Analyzing the Business World’s Newest Perk: Bonuses for Living Close to the Office

March 2, 2016

A new perk has made its way into some companies’ benefit packages: Cash bonuses for employees who live close to the office.

The Wall Street Journal reports that some companies are giving employees who live close to their office financial incentives, believing a shorter commute increases retention and employee morale. For example, the Journal cited Addepar Inc, which gives employees a $300 housing stipend if they live within a mile of their California office or within 15 minutes of their Manhattan office.

“The less time you’re spending on commuting, the more time you can spend focusing on work or focusing on your friends and family,” Addepar Vice President of People Lissa Minkin told the newspaper.

There are studies that support this concept. When analyzed, researchers have found a long commute increases the likelihood an employee will leave and generally decreases their overall health and happiness.

That said, there are potential downfalls to the perk. Primarily, it might turn off people who live far from the office or people who emphasize keeping their work and personal lives separate.

Let’s take a closer look at these two perspectives, as well as some alternative solutions.

The case for incentivizing your employees to live near the office: Closer employees are generally happier employees.

Gallup reports that employees with longer commutes are more likely to have chronic neck or back pain and have a higher chance of being obese. It also found that employees with long commutes tend to worry more and be more tired, compared to employees with shorter commutes.

A longer commute also means less time with loved ones and higher transportation/daycare costs. For those reasons, several studies have found that a longer commute generally increases the chances an employee will take another job.

For example, one large manufacturer found that if one of their factory worker’s commute was between 30-to-45 minutes, the probability of them quitting that year was 92% higher than employees who had commutes of less than 30 minutes. Additionally, if a factory worker had a commute of longer than 45 minutes, it was almost a guarantee they would quit within a year.

Therefore, encouraging your employees to live closer to the office could increase your retention rate and save you money on turnover costs. Additionally, Gallup’s research suggests it could also lead to a healthier, happier workforce.

The case against incentivizing your employees to live closer: Employee pushback.

The Wall Street Journal asked Nancy Rothbard, a management professor at the University of Pennsylvania’s Wharton School who studies work-life boundaries, about the program. Rothbard said some employees will find the perk “stifling,”particularly those who prioritize separating their home and work life.

Secondly, even if you give your employees a bonus to move closer, not all are going to do so. Employees with children might not want to take their kids out of their school or an employee might live in a certain spot because they really love it or they might live in a certain location for personal reasons; or thousands of other scenarios that prohibit them from moving.

How are those people going to feel when their colleagues get money to live closer? Now, not only do they have to deal with a long commute, they also have to deal with not getting a bonus many of their colleagues get.

For them, it’s a lose-lose.

Three other alternatives: Shuttles, relocation bonuses and telecommuting.

A cynic might see these stats and think they should only hire people who live within 30 minutes of their office. But that severely limits your talent pool, and any gain you might get from a lower turnover pales in comparison to the great people you are preventing yourself from hiring.

There are some other solutions, along with a bonus to move closer. They include:

1. Shuttling your employees to work.

Some companies, like Google, do this; although it is an expensive option. Yes, people still have long commutes, but they can work using the shuttles WIFI, or just relax. This drastically cuts down on the stress of the commute.

2. Paying for a relocation bonus when hiring.

This will increase the amount of employees who live close to your office, without limiting your talent pool. All in all, it's a few thousand dollars worth spending.

3. Allowing your employees to work from home a couple of days a week.

Conversely, this option doesn’t cost anything and is a nice perk for any employee. Sure, you’d probably like to have your people in the office as mush as possible; but letting them work from home once or twice a week cuts out their commute completely for those days. And, that can make a big difference.

*Image by Matt Newfield

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