With COVID-19 restrictions easing or going away entirely in some places, many employers are asking employees to come back to work at the office.
While some employees may be ready to get out of their house and bring some socialization back to their work routine, we should explore what this shift means for you financially and how it affects your bottom line.
We’ve looked at three of the biggest costs when it comes to returning to the office, and we’ve shared an example of how this back-to-work mandate could be costing you a hefty chunk of your paycheque.
1) Fuel & Parking
The return to the office couldn’t come at a worse time. As we prepare to exit a global pandemic and trouble brews in Eastern Europe, the price of fuel has hit an all-time high. With prices at the pump reaching almost $2.00/litre in early March, it’s important that we calculate the true cost to make that trip to the office. You will need to make a few assumptions on your fuel economy and know how far you travel to get to work, but you should be able to get a general idea of what your commute is costing you in fuel. We also need to account for any parking costs. While some places of employment provide free parking, others can have steep parking rates.
2) Wear and Tear
Due to a number of supply chain issues, buying a vehicle post-pandemic does not come cheap. The cost of new and used vehicles has soared to record levels. With rising inflation, parts & labour costs for repairs have shot up too. Wear and tear is the cost to safely maintain your vehicle - think oil changes, new tires, brake pads, and any other general maintenance. There is also an element of depreciation to the resale value of the vehicle based on the number of kilometres it’s travelled. You’ll want to factor in some expenses for maintenance and depreciation when looking at your daily drive into the office. This isn’t an exact science as a 2022 Honda Civic is going to be less costly to keep in good working order than a 2002 Mercedes SL500. However, we should be able to apply a formula to determine what the wear and tear cost is per kilometre, based on the amount spent on maintenance and repairs, as well as depreciation from the distance you travel to and from work.
3) Your Time
Time is truly our most valuable resource. We may not feel that way when we spend a Sunday afternoon lying on the couch binge-watching the latest season of Ozark on Netflix, but it certainly has significant value. So, we need to assign some financial cost to the time spent behind the wheel. The easiest way to calculate this is to break down how much you’re paid for your time by your employer. If you’re paid hourly, then it’s quite simple. If you’re paid a salary, then we can do the math to determine what an hour of your time is worth.
Here’s an example
Let’s look at a real-life example to see what this means in dollars and cents.
1) We’ll use a conservative estimate of the average commute for a Canadian worker, about 30 km each way – or 60 km round trip. Assuming you have fuel consumption at 9 litres/100 km, you’re in the region of about 6 litres of fuel per day, or 30 litres per week, for work travel.
With current gas prices at around $1.80/litre, that’s $54/week on fuel alone. And your place of work may even require you to pay for parking – this can vary, but let’s say you’re paying $5/day (which is low for most city centres) and add another $25/week for parking.
So, we’re at about $80/week for fuel and parking for a workplace that is 30 km from home.
2) It’s hard to say exactly what the exact cost of wear and tear will be on your vehicle. This will vary based on the age and make of the vehicle. For simplicity’s sake, let’s say that it’s about $0.15/km for a 2017 Honda CR-V. This is what we can expect on repair and maintenance costs and the depreciation if driven about 15,000 - 20,000 km each year. Going back to our daily commute of 60 km, that’s about $9/day or $45/week for wear and tear.
So now we’re at $125/week with fuel/parking and wear & tear.
3) A salary of $100,000 is roughly $48/hour – ($100,000 ÷ 52) ÷ 40 = $48.08. You get the point and can figure this out for your specific salary – there is a table below to help. For our example, let’s use a salary of $75,000/year. That 60 km commute is likely going to take you 45 minutes or more each way, assuming you’re doing any driving on congested major routes – think 401, QEW/403 or Gardiner Expressway in the GTA. That’s about 1.5 hours per day at $36/hour – which is $54/day or $270/week for the cost of your time spent commuting.
With the value for your time added back to the other travel costs, we are close to $400/week. Over a year, that’s roughly $20,000 - no chump change!
If you’ve been working from home for the last 24 months and your employer isn’t increasing your pay to offset your travel costs, then you’re effectively taking a pay cut to return to the office. With inflation on the rise and commute times getting longer, this won’t be getting better for you anytime soon.
Here’s the crazy part, if you were to continue to work from home and invested that amount each year in your RRSP/TFSA, assuming a 5% compounded rate of return, you would have accumulated over $250,000 in 10 years – compounded over an entire career of 40 years – it’s over $2.4 million.
If you’ve been called back to the office, then maybe it’s a good time to sit down and review your finances with a financial planner. If you are still working from home, you should talk to a financial planner about how to invest all your savings from not having to commute. Get in touch today for a free financial planning consultation.