Consider the practical and financial implications before setting up office at home, writes Laura Slattery.

Most office-bound employees have at some stage considered what it would be like to live the home-working dream: no traffic trauma, no shoulder-lurking bosses, pyjamas optional.

The self-contained home/ office can spare small businesses the overheads of renting premises, thereby reducing childcare and commuting costs for e-working employees of companies with flexible working policies.

But the home working revolution is still in its infancy and has yet to take off.

A study published last year by the Economic and Social Research Institute (ESRI) found that, although one in four employees has a flexible working arrangement of some kind and one in five work part time, just 8.4 per cent of employees work from home.

Although part-time and flexi-time working has been associated with less pressure, employees who work from home say they experience significantly higher levels of stress and greater work pressure compared to workers in the office.

So, while it might mean freedom from dodgy air conditioning systems, tiresome commuting and formal dress codes, working from home can bring its own headaches.

Countless distractions can derail self-discipline. Working and leisure hours can blend into one long day - and that's before the practical and financial considerations of setting up shop are considered.

TELECOMS

Access to your own fridge might be guaranteed, but access to the outside world will be somewhat more important to employers who are nervous about productivity.

Broadband internet is essential to any office worker who wants to create an efficient working environment at home.

In fact, Brian O'Donohoe of broadband providers Imagine attributes the lack of widespread home working in Ireland partly to "disgraceful" broadband penetration of about 5 per cent.

Home workers can be split into two groups in terms of their broadband needs.

"The first category is people who are continuously on the internet - they might work in customer care or accountancy and they need always-on remote access to their employer's system," says O'Donohoe.

A broadband product with a download speed of 1 MB and an upload speed of 128k is the most popular product among these workers, he explains.

"The second category is people like graphic designers or advertising agency creatives. They might not be online as frequently but they would send larger files, so they would need 2 MB broadband with an upload speed of 256k.

"That would give them a reasonable level of video, so it allows for fairly heavy use," he says.

A 1 MB "always on" is available for a monthly fee of €19.99 from Imagine or €20 from BT Ireland. Prices for 2 MB broadband start at €29.99/€30 from Imagine, BT Ireland and NTL.

According to O'Donohoe, most business customers want a bundled product, in other words, one that includes both broadband and their line rental for voice calls.

"If you are running a business, the last thing you want to spend money on is administration. You want it all on the one bill."

Line rental plus broadband is available for €35 and Smart Telecom is now offering 3 MB at this price.

With voice over internet protocol (VoIP) services like Skype offering free voice and video calls over broadband connections to other Skype users and cheap calls to non-Skype users, why bother with traditional phone lines at all?

"VoIP is in its very early stages. The percentage of VoIP calls in Britain, which has much higher penetration of broadband, is maybe 1 per cent," says O'Donohoe. "When you have broadband penetration levels up at about 20 or 25 per cent in Ireland, that's when you will see VoIP take off."

INSURANCE

Working from home can be a risky business, especially if the right insurance policy isn't in place.

"Probably the most typical type of home worker is a person who is employed by an organisation or company and works from home a couple of days a week. Most insurers will accept that as an acceptable risk under a normal home insurance policy," says Damien O'Neill of insurance company Allianz.

In the event of a fire, flood or burglary, office equipment will be covered up to a certain limit - €3,800 in Allianz's case.

Technological sophisticates with equipment worth more than that can get an extension to this limit for a relatively small amount: an extra €6 on the annual premium will extend the cover up to a value of €6,300, while an extra €12 a year will take it up to over €9,000, according to O'Neill. Things get a little trickier for people who have customers coming to their home.

The public liability cover under their domestic home policy will pay up if someone such as the postman, friends or neighbours were to have an accident on the premises.

But it won't cover accidents or injuries when it is a business customer in the home.

"The nature of the risk changes and they need commercial cover," says O'Neill.

If it's a desk-based worker, an architect or accountant for example, limited business cover adds 25 per cent to their regular premium - roughly €100-€125 - before the usual discounts are applied. Certain lines of work will require extended cover.

"It would depend on the nature of the activity. A florist, a hairdresser or a chiropodist, say, would each have their own inherent risks. It would also depend on the hours that the business is open and the level of footfall."

Sometimes people fall into a pattern of working from home, or what starts out as a modest cottage industry eventually turns into a full-scale operation, with clients knocking on the door.

"People should just be aware that this could have insurance implications," says O'Neill.

"The policy document will be specific about what's covered and what's not covered.

"If you go outside the rules of the standard home policy, you may inadvertently be picking up liabilities."

TAX

Self-employed people who work at home can claim tax relief for a proportion of their light, heat and electricity bills, usually on the basis of the proportion of the house that is used for business purposes.

Other allowable expenses include equipment, maintenance and repairs, stationery, postage and business-related travel and telephone calls.

Most companies that allow home working - just 11 per cent of Irish firms according to a recent survey on behalf of technology firm Citrix - are responding to requests from employees.

If the employer is encouraging home working, they may fork out for the necessary equipment. There is no benefit-in-kind implication to this.

The Revenue says as long as private use is "merely incidental" to business use, computers and mobile phones kept at home but provided by an employer are exempt from tax.

Employers can also make payments of up to €3.20 a day toward heat and electricity without deducting PAYE or PRSI - additional costs can be the subject of expenses claims to the employer.

The provision of a telephone line for business use will also not give rise to tax. Employees who use their homes for e-working purposes do not lose any of the capital gains tax (CGT) exemption available on principal private residences.

But if a self-employed person is running a full-scale business from their home, they may only receive partial relief from CGT and have some liability when they move to sell.