Most HR and people leaders don’t spend their time thinking about lease terms. But they should. The way your business structures its leases—whether for office space, equipment, or vehicles—can directly affect hiring plans, location strategies, remote work policies, and even budget approval cycles.
Leases aren’t just a finance problem. They’re an operational lever that can speed up or slow down your workforce strategy.
Why Leases Belong in Workforce Conversations
Let’s start with the obvious: real estate decisions impact where employees work. But it goes deeper than square footage. If your company holds long-term leases in cities where you’re downsizing, or can’t secure flexible space where you need to grow, your workforce plans are already misaligned.
A poorly timed lease can result in empty offices you still have to pay for—or worse, no space when you need to scale. These misfires can bottleneck hiring, limit internal mobility, or complicate return-to-office strategies.
Now, layer in the financial impact. With the new lease accounting standards under ASC 842, leases must be recorded on the balance sheet. That changes how businesses view long-term commitments. A solid operating lease accounting example shows how even a straightforward lease can shift financial optics—adding liabilities that influence spending, hiring freezes, or location-based strategies.
The Real-World Impact on People Teams
Advertisment
This isn’t just a facilities issue. Leases intersect with HR in all kinds of hidden ways:
- Remote Work Strategy – Your ability to support WFH depends on what you’re paying for office space. If you’re locked into underused space, that pressure often leads to forced return-to-office policies—whether they make sense or not.
- Geographic Hiring Plans – Want to expand into new regions? Lease costs and terms often dictate where and how fast you can move.
- Internal Mobility – If certain locations are closing due to lease terminations, people teams need time to prep for relocations or layoffs.
- Budget Timing – Lease payments and their accounting treatment affect when hiring budgets are released and how much flexibility exists.
In short, lease decisions ripple through the workforce in ways that aren’t always visible at the planning stage.
Cost Visibility and Compliance
With ASC 842 in effect, companies must report nearly all leases on their balance sheets. This adds transparency—but also complexity. Many people leaders aren’t aware how these new disclosures affect budget decisions.
A study by EY found that 94% of companies underestimated the effort required to adopt ASC 842. The standard impacts how businesses assess long-term commitments—including whether to approve new headcount or launch office expansions.
If you’re not in the loop on how these leases are classified, you could be planning growth in locations your finance team is trying to exit. Or worse, you could be building a remote-first workforce that clashes with the company’s accounting obligations tied to physical spaces.
Questions Every People Leader Should Ask
You don’t need to become a lease accounting expert, but you should know enough to ask the right questions. Start here:
- What are our major lease obligations by region?
- Which leases are up for renewal in the next 12–24 months?
- Are we considering lease impact when approving headcount?
- Do our office locations align with our current and future workforce footprint?
- How do lease costs affect our remote work or hybrid strategies?
When people leaders ask these questions early, it creates better coordination across HR, finance, and operations. That means fewer surprises and smarter, faster execution.
Aligning Leases with Workforce Flexibility
Today’s workforce demands flexibility. But your lease portfolio may be anything but flexible. Long-term leases signed pre-pandemic often don’t match how people work today. That misalignment creates pressure—from finance, facilities, and employees.
Here’s where forward-thinking people leaders can lead:
- Advocate for Flexible Space – Push for coworking or short-term leases where growth is unpredictable.
- Support Lease Exit Plans – If offices are underused, help build the case for consolidation by showing hybrid work success metrics.
- Build Real Estate into Workforce Planning – Treat leases like any other constraint—just like hiring timelines or IT capacity.
- Highlight Employee Impact – Show how lease decisions affect culture, commute, and engagement.
HR can’t just react to lease decisions. It has to help shape them.
Final Thoughts
Business leases may seem like a finance-side concern, but they affect nearly every part of workforce strategy. From budgeting to geography to flexibility, the structure and timing of leases play a powerful role in what people teams can do—and how fast they can do it.
Understanding key concepts like ASC 842, asking the right questions, and collaborating with finance early can help people leaders turn lease realities into strategic assets—not blockers.
In short: if you’re leading people, you need to understand leases. Because they’re already shaping your plans—whether you realize it or not.
