What Is Adverse Impact? HR Definitions And Example

The term adverse impact came into the picture when people started understanding that the hiring process should be fair and benefit diverse groups and organizations.

When any discrimination is practiced while hiring or selection or while doing resume screening or interviews, then it can have an adverse impact. It might not be intentional, but the policies that are framed might negatively affect a specific category of people.

It is important to remember that adverse impacts can attract legal implications, even though the processes and policies were unintentionally created. More important here is whether there is discrimination, intentional or unintentional.

The areas that may be protected or discriminated against might be based on characteristics like caste, race, sex, color, religion, disability, etc. If employees are selected, trained, appraised, promoted, or hired based on these characteristics, you can say that there is a presence of adverse impact.

Why Is It Essential To Understand Adverse Impact?

In many countries, understanding and rectifying adverse impacts is done mainly to make the hiring and selection process fairer.

But in the USA, the adverse impact can attract legal prohibitions. The company practicing adverse impact or having such policies will attract a lawsuit.

When adverse impact becomes live at the screening level, there will be no authenticity that the following steps are fairer. When discrimination is practiced, it will soon become evident at the organizational level.

This information can then harm the workforce. The company policies for hiring, selecting, and promoting employees should be neutral, and there should be absolutely no bias in that.

Understanding and measuring adverse impacts is essential to enhance fairness in the hiring process so that employees are efficient and the organization at all levels.

Check out why it is essential to understand and measure adverse impact here.

Why Is Measuring Adverse Impact Essential?

To avoid legal issues.

If you live in a country where adverse impact in the hiring process can entertain legal issues, you must immediately get agile. To stay safe, you must measure the negative impact while following the selection and hiring process.

To win the trust of the employees.

When the employees understand that the employer follows fair appraisal, promotion, and hiring processes and practices, the employees will have trust in the employer. They will think that the employer follows appropriate hiring methods and there is no discrimination.

To enhance reputation

Every company should have an excellent reputation to be considered a role model. An organization that works on fairgrounds and has tools to measure adverse impacts in the recruitment and appraisal processes will provide a great example.

To raise motivation among employees.

When the employees understand that the employment procedures are fair and there’s no scratch of discrimination, there will be sheer motivation among the employees. They will work at their best and enhance their productivity and performance.

It will automatically increase their efficiency at work. As a result, the employee retention rate will also be reasonable.

To have a diverse set of employees that covers all sorts of talents.

When an organization measures adverse impact, the recruitment and hiring process will include a lot of different talents and employees.

Thus, there is a rare chance that any skill is missed. When a company has a diverse range of employees, it provides better performance to the company too.

What Are The Adverse Impacts And Laws?

Some employment procedures and policies look neutral. But they might be negatively affecting a selected group.

As per Title VII of the civil rights act of 1964, employee discrimination or any policies that provide disparate treatment while selecting or hiring an employee is prohibited. At the federal level, this can attract legal implications in the USA.

If you are based in any other country, then you must figure out details about adverse impact laws to avoid any sort of legal issue.

How To Measure Adverse Impact?

Companies should know how to measure adverse impact. The most common way of measuring it is the 80 per cent rule or the 4/5th rule.

Even though this rule might not be full-proof and may even have sampling errors, there must be some base that one needs to keep in mind to know about the efficacy of the process.

Here’s how the 4/5th rule approach works.

  • Suppose the employer has made two groups, males and females. If one class has a selection rate less than four-fifth of the other class’s selection rate, then there is an adverse impact here, and one category is given more priority than the other.

  • The first step to measure the adverse impact of the 4/5th rule is to determine the selection rate for one group and the selection rate for the second group.

  • The next step is to divide the selection rate of one group by the selection rate of the highest group. With this calculation, there will be an idea about adverse impact.

  • There are, however, some limitations to this test. But you still have to follow it as it is one of the best tests. It would help if you got your test done by the screening technician. When the results are available, you must document the same.

To get better clarity about the concept, here are some examples.

Examples Of Adverse Impact

Job description or job posting that shows discrimination

In many cases, adverse impact is seen at the job advertisement level. When the job is posed or is advertised, the message that people perceive should be such that there is equitable treatment for all candidates. But the language used or the meaning that the advertisement serves might include:

  • Need only specific gender
  • Need someone with a particular religion or nationality
  • Using words like need mature people need men or need Italians etc.

Keeping a biased attitude while asking interview questions

Asking questions in an interview is quite common. But if the interviewer has more inclination towards some candidates because of their gender or some other criterion, then this can be an example of bias which means adverse impact. It may also include the following:

  • Asking more questions to some specific class of candidates than the other
  • Having gender-based bias in mind while asking questions.
  • Giving more importance to ethnicity and looks of the person than his talent and showing the same attitude while interviewing.

Too much dependence on hiring with a reference

Many companies are following referral hiring these days. The main reason is that when there is a reference, the company will be assured that the employee will work with all his heart. But only depending on this criterion and avoiding the other things can create a gap wherein there will be a need for more natural talent in the company.

With the above examples, there is better clarity about how, internationally, and sometimes unintentionally, there will be cases of adverse impact while doing screening or hiring process.

There Are Ways To Avoid Adverse Impacts In An Organization.

  • Creating perfect selection criteria when the screening process is going on. The company should have gramed policies and guidelines for fair hiring processes.

  • The screening tests should be done with the help of experts. The 4/5th rule should be applied wherever needed. Measuring adverse impact can provide prevention of infusing it into the recruitment processes.

  • Try to employ a diverse range of employees in the organization. The company should treat them equally, and all the actions taken to hire the person for the job should follow ethical standards.

  • While asking questions during an interview, the person should be judged based on his talent and competency, not on looks and gender.

  • When the job advertisement is posted, make sure to check it twice. There should be no words that must indicate any bias or discrimination. The job ads should be neutral and should not have any preference.


Avoiding adverse impacts is one of the company’s best solutions because it can have fairness in its recruitment processes and work models.

With diversity in the workplace, there will be innovation too. Employees will have better levels of motivation and satisfaction.

With the avoidance of adverse impacts, there will be better awareness and sensitivity in the workplace. The company will enhance its reputation and become a role model for its employees and competitors.

Sometimes, the hiring policies look neutral. But only on in-depth analysis can one figure out the negative impact of the same on a particular class.

The organization should keep its mind open and fix the areas where it can find issues. Hiring and selection processes should be altered to make the work environment healthy and suitable for all the concerned employees.

Similar Posts:

Was this article helpful?

Did you like this article? Why not share it: