Return to Work: GCCs’ Remote, Hybrid, or In-Office Model?

The last year and a half have been an unprecedented period for companies as well as their Global Capability Centers (GCCs) around the world. As soon as the news spread of the pandemic, companies were forced to ask their employees to work remotely. Some GCCs offered Work from Home (WFH) or Work from Anywhere (WFA) as a perk even before the coronavirus outbreak, however, this became the new norm for most businesses.

Employees have been working remotely for the last one and a half years, while maintaining productivity levels as working in an office setup. McKinsey famously declared that most GCCs were able to achieve pre-pandemic levels of productivity within days.

The limitations and the benefits of remote work are now obvious. For some employees, WFH has ruined work-life balance, while it has been a boon for others as they could spend more time with their families. On the other hand, for most employers WFH has improved productivity and given them an opportunity to engage with a diverse, global, and border-less workforce. However, it also brought additional security challenges.

With most Global Capability Centers (GCCs) getting their workforce vaccinated this year, the question looms: Should we ask our employees to return to workplace and, if yes, to what extent and whom should we continue to allow work remotely?

What we understand from conversations with our clients and market sentiments is that companies are planning to undertake different approaches to ‘return to work’, such as Remote-first (permanently working from home), Hybrid, and Fully Return-to-Work.

“The punch line for us is: I’m not sure what we’re going to do…We want to try to really experience all three again—full work from home, a hybrid environment, and fully back—and then make decisions about what the right outcome is for the company, for employees, and for customers.”
—Darius Adamczyk, CEO, Honeywell

“We put our workers into three different categories. The first category, about 30%, will be fully virtual…And 20% will be essential, who work in security, heavy data analytics, who we found work better together. And then the rest of us—about 50%—will be hybrid…could be two to three days a week.”
—Steve Collis, CEO, AmerisourceBergen

“There’s a real disconnect here. Our survey of C-suite executives would say that 75% of them are going to pursue at least a three-day week hybrid model. And when you look to what you hear from employees, you get about 50% of them wanting more than three days a week at home.”
—Liz Hilton Segel, Global Head of Industry Practices, McKinsey

GCCs are not in any hurry to decide the future of work without involving employees, as they do not want to lose talent. According to a TeamLease research report, some employees are so comfortable with working from their hometowns and small towns that they may even consider quitting their current firms if they are called back to offices in large metros. Some GCCs have rolled out surveys to get the pulse of employees before implementing workplace strategy. For example, Novartis’ survey has questions on preferences related to ideal work setting, priorities when choosing an ideal work setting, and challenges experienced in current work setting. One of the Big 4 firms conducted internal surveys in India and found that during the two waves and lockdowns, employees were comfortable operating from their hometowns. After vaccination, most are fine to come back to office. A few are seeking to work from hometown permanently. Instead of calling these employees to return to base office locations, GCCs should consider the hub and spoke model with nano-/micro-offices or global in-house centers of less than 20 people in multiple locations, thereby providing flexibility to employees.

• Remote-first / Work from Anywhere (WFA): With all adults eligible for vaccination in India, companies are outlining firmer plans for the offices of the future. Many firms believe that remote-first or WFA policy is not viable for all roles. Roles in the field of creative services that require extensive collaboration is one such example. Similarly, working from home without the necessary training is likely to be a huge challenge for entry-level employees. There are also challenges related to adapting to the new culture and insufficient bandwidth that many employees are constantly facing while working remotely. Having said that, GCCs are drafting relocation policies that will allow employees to WFA even post pandemic for a basket of roles with no compromise on network security. As per a pulse survey by Aon, 64%, or 151 out of 236 companies either have a relocation policy in place or are actively considering one. Prominent sectors looking at this include technology, telecom, financial services, professional services, and consumer goods. We foresee that GCCs will allow permanent WFH to employees in certain roles.

While allowing employees to work from home, Global In-house Centers are considering compensation restructuring as well. According to Aon, out of the firms considering a relocation policy, 45 plan to adjust salaries to the new location. 60 companies plan to make decisions on a case-to-case basis. As many as 32 companies plan to leave salary unchanged and manage merit increases normally going forward, while 15 plan to leave salary unchanged and limit merit increases going forward until alignment with local pay is achieved. The components that companies look to restructure include basic salary (when benchmarked to location market data), housing allowances, and cost of living allowances. Cheaper cost of living combined with better work-life balance has convinced employees to take salary cuts. According to a Mavericks India survey conducted with 720 respondents from India, 54% love WFH, of which, 34% are willing to take a 10% salary cut to WFH indefinitely.

For Remote-first/WFA policies to be successfully implemented in the long run, government needs to step up. There are certain policies and tax procedures that GCCs operating in Special Economic Zones (SEZ) must adhere to. One of the principal criteria for claiming I-T deduction under Section 10AA is export of services through the physically demarcated area of an SEZ. This means the income deduction is connected to companies operating from inside an SEZ unit. Another issue of concern for companies operating out of an SEZ is secured connectivity. The current SEZ rules allow employees working in an SEZ unit to WFH for specific reasons, with attached conditions. One such condition is that the laptop of employees working from home should be connected to the SEZ unit through a secure network. This is done through a virtual private network.

