Are you a business owner who is torn between whether or not you still need an office in this post-pandemic world? Given that remote work and videoconferencing have given us new ways to communicate and get work done, it might make sense to take a closer look at your space needs.
If your office is only partially full now on any given day, think through not only how much space you might need, but also how best to use it to empower, support and motivate your employees. It’s also important to consider the cost implications of keeping your existing office space, as well as what your tax bill might look like should you transition your employees to remote work.
Here are a few things to keep in mind as you evaluate your office environment.
Determine who is using your space
It will be important to assess the interests and capabilities of your workforce before moving forward. For instance, are there certain employees that can transition to full-time remote opportunities, based either on their personal preference or roles and responsibilities? Workers who rarely need to participate in meetings or have seen their productivity increase while working away from the office are good candidates to remain remote full time.
However, employees who routinely work in teams, interact with clients, or have regular needs for meetings might need to be in the office more than others. Understanding who needs to be in the office, when they need to be in the office and why they need to be in the office is a crucial first step in assessing your space needs.
Keeping your clients in mind is important as well. While many have enjoyed the flexibility that videoconferencing offers them, there always will be those who prefer an in-person meeting. As such, make sure there are quiet places with some measure of privacy where you can meet with them away from the commotion that comes with a communal setup.
Consider renegotiating your lease
After determining who needs to be in the office and how you’re going to use the space, it makes sense to take a closer look at the costs associated with your lease. It might be time to renegotiate your existing agreement, understanding that most landlords recognize that keeping a tenant at a lower rate is better than having a space sit vacant.
One way to potentially lower your rent is by offering to sign a lease extension in exchange for the reduction. That would assure the building’s owner that you’re committed to the space, ultimately boosting the long-term value for the landlord.
It’s also possible your landlord owns other commercial properties which might be a better fit for you from both a cost and space perspective. Exploring a relocation to one of those sites demonstrates a willingness to extend the relationship, just with an office environment that better suits your needs and your budget.
It also will be important to evaluate the trade-offs from a tax perspective. While a smaller office footprint and more affordable lease might mean fewer expenses for you, it also means you’ll have a smaller tax deduction from your lease or rent.
Examine the costs – and benefits – of transitioning your workforce
You’ll also have some financial decisions to make with your employees who can work remotely.
Due to changes stemming from the Tax Cuts and Jobs Act, your employees who voluntarily transition to work remotely are no longer eligible for any tax credits to assist with expenses. Some states, though, have laws in place that require employers to reimburse their employees for various home office costs, so it’ll be important to work with your tax advisor to determine if this applies to you.
Regardless of what is and isn’t allowed, it’s good to engage with your workers and consider sharing some of the work-from-home cost burden. In fact, you can provide them with tax-free employee benefits that reimburse legitimate job-related expenses, such as setting up a home office, and your business, in turn, can deduct these reimbursements.
In order to qualify, your employee has to use a portion of his or her home exclusively for work, and the home office must be put in place for the convenience of your business rather than your employee. Items such as a computer, printer, internet service and additional office equipment also are eligible for full reimbursement. Employees can be reimbursed for the home office percentage of rent, utilities and other home maintenance costs. A written Accountable Plan is required to make this work, so plan on engaging your tax advisor in its development and administration.
Serving our clients is a priority
At Padgett, we adapted to the challenges presented by the pandemic by pivoting to remote work to keep our clients safe and served. Today, we’re working with small businesses to give them the guidance and advice they need to make informed, long-term decisions as we all move into the “new normal.” If you’re a small business seeking a trusted partner to stand with you, don’t hesitate to reach out to an office today.