Understanding the Adverse Impact Calculation

Posted on April 19, 2023

The importance of understanding adverse impact lies in its ability to identify shortcomings within the hiring process and promote a more diverse and inclusive workplace— this can lead to increased innovation, creativity and ultimately better business outcomes. If you’re unsure where to start, it might be wise to opt for HR consulting in Orange County, CA.

Here’s what you need to know about adverse impact in the workplace:

What is the Adverse Impact Calculation?

Adverse impact calculation is a statistical method used to determine whether a particular employment practice, such as a selection process or a performance appraisal system, has a disparate impact on a protected group, such as a racial or ethnic minority group.

Adverse impact is considered to exist when a particular employment practice results in a significantly higher rate of rejection or a lower rate of selection for members of a protected group compared to non-protected groups.

How to Determine Adverse Impact

To determine the adverse impact calculation, you would typically use the following steps:

Define the Employment Practice: This involves identifying the specific selection process or employment practice being evaluated for adverse impact.
Identify the Relevant Population: This involves determining the pool of applicants or employees eligible for the employment practice being evaluated.
Calculate the Rate of Selection for Each Group: This involves calculating the selection rate for each protected group, as well as for the non-protected group, by dividing the number of members of each group who are selected by the total number of members in each group.
Compare the Selection Rates: This involves comparing the selection rate for each protected group to the selection rate for the non-protected group. If the selection rate for a protected group is significantly lower than that for a non-protected group, this indicates adverse impact. For top-quality HR consulting in Orange County, CA, contact eqHR Solutions.
Conduct Statistical Tests: Statistical tests, such as the four-fifths rule or the chi-square test, can be used to determine the statistical significance of any differences between the selection rates for the different groups.
Evaluate the Results: The results of the adverse impact calculation should be evaluated to determine if the employment practice has a disparate impact on a protected group. If a disparate impact is found, the employer may need to take steps to remedy the situation, such as revising the selection process or providing additional training to managers involved in the selection process.

It is important to note that individuals with specialized training and experience in statistical analysis and employment law should conduct adverse impact calculations. Employers should consult with HR professionals, attorneys or other experts as necessary to ensure that their adverse impact calculations are conducted properly and in compliance with all applicable laws and regulations.

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