On lobbying from IT/ITeS industry, Ministry of Commerce and Industry has issued various circulars to industry providing relaxations around compliance filings, due dates, and flexibility of operating from home for SEZ unit employees. Requirements such as deposit of bank guarantees, requirement for static IPs, publication of network diagram, and penal provisions have been removed. The organization can define its own internal policy on WFH, and employees can take the WFH benefit on a rotational basis. In case of GCCs planning to open nano/micro-offices in cities / states to offer flexibility of permanent WFH, that office must be registered under laws such as GST, PF, and other respective state laws. The compliance for employees attached to this office must be maintained. Even if the employee is physically present in another location on a long term/permanent basis, GCC can issue the employment letter pertaining to its corporate office in India from legal perspective. The only condition is that GCC pays the related GST and Income Tax for the team members who will be permanently working from other cities / states.

However, based on the latest circulars, WFH relaxation to SEZ units is allowed up to September 30, 2021. The industry is still in a wait-and watch game waiting for the Ministry to decide SEZ rules and related tax procedures so that a long-term blended work model with remote working across geograpihcally distributed teams can be implemented.

• Hybrid: A hybrid model is a combination of remote and in-office working, where some employees are on-premises, while others WFH / WFA. Majority of Global Capability Centers foresee hybrid model as the future of work. According to HFS Research & Infosys study, over 50% organizations that responded will take to a hybrid workforce model. By gathering feedback through surveys, GCCs plan to leave the decision to work from office to employees. For example, Google announced a hybrid workplace model wherein around 60% of the employees would come together in the office a few days every week, another 20% would work in new office locations, and the remaining 20% would work from home. Honeywell Automation India is likely to open work from office for young employees irrespective of roles. SAP Labs and KPMG are evaluating WFA in the long run as part of hybrid working model for employees. Acer has settled into a “hybrid” model. We understand that there will be variations even within the hybrid model and employees will have strong voice in choosing between WFA/WFO in a hybrid delivery model.

• Fully Return-to-Work: Some companies believe that while the hybrid model has allowed employees to find work-life balance, employers have found it challenging to foster innovation, collaboration, and sustain an organization’s culture in a virtual environment. The proponents of ‘fully return to work’ work model opines that working from offices will increase the productivity, coordination, and collaboration among employees along with helping them socialize and stay connected with peers, which will aid improving employees’ mental health. This type of work model is likely to be seen in startups, going forward. Flipkart is bringing its employees back to office in phased manner starting Oct 2021 and is likely to have all employees return to office by start of new year (2022). None of GCCs have current plans to bring its workforce fully Return-to-Work.

Return-to-Work readiness and role of office in the new normal

Global Capability Centers (GCCs) adopting hybrid working model will need to take cognizance of the comfort and requirements of individuals and teams. In the new normal, people will come to office to collaborate, build social capital, and feel connected to the organization they work for. Companies will have to remain nimble and may have to take decisions on monthly/quarterly basis once employees resume office. For the safety of employees, some protocols that companies should look at:

• Use of Arogya Setu app and travel history checks at the entrance
• Availability of hand sanitizer at multiple locations
• Cleaning and sanitization of desks, chairs, and all key touch point areas multiple times a day
• Designated quarantine area for isolating employees if one falls sick in the office
• Temperature screening before entering the office
• Doctor on call

There has been debates and concerns over the years whether employees can be productive and efficient without having everyone in the same space. Pandemic has made it clear that employees working full-time remote could be as productive as they are in office. However, we believe that certain in-person collaboration, social bonding is essential. In a world that has been forced into isolation, workspace needs to evolve. It should become the place that will provide employees with opportunities for collaboration, communication, and recognition. It should act as a medium to foster trust, alignment with corporate culture, innovation, and inclusion — these are human imperatives linked to successful business outcomes. Global Capability Centers need to look beyond the existing office as a mere infrastructure to the workspace that is a driver of cost resilience, a strategic asset, or a catalyst for growth depending on their strategic imperatives. They will have to look at workspace investment as strategic investment in design, infrastructure, and technology that has measurable business impact. Workspace offering new experiences, choice of spaces, and with digital-first built environment will create opportunities for discovery, creativity, innovation, problem-solving, and organic growth.

Future of Work

While remote-first has been successful out of necessity, GCCs need to adopt a pragmatic approach as they re-think the future of work. Key points to remember

• WFA is here to stay
• Employees’ choice will be given preference
• We expect GCCs or Global In-house Centers to use different variations to create their own version of a WFA model. WFA will get decided on case-to-case basis and role requirement
• Creating satellite / micro-offices across major non-metro (Tier-2/3) Indian cities is another WFA variation that will be explored. Instead of developing own space, GCCs should consider shared workspaces in these locations
• GCCs will have to wait-and-watch as far as SEZ regulations are concerned. However, Ministry and Telecom Regulatory Authority of India (TRAI) are taking a proactive approach to define taxation, labor laws, and network policies to enable hybrid delivery going forward

The return to the office is an opportunity to create a new, more effective operating model that works for organizations with a global team and employees navigating a world of uncertainty. The ability to strike a good balance between remote and in-office work, aided by technology, will be a key factor in shaping people’s lives in the post-pandemic world. If GCCs don’t keep up with this trend they run the risk of losing their best talent. Leaders must role-model new behaviors, not just talk about them. They should re-emphasize the positives of hybrid work, focusing on energy, coordination, and cooperation rather than the ‘stop’ aspects of legacy team culture, such as never switching off, presenteeism, and exclusion. After all, GCCs that embrace change and strive for it will create a more resilient organizational culture that can adapt to whatever the future of work may bring.