The Price You Pay for Rigid Return-to-Office Mandates
As many of you will know, I am a strong advocate for “true” flexible working arrangements. Let me explain what I mean by “true.”
A “true” flexible working arrangement is a model adopted by an organisation that ensures business needs are met and that employees who can carry out some or all their work location-agnostic can do so.
This does not mean every role can or should be location-agnostic. Some work requires employees to be physically present because of operational, customer, safety, security or equipment requirements. True flexibility applies wherever the nature of the work allows it. It is not about ignoring business needs; it is about removing unnecessary restrictions where physical presence adds no value.
Work is what they do, not where they go.
The decision on where to work to achieve the best outcomes is one made by the employee.
The decision on when co-location and in-person presence will result in better outcomes is one made by the leader and the team members.
There is no hybrid arrangement. Hybrid is binary – you work here or there. A truly flexible arrangement means you can work where, when, and how you want, as long as you deliver the expected outcomes. It is not just about working from the office or home. It could be working from the office, a café, a shared workspace, a library, a home office, a hotel, or a beach box. Location doesn't matter; what matters is what you deliver.
There is no mandate on how many days you must be in the office or how many you can work from home. That is not flexibility. It is unnecessary rigidity. Where you work and how many days you spend there should be driven by the need to deliver outcomes, not by having to work in the office on Tuesday and Wednesday or by meeting your 3-days-in-the-office quota.
The evidence increasingly suggests that flexibility, when intentionally designed and effectively led, can outperform rigid in-office mandates.
We know that many leaders are not ready to lead a distributed team, but that is a problem that can be overcome if the organisation is willing to do so. It should not be a barrier to flexible working.
Organisational willingness is the harder challenge. Many executives remain unconvinced by the arguments about trust, autonomy and employee preference. So the debate should move to where it carries more weight: financial cost.
What price are organisations paying for trying to restore working practices designed for a pre-2020 world?
What the evidence shows
On one side of the return-to-office debate are corporate giants like Commonwealth Bank (CBA), which has rigid return-to-office (RTO) mandates, with adherence linked to bonuses and performance rankings.
On the other side, enterprises like Canva and Atlassian have adopted a “total flexibility” model with no mandated days in the office. The office is positioned as a tool to be used if it helps achieve outcomes, rather than a place you must be.
While some executives argue that return-to-office mandates are required to maintain productivity, global workforce data tells a completely different story.
A six-month controlled trial by Stanford University investigated the effects of hybrid working on employees and found that it improved job satisfaction, reduced attrition by one-third and had no impact on productivity.
Research from the University of Pittsburgh identified Standard and Poor’s (S&P) 500 firms with RTO mandates and then examined the impact on employees, including job satisfaction data from Glassdoor. It found that RTO mandates hurt employee satisfaction and did not improve company performance.
At the Federal Reserve Bank of San Francisco, economists found little evidence that the rise in remote work explained differences in industry productivity performance.
Harvard Business School tracked federal workers at the U.S. Patent and Trademark Office who transitioned from fixed locations to complete geographic flexibility and found an unconditional 4.4% increase in total output, without any drop-off in work quality.
Research by Alessandra Fenizia and Tom Kirchmaier estimated the individual-level treatment effects of WFH on worker productivity in public sector jobs. Exploiting novel administrative data and exogenous variation in work location, they found that working from home increased productivity by 12% on average, with considerable heterogeneity across workers. Reduced distractions primarily drove these gains, and changes in work quality, hours worked, absenteeism, characteristics of reported cases, training, administrative duties, or task allocation do not explain them.
Gallup research has found that workers with flexibility report higher workplace engagement than fully on-site workers. It also revealed that flexibility to do focused, independent work at home while collaborating intentionally on-site supports both workplace productivity and connection.
Clearly, those results don't convince hard-nosed RTO advocates.
So, what happens when the financial justification for total flexibility becomes undeniable?
Attrition
The most immediate cost of a rigid RTO mandate is employee attrition.
Another University of Pittsburgh study, using employment-history data covering approximately three million technology and finance workers, found that employee turnover increased by 14% following RTO mandates. The increase was significantly greater among senior employees, highly skilled professionals and women. The study also found that some employees accepted lower-ranked positions elsewhere to retain flexibility, and that vacancies took 23% longer to fill after a mandate was introduced.
Many employees also see RTO mandates as a lack of trust in their capabilities, and when trust evaporates, employees will walk, and the talent will often go first.
An illustrative cost scenario
This is an illustrative scenario, not a forecast. Actual savings would depend on workforce composition, salary levels, existing turnover and the effect of the organisation’s particular flexibility policy.
For an organisation with 10,000 employees, a one-third reduction in attrition could translate into millions of dollars in avoided replacement costs.
Let us assume the organisation has a standard 12% annual turnover rate, which equates to 1,200 departures per year.
Offboarding creates costs through accrued annual leave, administration and hardware recovery. There is also a significant cost associated with replacing the employee.
The Society for Human Resource Management (SHRM) estimates that replacing a professional employee costs an average of 60% to 90% of their annual salary due to recruitment fees, onboarding, and lost productivity during the ramp-up period. This is based on research by Wayne F. Cascio.
According to the Australian Bureau of Statistics, the average weekly ordinary time earnings for full-time adults was $2,051.00, which equates to an annual salary of $106,657.20.
If we assume a replacement cost equivalent to 70% of annual salary, that means one departure costs $74,659.90.
If the organisation achieved a one-third reduction in attrition, consistent with the result observed in the Stanford trial, it would retain 396 employees who might otherwise have left, producing an estimated annual saving of $29,565,320.40.
Disengagement, absenteeism and the “good news” bias
The financial cost of an RTO mandate isn’t just measured by those who leave. It is also measured by the employees who stay but are disengaged.
Disengagement
Researchers from Pittsburgh University used Glassdoor data to track employee sentiment across S&P 500 firms. They found that return-to-office mandates were linked to lower job satisfaction and did not improve company performance. This matters because declining satisfaction can contribute to disengagement, which carries high organisational costs.
Gallup’s research is not specifically about return-to-office mandates, but it demonstrates what organisations risk when employee engagement falls. Organisations with low engagement typically experience:
higher employee absenteeism
higher employee turnover rate
lower employee productivity
weaker profitability
more quality issues
Gallup's research shows that business units with high engagement significantly outperform those with low engagement. Compared with bottom-quartile teams, top-quartile teams experience 78% lower absenteeism, 23% greater profitability and 21% less turnover in high-turnover organisations.
Disengagement can also create indirect costs that are harder to measure but equally important. Organisations often experience more quality issues, weaker customer experiences and lower team performance when employees are less connected to their work.
The Gallup State of the Global Workforce 2026 report says, “Last year, low engagement cost the world economy approximately $10 trillion in lost productivity, or 9% of GDP.”
Absenteeism
Rigid RTO mandates can contribute to absenteeism by weakening employee trust, damaging work-life balance and imposing unwanted commuting demands.
When employees lose the flexibility and autonomy to manage work alongside their personal responsibilities, unplanned absence may increase as they look for other ways to meet those responsibilities.
Employees required to commute to an office only to spend much of the day on virtual calls may become cynical about the purpose of attendance, contributing to frustration and exhaustion. Rising dissatisfaction can also increase unplanned absence and job-search activity, creating further disruption for teams.
A report from Cornerstone and Great Place to Work revealed that roughly 85% of the economic cost tied to capability and culture gaps originates from retention and absenteeism rather than inefficient hiring.
Gallup found that organisations in the bottom quartile of employee engagement experience substantially higher absenteeism compared to highly engaged organisations.
Good news bias
RTO mandates are visible assertions of executive authority. When an organisation has a rigid, top-down, command-and-control power dynamic, employees can perceive that compliance and falling in line are valued over honesty.
As a result, employees may become more likely to share good news while withholding information that could attract criticism or challenge senior decisions. They actively self-censor, hide operational bottlenecks, system errors, project delays, product defects, or customer dissatisfaction from leaders to protect their own standing. That can be extremely dangerous.
The risks of a good-news culture were highlighted at Australia and New Zealand Banking Group following an independent review by McKinsey & Company. While the review did not attribute the culture specifically to RTO policy, it illustrates what can happen when challenge, speaking up and cross-functional responsibility are weakened.
The Australian Financial Review reported, “The McKinsey report pointed out that the bank’s ‘good news culture’ masked its problems.
ANZ employees can prefer to ‘stay in their own lane’, leading to assumptions that problems will be addressed by someone else; it is not common to challenge or ask questions about areas outside their immediate area of responsibility.
ANZ has a culture of respect that extends into a reluctance to challenge, which can diminish healthy debate and speaking up.”
An insular culture has the potential to damage an organisation, the cost of which cannot be predicted.
The price organisations pay
Rigid return-to-office mandates are often presented as a solution to concerns about productivity, collaboration and culture. However, the evidence does not show that compulsory attendance reliably improves organisational performance. It does show that flexibility can improve job satisfaction and retention without reducing productivity.
The financial consequences extend well beyond office occupancy. Organisations may pay through increased employee turnover, longer recruitment cycles, lost organisational knowledge, absenteeism, disengagement, lower productivity and weaker profitability. In the illustrative scenario used in this article, reducing attrition by one-third could save a 10,000-person organisation almost $30 million each year.
There is also a less visible but potentially greater cost. When employees experience rigid mandates as evidence that they are not trusted, they may become less willing to question decisions, challenge assumptions or report emerging problems. A culture of compliance can quickly become a culture of silence, and leaders may not discover the true cost until the damage has been done.
True flexibility is not the absence of accountability. It requires leaders and employees to agree on outcomes, coordinate deliberately, choose co-location when it adds value and measure performance by what is delivered rather than where someone sits.
The question for leaders is therefore not simply, “How many days should people be in the office?”
It is: “What working arrangements will enable our people to deliver the best outcomes, and what price are we paying when we refuse to consider them?”
