Workplace harassment impact assessment: final stage, October 2021 – part 1 of 2 (overview, costs, benefits, annex)
Updated 21 July 2021
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This publication is available at https://www.gov.uk/government/consultations/consultation-on-sexual-harassment-in-the-workplace/cd2155b7-f095-45b1-9f03-0aec8d6c6873
This impact assessment has 2 sections:
- overview (including costs and benefits of each option), annex 1 (this section)
- evidence base
You can also download a PDF version from the main consultation page.
- RPC Reference No: RPC-GEO-5093(1)
- Lead department or agency: Government Equalities Office (GEO), Cabinet Office
- Other departments or agencies: N/A
- Date: 7/10/2021
- Stage: Final
- Source of intervention: Domestic
- Type of measure: Primary Legislation
- Contact for enquiries: Niamh O’Toole, [email protected]
- Summary: Intervention and Options
- RPC Opinion: Fit for purpose
Overview
Cost of preferred (or more likely) option
(2019 prices, 2020 present value)
| Item | Cost |
|---|---|
| Total Net Present Social Value | -£31.1 million |
| Business Net Present Value | -£44.8 million |
| Net cost to business per year | £4.6 million |
| Business Impact Target Status | 23.2m |
What is the problem under consideration? Why is government action or intervention necessary?
The Equality Act 2010 (‘the Equality Act’) sets out clear protections against harassment in the workplace, making employers legally liable for the harassment of their staff in the workplace, subject to certain conditions. In 2019 GEO consulted on a potential new duty, protections from third party harassment, protections for volunteers and interns, and employment tribunal time limits, to understand the issue, receiving 133 technical responses.
This demonstrated that despite these protections, rates of workplace sexual harassment continue to be unacceptably high, that employers are not taking sufficient steps to protect their staff, and that employees experiencing harassment may face barriers to justice, for example time limits in the tribunal system.
The Government response commits to a number of legislative measures which will provide further protections to staff and motivate employers to take all appropriate action to prevent it.
What policy options have been considered, including any alternatives to regulation?
Option 1 – Do nothing.
Option 2 – New package of legislative measures. This includes: a preventative duty on employers and third party harassment protections. Government also committed to keep extending employment tribunal time limits under review. It also contains the introduction of a statutory code of practice and government guidance. Each of these options is intended to tackle a different part of the problem, they are not alternatives to each other.
Is this measure likely to impact on international trade and investment?
No
Are any of these organisations in scope?
- Micro: Yes
- Small: Yes
- Medium: Yes
- Large: Yes
What is the CO2 equivalent change in greenhouse gas emissions? (Million tonnes CO2 equivalent)
- Traded: N/A
- Non-traded: N/A
Will the policy be reviewed?
It will be reviewed If applicable, set review date: 5 years
I have read the Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options.
Signed by the responsible minister: [Liz Truss]
25 November 2021
Summary: Analysis & Evidence – Policy Option 1
Description
Do nothing – do not respond to the consultation with legislation.
| Price Base Year | PV Base Year | Time Period | Net Benefit (Present Value (PV)) (£m) | Net Benefit (Present Value (PV)) (£m) | Net Benefit (Present Value (PV)) (£m) |
|---|---|---|---|---|---|
| 2019 | 2023 | 10 years | Low: 0 | High: 0 | Best: 0 |
Costs
| COSTS (£m) | Total Transition (Constant Price) | Total Transition (Years) | Average Annual (excl. Transition) (Constant Price) | Total Cost (Present Value) |
|---|---|---|---|---|
| Low | 0 | 0 | 0 | |
| High | 0 | 0 | 0 | |
| Best Estimate | 0 | 0 | 0 |
Description and scale of key monetised costs by ‘main affected groups’
The key monetised annual recurring cost to private businesses is from compensation, settlement and legal costs that result from the number of cases brought to Employment Tribunals. Please note compensation and settlement costs are a transfer to individuals from business.
Other key non-monetised costs by ‘main affected groups’
N/A
Benefits
| BENEFITS (£m) | Total Transition (Constant Price) | Total Transition (Years) | Average Annual (excl. Transition) (Constant Price) | Total Benefit (Present Value) |
|---|---|---|---|---|
| Low | 0 | 0 | 0 | |
| High | 0 | 0 | 0 | |
| Best Estimate | 0 | 0 | 0 |
Description and scale of key monetised benefits by ‘main affected groups’
The key monetised benefit of these measures is the compensation pay-outs to individuals whose claim is successful and settlement pay-outs to individuals whose case is privately settled.
Other key non-monetised benefits by ‘main affected groups’
There are currently protections for individuals against sexual harassment in the workplace but as set out in the ‘problem under consideration’ section there are gaps.
