A large mining firm in Australia is in hot water after a government-sanctioned inquiry found a deep-seated culture of workplace sexual harassment. In the US, a former manager for a professional football team broke her silence with claims of sexual harassment by the team owner. Meanwhile, a former bank employee in Germany prepares to appeal the motion of throwing out her claim of sexual harassment (which was because of a technicality).
These blurbs are just a few of the countless issues of workplace sexual harassment all over the globe. In an age where the call for gender equality is more vocal than ever, tolerating—if not promoting—such a culture is a good way for a business’ reputation to suffer. More importantly, it puts a company in dire financial straits. One study in 2018 estimates the total cost is around USD$3.5 billion, primarily due to lost productivity.
It’s not that difficult to see why sexual harassment in the workplace would cost businesses so much. This article will delve deep into the topic and its financial impact on businesses.
According to the Civil Rights Act of 1964, sexual harassment is a type of sex discrimination that’s illegal. The Equal Employment Opportunity Commission (EEOC) provides more specific criteria that define sexual harassment, of which there are three:
- Undesirable sexual advances
- Unwanted, sexual demands
- Verbal or physical sexual harassment
While most incidents involve women (81% vs. 43% of men, as per the National Sexual Violence Resource Center), the EEOC stresses that sexual harassment can happen to both sexes. Both the victim and perpetrator can even be of a similar sex. It can also occur between the employee and customer or between co-workers.
Furthermore, the Commission points out that offhand comments and friendly teasing aren’t illegal under federal law. However, if these activities create a toxic work environment or, worse, result in the employee’s unjust demotion or dismissal, they can constitute workplace sexual harassment.
Consequences To Companies
As mentioned in the beginning, sexual harassment in the workplace jeopardizes a business’ finances as much as its reputation, if not more. The Institute for Women’s Policy Research cites four areas where sexual harassment incidents can leave a significant dent in a company’s coffers.
Productivity takes the worst brunt of the economic effects of sexual harassment in the workplace. Of the USD$3.5 billion estimate mentioned earlier, reduced productivity accounts for three-quarters of that.
In a study of 262 women who sought professional help as a result of such incidents, many said sexual harassment impaired their work performance. Aside from that, they suffered from various physical and mental health conditions, further affecting their work. An older study of food service workers discovered that disparaging, sexual-related remarks had damaged their workflow.
Experts estimate that lost productivity caused by sexual harassment averages at USD$28,862 per employee (based on a 2005 study that valued it at USD$22,500). The figure excludes the other aspects on the list.
The 2010 National Health Interview Survey reported that workers at the receiving end of constant sexual harassment were almost twice as likely to take two weeks off work. In a later survey, one in six respondents said they took sick or annual leave after an incident.
Even if paid leaves are within an employee’s rights, losing valuable hands at work can grow too costly over time. Statistics estimate that unplanned absences can cost a business USD$3,600 a year per hourly-paid employee or USD$2,660 a year per salaried worker.
It’s not surprising that sexually harassed employees tend to file their resignation letters after some time, if not immediately. A study in 2017 found that victims of sexual harassment were more than six times likely to seek a new job.
Businesses are well-aware of the cost of employee turnovers. A Gallup study in 2019 reported that an employer could spend up to twice as much as the resigned employee’s salary just finding a replacement. Take note that the reason for leaving doesn’t matter; whether due to sexual harassment, turnovers are turnovers.
Employers can be held legally responsible for letting sexual harassment in the workplace go unabated. While the judiciary usually keeps settlement amounts for sexual harassment cases confidential, the EEOC reported that they secured over USD$46 million in benefits for victims for the 2017 fiscal year.
Another study estimated the cost for settling sexual harassment claims for the plaintiff at nearly AUD$60,000 (USD$42,430)—and that’s considering they’re settled before a civil court. Criminal cases naturally command higher costs.
Sexual harassment carries a costly toll on businesses, no matter the size or industry. Adding all the above-mentioned figures, it’s not unusual if these kinds of incidents can cripple a company to the point of shutting down. Employers should nip undesirable conditions in the bud to avoid trouble.