Economic cost of sexual harassment at workplace which employers bear

Sexual harassment is costly to workers and organizations, and more than 75 countries have legislation prohibiting sexual harassment in the workplace. But it remains pervasive and under reported. To date, laws and market incentives have been insufficient to eradicate workplace sexual harassment. Not all nations have legally acknowledged sexual harassment, notably in the Middle East and Japan where there are no laws making it an illegal practice. Information about not only the social, but also the economic, impact of sexual harassment could lead the way for policies to reduce harassment at work.

Lack of research on invisible costs of sexual harassment to employers

The most easily calculated cost for employers, and probably the most asked about cost when it comes to handling sexual harassment claims in the workplace, is the legal bill. In the American context , assuming that the claim is settled out of court, the average harassment claim will typically run an organization anywhere from $75,000–$125,000.If it goes to court, employers are often looking at more like double those numbers, again in legal fees alone.

According to a survey  done in 2016 in United Kingdom‘s Trade Union Congress: Of the 1,533 women surveyed, 52% said they had experienced workplace sexual harassment. Despite half of the female population at workforce  at stake, there is little – up-to-date research into the economic impact of sexual harassment on victims in terms of missed career opportunities and on the companies and organizations that failed to prevent it happening in the first place.

According to World Economic Forum, the most recent data available on this topic anywhere in the world is an US survey done in 1988.  It was answered by personnel and human resources directors and equal-opportunity offices representing 3.3 million employees at 160 corporations and came to the conclusion that a typical Fortune 500 company with 23,750 employees lost $6.7 million a year because of absenteeism, low productivity and staff turnover as a result of sexual harassment as explained below :

Absences

Victims call off work to avoid interacting with the perpetrator before, during, and after a formal complaint is filed. Once the allegations come to light, Hiscox insurance reports an average of 275 days for a harassment claim to be settled (and this is for unsuccessful claims that simply settle). This is for a case in USA, otherwise the number of days a sexual harassment case takes depends on every country‘s dispute- resolution mechanism.   For cases that do see a court room, any and all parties involved (including any witnesses) may absent from work periodically for court proceedings, investigations, depositions, etc. And of course, personal time may also be taken for any number of reasons connected with the emotional or physical damage caused by the alleged harassment.

Turnover

Employee turnover refers to the number or percentage of workers who leave an organization and are replaced by new employees. Employees quit because of various reasons such as a general disbelief of the veracity of the complaint, the way it is handled by the organization and because of the ostracization they have to face by their co – workers after bringing a case of sexual harassment to light. Other co workers do not feel safe because of the way sexual harassment cases are handled and it impacts turnover numbers negatively in the long run. Also, the offender loses his job if the disciplinary standards of the company demand so and it further impacts the employee turnover.

Low Productivity

After a sexual harassment case has been brought out in open, the discussion around it lowers down the overall morale. The co workers feel threatened and unsafe at work. Victims suffer psychological damage that makes it difficult for them to concentrate on the work (especially if the perpetrator is still employed with them), and HR has to spend time conducting internal investigations that could be spent elsewhere if this problem didn’t exist.  Basically, sexual harassment makes it harder for everyone in the company to get their work done and that (not just legal bills) is what will likely cost the employer the most money in the long run.

To understand the magnitude of problem of sexual harassment, researchers face challenges such as obtaining true rates of the problem; dealing with variations in impact; comparing the potential differences in losses among industries; the conflation of broader gender discrimination and sexual harassment; and the problem of parsing cases in which multiple forms of discrimination are at play, such as sexual harassment together with racial discrimination. Nonetheless, it is precisely these more subjective measures that are perhaps the most critical part of the overall calculation when it comes to determining the true costs of sexual harassment in the workplace.

Lack of laws for sexual harassment reduces country’s economic growth

Instances of sexual Harassment to themselves and their colleagues directly affect female workforce’s participation in economy. In unorganized sector, where compliance with sexual harassment laws is difficult due to a lack of organizational structure, the onus falls on the government to ensure that women in unorganized sector work in a safe environment. According to The World Bank, countries whose laws discriminate against women and do not promote gender equality suffer economically. Gender gaps in women’s entrepreneurship and labour force participation account for estimated income losses of 27% in the Middle East and North Africa, 19% in South Asia, 14% in Latin America and the Caribbean and 10% in Europe. These are losses that many countries can’t afford, particularly those facing high levels of poverty

Positive impact of encouraging female participation in workforce can be seen in the case of Bangladesh . It is estimated that if it continues to follow the same policies, the female workforce in Bangladesh will grow from 34 to 82% over the next decade, adding 1.8 percentage points to its GDP. In the 1990s very few countries had laws protecting women from violence; now 127 do partially because the world is more aware of the human and economic cost of mistreating women.

CONCLUSION

Tolerance of Sexual Harassment is a result of institutionalized patriarchy – the system in which men predominantly hold the power and women are largely excluded from it – a system which slows down the economic progress. When there is no protection given to women against sexual harassment, the company is indirectly disregarding her contribution and worth to work. As sexual predatory behaviour goes on and is covered up, some people get to contribute their ideas, while others do not. The system itself is the limiting gateway for our ideas, growth, and prosperity. While researchers attempt to quantify the economic cost to individual women of being harassed, we may never be able to fully quantify the total economic cost to all of us – just as we can’t quantify the total costs to human prosperity of racism or other systemic discrimination.

Author: This post has been submitted by Prerna Seerwani, as part of her assignment with Ungender Insights. Prerna Seerwani is currently a student of NALSAR University of Law, Hyderabad.