Does Working from Home Increase Job Satisfaction and Retention? Evidence from the COVID-19 Pandemic

Abstract

We study how working-from-home (WFH) impacts employee job satisfaction and retention using proprietary data on the WFH arrangements of over 70,000 employees. We find that the positive association between always WFH and satisfaction vanishes after controlling for employee compensation, occupation, demographics, and workplace environment characteristics (e.g., feeling appreciated at work). Employees who always WFH also have a higher intention to leave their job than employees who never work from home. In contrast, less frequent WFH arrangements relate to higher satisfaction but no difference in intention to leave, and their impact is limited relative to workplace environment characteristics. We draw on work-psychology and employee well-being models to explore potential mechanisms. Working from home more frequently tends to confer higher satisfaction when employees have jobs requiring less coordination with others and when employees believe they have a ``bad boss,'' suggesting an interplay between WFH arrangements and employees' psychological states. Our results suggest that WFH is not a one-size-fits-all approach for organizations and may not be a panacea that resolves employee engagement and retention challenges.

Keywords: flexible work arrangements; remote work; job satisfaction; employee retention; employee turnover; corporate culture

JEL Classification: D13, D23, E24, G18, J22, M54, R3