Will COVID Have a Lasting Impact on the Way We Do Things?

I was listening to a podcast recently where a discussion developed over whether COVID would have a lasting impact on the way society/business does things.

What was interesting was that an event even as large as World War II did not lead to a significant lasting change in the way people did business.  Despite one of the most significant changes to industry in World War II, being women entering in the workforce to replace men fighting in the war, this was not sustained.  The women learnt many news skills for the first time and at the same time gained freedom to undertake work previously not available to them. However, after the war, to a large degree, women left the workforce and returned to their homes.  So, all the training and skills acquired were mainly lost to industry.

Having said this, the fuel crisis in the later part of the 20th century did see a significant change in industry use of resources e.g. power to drive industry.  Prior to the crisis, many industries relied on oil and petroleum to drive their machines but were forced to look to alternative sources of power with the shortage of traditional fuel.  Electricity was the major alternative which required significant investment that once made became a sunk cost from which there was no turning back.

So, what about COVID? One of the most significant changes that has occurred in COVID has been the move to working from home.  After a year of change, the questions to be asked are “Will this be a long-term change?”  and “Has industry and commerce made significant investment (sunk costs) in this area that would make it prohibitive to change back?”

Adopting working from home, in some areas, has been out of necessity and in doing so, businesses have taken a short-term view due to many still having long-term leases in CBD and other areas which will keep them, at least in the short-term, committed to those places.

Also, working from home attracts workplace, safe and healthy issues, which by some, have been ignore during the crisis. Long term commitment to working from home arrangements will require the workplace in the home to meet all the requirements in relation to workplace legislation.  For example, does the home lighting or working environment meet workplace standards? and, similarly, does the IT infrastructure meet standards? just for starters.

Consideration also needs to be given to the worker’s mental health due to isolation, the lack of face to face/social meeting with fellow workers and the work/family balance. 

This leads to the critical question of what is the employer’s responsibility for providing an adequate working environment (lighting, diskspace etc), insurance for accidents in the workplace at home (as the public liability clauses in a home insurance more than likely won’t cover a work related injury/accident) and the employer’s obligation to ensure the physical and mental well being of workers.

So, the question is will employers be willing to incur the cost to undertake the upgrades to employees’ homes if they are to comply with appropriate workplace standards and how will they deal with employees moving house or staff who rent moving house?

If they do, will there be a capital gains tax issue going forward when the employer eventually sells the property?  And what about Fringe Benefit costs which may apply?

Generally, at present, employers have not made significant outlays during COVID that would make going back to the office unviable so it will be interesting whether greater working from home will continue or whether industries will go back to business as usual.

David Balwin FCPA Registered Tax Agent