How to Calculate Impact Ratio

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Impact ratio is the selection rate for a group belonging to a protected category divided by the selection rate of the most selected group. Adverse impact occurs when identical selection procedures are used for all groups, but systematically negatively affect a particular group. Adverse impact is determined using the four-fifths rule as defined in the Uniform Guidelines for Employee Selection Procedures. The four-fifths rule states “a selection rate for any race, sex, or ethnic group which is less than four-fifths (or 80 percent) of the rate for the group with the highest rate will generally be regarded by the Federal enforcement agencies as evidence of adverse impact, while a greater than four-fifths rate will generally not be regarded by Federal enforcement agencies as evidence of adverse impact.”

Calculate Impact Ratio

Determine the selection rate for protected groups comprising more than 2 percent of the entire applicant group by dividing the number of applicants hired within a group by the total number of applicants in the group.

Designate a majority group by observing which group has the greatest selection rate.

Divide the selection rate for each group by the selection rate of the majority group to calculate the impact ratio. Remember, majority is defined as the group with the highest selection rate.

Analyze the selection rates for variance. If the impact ratio is less than 80 percent, there is a violation of the four-fifths rule.

Warnings

  • This ratio is vulnerable to error, especially if the sampling group is small.