Consequences of sexual harassment and non-compliance to the POSH Act




A research conducted among the working women in India concluded that a woman endured an incident of sexual harassment every 42 minutes. This sums up to 34 incidents in a day and 240 incidents in a week and a surprising 1028 incidents in a month. It is an alarming number to deal with as most of these incidents go unreported. All this demands the need for a legal structure to prevent sexual harassment at the workplace.


The Prevention of Sexual Harassment Act of 2013 came into existence to protect women in their workplace and to provide guidelines for organizations in providing better working conditions for women. The Act lay down specific provisions that the organization needs to comply with. It focuses on preventing workplace sexual harassment and any failure to comply with the law can have adverse consequences for you and the entire organisation.

How does Sexual Harassment Impact the Organisation?


Financial Impact

Sexual harassment claims can probably cost you a lot of money. One of the youngest directors at Infosys, Phaneesh Murthy, was accused of sexual harassment by his executive secretary and was paid $3 million in settlement.


Not only the settlement, but any incident of sexual harassment can also bring a lot of trouble to your company even without any settlement because you will still have to bear the legal costs associated with the case.


Sexual harassment cases have a major impact on the organization and abuse or harassment can adversely impact the company’s stock. The market goes for a spin when the news of the incidence surfaces. Other than this monetary losses are incurred in several other indirect ways. Firstly, employee productivity decreases. Secondly, if customers and clients are aware of sexual harassment in your organisation, they are less likely to return to your product or service. Thirdly, employees who have faced sexual harassment tend to actively discourage customers from buying from your company.


Impact on Goodwill

It takes years to build a brand image, and one single sexual harassment case can jeopardize your company’s reputation. Research shows that a single sexual harassment claim can throw a negative shadow on the company’s gender equality policies. It can impact the company far greater than a financial fraud would. Having a Sexual Harassment policy in place along with a trained Internal Committee to handle the complaints can help in mitigating the effects. Trained employees can handle the situation and the accused can be punished following the company policy without it becoming big news on national or social media.


Impact on Employees

The incidence of sexual harassment makes the office environment hostile to women. An unsuitable environment leads to lower job satisfaction and increased absenteeism. Women who have experienced or are experiencing sexual harassment in the workplace go through debilitating stress reactions, including anxiety and depression. This greatly impacts employee productivity.


A significant number of employees also quit their jobs due to the presence of sexual harassment in the organisation. This also complicates the procedure of hiring new employees as new employees are unwilling to join organizations with a history of sexual harassment.


Non-Compliance of Sexual Harassment Laws

Sexual harassment cases have a major impact on the organization and the director’s reputation. Since the director is the person behind the company, they would typically face the wrath of the community for any incidence of harassment that happened under their watch.


As per Section 4 of the Act, every company with 10 or more employees must constitute an Internal Committee (IC), it is your duty as a director to make sure that your company is in compliance with all the provisions of law that are currently in force in the country. Any non-compliance on your behalf can lead to adverse consequences.


  • Non-compliance to the law can attract a financial penalty of Rs 50,000 which can go up to twenty-five lakhs or imprisonment or both. The term can last for as long as 3 years.
  • Once imprisoned for more than 9 months, a director cannot become a director again for a period of 5 years.


Also, upon the request of the Ministry of Women and Child Development, the Ministry of Corporate Affairs has amended the Companies (Accounts) Rules, 2014, issued under Section-134 of the Companies Act. This means that It is now mandatory to include a statement in the annual Director’s report that the company has complied with provisions relating to the Sexual Harassment of Women at Workplace or not.


Anti-Harassment Policies and Awareness Training


It is required under the PoSH act to conduct awareness programmers at regular intervals for sensitizing the employees about the provision of the law and the employee rights against sexual harassment. One must not forget that it is also essential to conduct training programs on the managerial level and constitute an Internal Committee and train them to prevent sexual harassment at the workplace.


PoSH law lays down several requirements for the employer, that the organisation has to comply with, which includes-


  • Constitution on an Internal Committee- Any organization with more than 10 employees is required to constitute an Internal Committee with an external representative. This committee is responsible for preventing and managing sexual harassment cases within the organization.
  • Drafting policies- Internal Anti-Sexual Harassment policies have to be drafted and shared among all the employees of the organization.
  • Reports- The Internal Committee is responsible for resolving, reporting and maintaining records of sexual harassment complaints received from the employees.
  • Conducting awareness workshops- These workshops are essential for educating the employees and the management about workplace sexual harassment.


Rainmaker has developed dedicated training modules for managers and employees as they are exposed to different situations in the workplace. A trained and sensitized manager can contribute in multiple ways towards a safe working environment.



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