Back to Glossary

Definition of Adverse Impact:

Adverse impact is the repercussion of an employer practice that may appear neutral, but would negatively impact protected groups such as women, older employees, and minorities. Adverse impact may be seen at any stage of the employment right from hiring, training, promotions, layoffs, etc. .

According to the Society for Human Resource Management (SHRM), “Adverse impact refers to employment practices that appear neutral but have a discriminatory effect on a protected group. Adverse impact may occur in hiring, promotion, training and development, transfer, layoff, and even performance appraisals,”

Example of Adverse Impact: 

Suppose your job description says that you are looking for employees who have 5-7 years of prior experience. By doing so, you essentially say that you do not want entry-level graduates, or older employees who have more experience and can bring more knowledge to the table. 

While this may not seem intentional, and one can argue that older candidates do exist with 5-7 experience. But in a general sense, this is what it implies. 

Why should you focus on Adverse Impact?

When companies are looking for one specific type of candidate, it encourages only one way of thought. It doesn’t foster innovation and doesn’t help the company in the long run. By hiring employees from different backgrounds, ethnicity, gender, and age groups, you breed diversity that can bring different, innovative ideas to the table. This can positively help your company. 

How to tackle Adverse Impact - the four-fifth rule

A practical way to measure if adverse impact exists in your organization is to see if the selection rate of the protected group falls below 80 percent of the group that has the highest selection rate.