Key assumptions/sensitivities/risks
Discount rate (%): 3.5
Business assessment (Option 1)
| Direct impact on business (Equivalent Annual) £m: | Direct impact on business (Equivalent Annual) £m: | Direct impact on business (Equivalent Annual) £m: | Score for Business Impact Target (qualifying provisions only) £m: |
|---|---|---|---|
| Costs: 0 | Benefits: 0 | Net: 0 | 0 |
Summary: Analysis & Evidence – Policy Option 2
Description
Extend legal protections under the Equality Act. This includes: a preventative duty on employers; third party harassment protections; and looking closely at extending employment tribunal time limits. It also contains the intervention of introducing a code of practice. Each of these options is intended to tackle a different part of the problem, they are not alternatives to each other.
| Price Base Year | PV Base Year | Time Period | Net Benefit (Present Value (PV)) (£m) | Net Benefit (Present Value (PV)) (£m) | Net Benefit (Present Value (PV)) (£m) |
|---|---|---|---|---|---|
| 2019 | 2023 | 10 years | Low: -135.4 | High: -13.8 | Best: -34.4 |
Costs
| COSTS (£m) | Total Transition (Constant Price) | Total Transition (Years) | Average Annual (excl. Transition) (Constant Price) | Total Cost (Present Value) |
|---|---|---|---|---|
| Low | +18.1 | 1 | +0.7 | +24.0 |
| High | +37.4 | 1 | +18.9 | +137.0 |
| Best Estimate | +27.4 | 1 | +2.6 | +49.6 |
Description and scale of key monetised costs by ‘main affected groups’
The key monetised annual recurring cost to private businesses is from the legal costs that result from a possible increase in the number of cases brought to Employment Tribunals as a result of changes to workplace protections.[footnote 1] All businesses are in scope of these regulations, as such we expect businesses to incur costs from familiarisation with legislative changes and updating HR policies.
Other key non-monetised costs by ‘main affected groups’
The GEO are working with MoJ and other departments to assess the overall impact of these changes to the Equality Act on public expenditure, for example estimating costs to HM Courts and Tribunal Service from increased tribunals (following the removal of tribunal fees in 2017). A justice impact test will also be produced after the consultation, before policy implementation, to ensure it is based on the most up to date information.
Benefits
| BENEFITS (£m) | Total Transition (Constant Price) | Total Transition (Years) | Average Annual (excl. Transition) (Constant Price) | Total Benefit (Present Value) |
|---|---|---|---|---|
| Low | 0 | 1 | +0.2 | +1.5 |
| High | 0 | 1 | +1.2 | +10.2 |
| Best Estimate | 0 | 1 | +3.1 | +15.2 |
Description and scale of key monetised benefits by ‘main affected groups’
The key monetised benefit is the compensation pay-outs to individuals whose claim is successful and settlement payouts to individuals whose case is privately settled. This is a transfer from businesses to individuals. It has not been possible to monetise other benefits (such as reducing staff turnover, sickness absences and increased productivity) from the expansion of protections under the Equality Act due to a lack of evidence in this area.
Other key non-monetised benefits by ‘main affected groups’
It is likely this option would produce the most benefits to individuals and society, however it is not possible to monetise these due to a lack of evidence. Non-monetised benefits include employees feeling safer at work, individuals being able to submit a claim within a longer time limit and organisations who are seen to deal strongly with sexual harassment are likely to get a boost to their reputation, which will help to attract, customers, clients and talent.
Key assumptions/sensitivities/risks
Discount rate (%): 3.5
The number of businesses, assumed staff costs and time taken to familiarise with the legislation are key sensitivities covering a sizable proportion of costs associated with these provisions. The estimated number of additional harassment claims brought to tribunals is a key sensitivity in our analysis. It is assumed that all cases brought to tribunal would incur legal costs, regardless of outcome.
Business assessment (Option 2)
| Direct impact on business (Equivalent Annual) £m: | Direct impact on business (Equivalent Annual) £m: | Direct impact on business (Equivalent Annual) £m: | Score for Business Impact Target (qualifying provisions only) £m: |
|---|---|---|---|
| Costs: 5.1 | Benefits: 0 | Net: 5.1 | 23.2 |
Annex 1: Third party harassment sensitivity analysis
The estimated number of individual discrimination cases expected at tribunal per annum is volatile, as shown in the figure below. As a result, it is difficult to robustly estimate the change in the number of cases per annum. But the sensitivity analysis uses the second largest variations to model a realistic variation in case numbers (+26.9% in 2016/17 and -24.1% in 2010/11).
The impact on the number of cases is shown below.
| Total discrimination cases: Percentage of cases | Total discrimination cases: Number of cases | Third party harassment cases: Low | Third party harassment cases: Best (main analysis) | Third party harassment cases: High | |
|---|---|---|---|---|---|
| Percentage of cases | - | - | -24.1% | 0.01% | 26.90% |
| Private sector | 70% | 10,454 | -2519 | 1 | 2812 |
| Public sector | 17% | 2,539 | -612 | 0 | 683 |
| Voluntary sector | 12% | 1,792 | -432 | 0 | 482 |
| Total | 100% | 14,934 | -3599 | 1 | 4017 |
The table below shows the estimated ‘additional’ number of third party harassment cases per annum, by outcome.
| Percentage of cases | Number of cases: Low | Number of cases: Best (main analysis) | Number of cases: High | |
|---|---|---|---|---|
| Successfully defended by an employer | 46% | -1159 | 0 | 1294 |
| Successful at hearing | 3% | -76 | 0 | 84 |
| Privately settled | 30% | -756 | 0 | 844 |
The resulting direct costs to businesses per annum are shown in the table below.
| Costs | Low | Best (main analysis) | High |
|---|---|---|---|
| Defending a case (all private cases) | -£33.1m | £13,800 | £37.0m |
| Defending a case (successful cases) | -£15.3m | £6,333 | £17.0m |
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Note: there are three different elements to the legislative package proposed. The preventative duty to employers and third party harassment protections have limited impact, while the extension to Employment Tribunal Time limits, if introduced, will drive the increase in cases and compensation. ↩