real. Would you downsize your entire office just to reduce it by a mere 100 square foot? Probably not.
If you, like thousands of other businesses all over the world, are thinking about implementing a hybrid working strategy, your business would have an entirely different relationship with the office.
Instead of needing 100 square foot for every employee, your office would become a flexible hub for a flexible team. With this in mind, let’s crunch those numbers again.
Let’s crunch those numbers again
Say you have a team of 250 people, your private office in Central London costs you £2 million to rent every year (before utilities), and you need to find a way to reduce your annual outgoings by over £1 million. What are your options?
On the one hand, you could make 15 people redundant and save the business £1,181,250 a year (based on 1.5 times the average salary mentioned above). But this wave of redundancies could negatively impact company performance, culture, team morale and your reputation as an employer, especially during a cost-of-living crisis.
Alternatively, your business could save £1,200,000 a year on rent by going hybrid. How? By moving into a smaller office that’s big enough for 100 people, giving your team the choice to hot desk from the HQ, from home or from anywhere!
Our survey showed that 86% of people want to work somewhere other than the office at least once a week and research from Ergotron revealed that the flexibility to work from home or the office has increased job satisfaction for 88% of employees.
So, you don’t have to make redundancies. With hybrid working, you can have the strength of your full team and your employees can feel supported and secure in their jobs.
Five costs to consider before making redundancies
Salaries and benefits can account for 40–80% of your revenue, so when businesses are trying to cut costs, redundancies can quickly and vastly reduce those outgoings. It seems like the simplest solution, but the numbers aren’t black and white. Here are some other factors to consider:
- How much you’ll pay in statutory redundancy 💰
- Your budget for gardening leave or payments in lieu of unused holiday 🏖
- Your budget for wage rises to compensate for others’ increased workload 👨💻
- Revenue losses with a smaller team 📉
- The affordability of keeping current employees on vs. rehiring for their roles in the future 📄
Seven costs to consider before going hybrid
Going from a permanent office to a hybrid setup is a big change for your business and rent is just one part of the equation. Here are some other points to consider:
- It costs between £3,000-10,000 to move office; how much will it cost you? 🚚
- If your landlord allows you to end your lease early, what’s the early exit fee? 💵
- What equipment would your employees need to work from home/anywhere? 💻
- Are you going to pay to provide your team with credits for coworking spaces? 🎟
- What equipment would you need for your new office and what’s your budget? 🖥
- It costs between £15-65 per sqft for an office fit out. How much will it cost you? 🔧
- How much will your utilities cost for a smaller space, given today’s energy prices? 📈
How Hubble can make it easier to cut office space
If, after crunching the numbers on your business, you’ve realised that going hybrid would save you more money than reducing the size of your team, Hubble can help you take the next step.
Long-term office leases make it difficult for businesses to adapt in times of uncertainty. But with Hubble HQ, you and your team can take a flexible full-time office for as little as one month, allowing you scale up and down as much as you need on a frequent basis.
And with the Hubble Pass, you and your team can enjoy on-demand access to coworking spaces, meeting rooms, private offices and event spaces in over 1000 locations worldwide.
From London to Lisbon, the Hubble Pass gives you and your team the power to work from anywhere, anytime, with one all-access membership. And you only pay for what you use, making it a great way to manage and control your office spend in times such as these.