What is adverse impact? And why measuring it matters

“5-7 years of experience required” or “Native English speaker preferred.” We’ve all come across job prerequisites like this. At first glance, these qualifications seem perfectly reasonable—after all, shouldn’t employers expect candidates to meet specific criteria?

But phrases like the ones above can actually discriminate against different groups of people, including younger candidates, career switchers, non-native speakers, and ethnic and minority groups. 

While it’s important to specify job requirements, there’s often a bigger issue that looms below the surface—unintentional discrimination. Also known as adverse impact, these hiring practices are not overtly discriminatory in nature, yet they can unintentionally disadvantage certain groups of people.

It’s an easy trap to fall into, which is why employers need to cautiously be aware of policies or practices that may exclude some candidates.

The big question is: How can talent teams identify and address adverse impact when it’s not immediately obvious? In this article, we’ll uncover strategies to help organizations pinpoint places where bias may be hiding so they can reach a wider pool of talent.

Understanding adverse impact in hiring

According to a recent Benevity report, two-thirds of US employees want their employers to commit more time and resources to DEI initiatives.

It’s an ask that employers need to take seriously, especially since it’s easy to fall into practices that appear neutral but unintentionally discriminate against certain groups. 

The hiring process is a window into the employee experience. And if candidates feel discriminated against, it won’t take long for them to jump ship. This is why it’s critical to understand how adverse impact can show up in the hiring process. 

Here are a few places where it can be found:

• Education requirements are necessary for some jobs. However, many roles list education as a requirement when a degree is not necessary. As a result, employers can unintentionally exclude candidates from socioeconomic backgrounds where higher education is not accessible, but they have the skills or experience for the job.
• Years of experience is another job requirement that often deters perfectly qualified candidates from applying simply because they haven’t worked long enough to meet the arbitrary threshold. Many jobs require a number of years when, in reality, candidates with the right skills could be successful with half the number of years required, the right training, or both.
• Physical ability tests are necessary for some jobs, such as lifting heavy equipment. However, many employers list physical ability requirements when they’re not truly relevant to the job. For example, desk jobs will often require a strength test, which can exclude older candidates or those with disabilities.

In each of these cases, the job requirements may not appear discriminatory, but implementing them could lead to unfair outcomes for certain people.

So how can employers uncover unintentional discrimination when it may be hard to spot? Start by measuring the organization’s policies and practices.

How to measure and mitigate adverse impact

In order to analyze the adverse impact of an organization, employers need to first compile a list of hiring policies, procedures, and data. Because adverse impact only indicates potential for discrimination, it requires a much more methodical approach when identifying issues.

Use the 4/5 Rule (or 80% Rule)

One way to measure adverse impact in hiring is to use the 4/5 rule, which comes directly from the EEOC’s Code of Federal Regulations.

This rule evaluates and compares the hiring rates between different groups. If one group is hired at a rate that is less than 80% (or 4/5) of the hiring rate of another group, this triggers a warning that discrimination may be present.

Let’s look at the below scenario as an example:

200 men applied for a job and 100 were hired, resulting in a selection rate of 50%. Meanwhile, 200 women applied, but only 30 were hired, resulting in a selection rate of 15%. This significant difference in hiring rates suggests a potential adverse impact against women.

Group	Candidates	Hires	Selection Rate and Percent Hired
Men	200	100	100/200 or 50%
Women	200	30	30/200 or 15%

Using the 4/5 rule, the 15% hiring rate for female applicants is less than 80% of the 50% rate for male applicants (50% x 80% = 40%).

Thus, further investigation for discrimination is necessary.

Assess job qualifications objectively

Another way to mitigate adverse impact is to carefully review job listings.

Figure out what job requirements are directly related to the duties of the position—and what responsibilities don’t matter. Rigid or inflexible job requirements can easily exclude certain groups.

For example, employers often make the mistake of setting unnecessarily high education levels for a job. Instead, what if the employer was less strict on education and more open to experience or skills training? This would open doors for an entire group of people that wouldn’t otherwise be considered.

It’s also important to watch out for bias in language. For example, phrases like, “looking for a young, energetic team member” could be considered age discrimination. A much better way to say this would be, “looking for an enthusiastic team member.”

Evaluate your hiring assessments

One way to stay clear of adverse impact is to assess for skills and potential—not background.

Skills assessments are tools used in the hiring process to evaluate a candidate's ability to perform specific job tasks based on skill and potential. By focusing on what candidates can do rather than what they have done, these assessments ensure that decisions are formed on objective abilities, not biased opinions.

Why addressing adverse impact matters

Workplace discrimination—whether intentional or unintentional—is strictly regulated by laws worldwide. These laws are in place to protect candidates and employees and ensure they are fairly treated. If adverse impact is found within a company’s practices or policies, it can result in legal consequences and the company will be held accountable for discrimination. Both individuals and regulatory agencies can file complaints and initiate investigations due to biased actions.

For employers, this can be detrimental to their organization, resulting in costly lawsuits and legal penalties.

Moving forward

Addressing adverse impact is so much more than protecting an organization against legal matters. It’s a chance to stand for DEI and to reduce hiring biases—even if they’re not obvious. It shows a commitment to a workforce that fairly deserves the same treatment and respect throughout.

If you’re looking for tools to help mitigate unintentional bias in your hiring process, schedule a demo with one of HireVue’s team members.