The Real Cost of Workplace Sexual Harassment to Organizations

The Real Cost of Workplace Sexual Harassment to Organizations

Headlines about egregious sexual harassment cases do a good job of grabbing our attention.

We read about the lurid details of the complaints and see huge amounts of money being awarded in damages. Then, to make sure that kind of thing never happens at our own workplace, we implement sexual harassment prevention training. We hope that through training and education, everyone will understand what behavior is appropriate and act accordingly.

But focusing on the most extreme examples of workplace behavior misses a larger opportunity.

The sexual harassment cases that make the news are often just the tip of the iceberg when it comes to bad behavior in a workplace. In fact, it generally accounts for just 1-3% of total bad behavior at work — and just a fraction of the cost.

To understand the full cost of sexual harassment to your workplace, you need to take into account its many hidden costs, as well.

The Cost of Damages and Legal Fees

These are the costs most people think of first when they think about the costs of sexual harassment. Judges and juries may award employees back pay, front pay (that’s pay that they have since missed out on since the lawsuit or judgment), and the cost of their attorney’s fees.

On top of those costs, of course, are what tend to be the biggest legal costs — those that come in the form of compensatory and punitive damages. This kind of fee is what makes headlines, with some verdicts awarding in the hundreds of millions of dollars.

Besides running the risk of paying the plaintiff’s legal fees if your organization “loses” the case, you will also have to pay thousands of dollars to your own lawyers. Even if the case is quickly dismissed, legal fees can add up to a significant amount.

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Time and Energy Spent Dealing With Claims

Your employees’ time and mental energy are arguably your organization’s most valuable resource. The cost of their time may not be as simple to calculate as it is with damages or legal fees, but it does add up.

First, there are the expenses for their salary and their benefits, which you can calculate as a loss for each hour they spend on sexual harassment claims. However, there’s also the opportunity cost of their time to consider. For each hour that your staff spends dealing with sexual harassment claims, they could have spent it in other, much more valuable ways — such as proactively saving the organization more money or making advancements that give your organization an edge over competitors.

In the case of HR staff, who are the most likely to get bogged down in dealing with complaints, they could have used that time to get ahead of other potential employee issues before they escalate to become more expensive and damaging.

Again, even the sexual harassment claims that are eventually dismissed cause stress and take time to manage. As we wrote in our full post on the cost of dismissed claims, every charge must be investigated, written up, reviewed, responded to and managed, regardless of whether it is ruled valid or not. And sexual harassment claims can take an emotional toll on everyone involved that can leave them feeling less than energized for their other work — or at least distracted from it.

The Cost of Employee Turnover

It can be difficult to calculate exactly how much money your organization loses each time an employee leaves your organization. However, this SHRM article cites a statistic that each employee departure costs about one-third of that worker’s annual earnings.

That statistic shouldn’t surprise you once you consider all the work it takes to hire a new employee. For each new hire, someone on your team has to write a job description, post it to various job boards, recruit and review candidates, schedule and conduct interviews, and finally train that new employee until they reach peak capacity. There are other indirect costs, too, like loss of institutional knowledge that happens with the abrupt departure of seasoned employees.

Of course, anyone on the receiving end of harassment will probably leave for another job at the earliest opportunity. But it’s not just the harassed who will be more likely to quit in a workplace where sexual harassment thrives. After all, this kind of harassment rarely happens in a complete vacuum.

As we all learned from the stories of the #MeToo movement, there are usually many people at least tangentially aware of the harassing behavior. Some of them may be even enabling the behavior, but many others are just standing by in discomfort, unsure of what action to take.

One report, The Cost of Bad Behavior, Pearson and Porath, 2009, found that an astounding 95% of employees were aware of inappropriate behavior but just ignored it since they didn’t know how to deal with it effectively.

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A workplace culture that tolerates harassment is hardly a selling point for employees. It makes your workplace feel threatening to everyone, even those who haven’t been direct targets yet. Employees working in this kind of environment will be happy to pursue other opportunities that come their way, and your turnover expenses will continue to increase accordingly.

The Cost of Poor Productivity

Here’s something that won’t come as a surprise: People don’t tend to do their best work when they’re being harassed. And long before your HR department catches wind of any harassment allegations, your employees have probably been very stressed and distracted by harassing behavior. This kind of stress and distraction can make it practically impossible to get work done — much less the kind of work that requires creativity and unstructured thoughts.

Most employees don’t want to make waves. They don’t even report bad behavior at work because they understandably fear the repercussions that they can face professionally as a result of speaking up.

For this reason, issues like harassment can fester for months and even years, killing productivity and boosting turnover, before they’re addressed.

According to a report cited in this Entrepreneur article, unhappy workers cost the U.S. between $450 and $550 billion in lost productivity each year.

The Cost of More Bad Behavior

Harassment certainly isn’t the only type of bad behavior that costs an organization. If harassment thrives in your workplace, other less egregious forms of bad behavior probably are too — each of them with their own costs in the form of lost productivity and poor employee retention. These common bad behaviors can include bullying, yelling and explosive behavior, and even general rudeness.

In fact, sexually harassing behavior rarely comes out of nowhere. Perpetrators generally start with bad behavior such as inappropriate jokes and unfair behavior long they eventually escalate to harassment.

For more on these behaviors, check out our post 5 Common Examples of Workplace Incivility.

All of these bad workplace behaviors generally stem from the same issues — an employee’s failure to respectfully listen to one another’s concerns and apologize effectively when they’ve done something hurtful.

That’s why a good employee training program can effectively address sexual harassment issues holistically with these other bad behaviors.

At ELI, we developed the Civil Treatment Workplace initiative, which takes a comprehensive approach to preventing bad workplace behavior.

ELI’s team has years of legal expertise, so the Civil Treatment Workplace program meets all the legal and compliance requirements. More importantly, though, it helps organizations build workplace cultures where civility can thrive for the long-term.

For more information or to request a quote, please contact us.

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