Prospective analysis of labor law – Publication 5 | Bryan Cave Leighton Paisner
Many employers, especially in the City of London, prefer their employees to be in the office rather than working from home.
Working from home was not unusual before the pandemic, but it was not part of normal work. Although the experience of confinement is a contributing factor, the question still arises as to why employees are reluctant to come to work, certainly as they did before?
Employees may move to the capital for career opportunities, particularly in financial services and the liberal professions, but may see their salaries, even if relatively high, quickly disappear in mortgage payments, rents, service charges and a high cost of living. If the salary is not relatively high, things can be worse. In 2021, a ‘Shelter’ survey found that 24% of private tenants had to borrow money to pay their rent, 18% had to cut back on their diet, including skipping meals, and 12% had to cut back on their heater. Recent and upcoming increases in mortgage rates, rents, fuel and general living expenses will only compound affordability issues.
The lack of affordable housing near the office can force employees to move to more distant towns and villages, where rents in particular and the cost of living are lower. However, employees have to live away from London to save significantly on rent and general living expenses, which means a tiring, long and expensive daily commute, as reflected in the CIPD survey. Given this, it’s no surprise that travel from outside London is the main reason employees prefer to work from home.
In addition, housing issues are very important for employees and employers. According to figures from the Center of Social Justice (CSJ), almost half (48%) of large UK employers say housing problems have a negative effect on staff wellbeing and 54% of employers say problems accommodation have a negative impact on recruitment. 43% of employers say they hurt company productivity. The CSJ considers that this is often due to “tiring and long journeys” and “housing insecurity which reduces productivity”.
The shortage of affordable housing close to the office has left some employers worried about recruiting and retaining top talent and as a result some employers are considering taking steps to offer or help find housing close to work in the part of a global employment package. This would help reduce barriers to recruitment and attract better talent. Living close to work with support would help promote well-being and reduce worries about sky-high rents. This approach could also facilitate the attraction of the best talent in the market. It also removes the main attraction of working from home – the tiring, expensive and stressful commutes.
This may seem like an unusual move on the part of employers, but it’s not as uncommon as some might think.
The reality – how prevalent is the trend?
Accommodation provided by employers is not a new concept. One of the earliest examples occurred when, in 1879, George Cadbury established the “model village” of Bournville which provided affordable rental housing for workers at his chocolate factory. The Lever brothers also built an entire town on the Wirral, “Port Sunlight”, to accommodate its workers.
These days, housing support for employees is gaining ground in London. In 2017, Hachette UK partnered with The Book Trade Charity to provide subsidized accommodation in London for people starting a career in publishing. In Inverness, Parklands Care Homes have submitted plans to build houses to encourage workers to live nearby.
In 2018, a significant number of employers, including Deloitte and KPMG, joined the Mayor of London in pledging to help employees cope with the cost of living in London. KPMG has offered to arrange preferential mortgage rates for employees and Deloitte has settled around 150 new hires into its East Village apartments, including offering graduates two weeks’ rent-free accommodation and waivers of agency fees.
In the United States, employer-funded housing is more common, with a major tech company building 1,700 apartments next to its Silicon Valley headquarters, and others also offering affordable housing for employees.
Post-pandemic, we may see assisted housing close to offices becoming an established feature of compensation packages in London, with the dual benefit of employers having employees with easy access to the office, which is a valuable retention tool , and employees with the security of good quality accommodation in London, close to work, minimizing the horrors of commuting.
However, if employers continue to offer adjustment assistance, what problems might they face?
Important considerations for employers
Given the possible trend mentioned above, we outline some key considerations for employers:
- Employers should consider who should be eligible, for example, would employees at all levels of the company be eligible or perhaps only graduates/new hires? If housing is only available to some employees, employers should carefully consider whether this could give rise to complaints of direct or indirect discrimination from those who have not received support or housing.
- Where an employer provides actual accommodation as opposed to assistance, the question arises of repossession of the property upon termination of employment. The employee may have accrued security of tenure rights as an insured tenant. This could cause issues with the employee’s dismissal and result in a difficult and potentially costly dispute. The relationship between employment and housing must be very clearly defined, including the provisions relating to dismissal.
- The loss of a home could mean that an employee is awarded a higher level of compensation in a successful lawsuit because they will be able to show a greater loss.
- Employees may feel compelled to avoid claiming rights as tenants, as well as rights to repairs and safe housing, when the landlord is also their employer. Indeed, “the risk for employees is that they are dependent on their bosses not only for wages but for housing” (Financial Times, 2022).