Leading companies have found that acknowledging and supporting the gender and sexual diversity of their workforce makes good business sense. Data from the Human Rights Campaign (HRC) Foundation's 2022 Corporate Equality Index (CEI)—which benchmarks participants on their LGBTQ-inclusive benefits, policies and practices—has continually demonstrated that being an LGBTQ-friendly workplace positively impacts a company's recruitment, retention, engagement and revenue.
A growing body of research on LGBTQ+ inclusion in the workplace has found that Fortune 500 companies that welcome sexual and gender diversity among their employees attract strong talent that leads to business success. Studies have found that the presence of LGBTQ-supportive policies is associated with increased productivity, increased profitability and higher firm valuation.
Thus, failing to provide HR support for transgender, nonbinary and LGBTQ+ employees can come with real bottom-line consequences.
However, these employees continue to report serious employment challenges, including discrimination, harassment and a historical lack of internal support. Tackling these issues has become not only a moral obligation, but also a business imperative.
A Persistent Issue
As we celebrate Pride Month and all of the advances transgender, nonbinary and LGBTQ+ people have achieved, it's important to remember that their sexual and gender identities can still complicate their everyday professional lives. According to new SHRM research, 40 percent of LGBTQ+ employees have not disclosed their identity at work, the most common fear being that their coworkers would talk about them behind their back if they did so.
Employees who do share their identity say they must repeatedly come out to their colleagues. Nearly half of the respondents to a 2020 McKinsey & Company survey reported having to come out at work at least once a week, 20 percent said they had to come out multiple times a week and 10 percent said they had to come out daily. The gender and sexual discrimination that leads to this lack of belonging can isolate employees and play out in ways that significantly disrupt workplace continuity.
SHRM's research has found that of the LGBTQ+ employees who have disclosed their identities at work, just 53 percent have done so with their supervisor, and only 34 percent have done so with HR. This can prevent HR from having an accurate knowledge of members of protected classes in their workforce and can hinder them from addressing potentially unfair or inequitable treatment. Without workplace support, transgender, nonbinary and LGBTQ+ employees who encounter discrimination are more likely to leave their jobs, significantly affecting a company's workforce and overall productivity.
By emphasizing their HR support for transgender, nonbinary and LGBTQ+ employees, HR executives can avert the adverse consequences associated with discrimination and bias. Investing in comprehensive HR policies and practices that champion diversity and inclusion can help companies retain long-term, loyal employees who consistently contribute to the bottom line.
The Cost of Discrimination
Neglecting to provide appropriate HR support for transgender, nonbinary and LGBTQ+ employees can lead to serious legal and financial repercussions. Federal, state and local laws—including Title VII of the Civil Rights Act—prohibit discrimination against these employees. Noncompliance with these laws may lead to lawsuits and fines, incurring significant costs and tarnishing a company's reputation. Negative publicity stemming from discrimination or poor support for LGBTQ+ employees can erode customer loyalty and result in reduced revenue.
When employees leave a company due to a perceived lack of support, the financial burden of replacing them can be considerable. Gallup estimates that the cost of replacing an individual employee can range from one-half to two times the person's annual salary.
Employee attrition also carries indirect costs, including diminished productivity, decreased morale and compromised customer satisfaction. This can create a ripple effect across an organization, hampering the performance of other employees, increasing turnover and even jeopardizing customer relationships.
HR executives can address these challenges by supporting policies and procedures that forbid discrimination based on sexual orientation and gender identity, fostering a more supportive work environment. Training managers and employees on these policies can help ensure that everyone appreciates the significance of an inclusive workplace. These measures can help retain top talent and establish a more stable, productive workforce.
8 Steps Toward Inclusivity
Transgender, nonbinary and LGBTQ+ employees in the workplace may also struggle with inadequate health care benefits, hostility toward preferred names and pronouns, uncertain restroom usage policies and confusion over dress codes. HR executives can play a significant role in addressing these challenges by putting into practice specific solutions:
- Implement nondiscrimination policies. These policies should explicitly protect employees based on sexual orientation and gender identity. They should also require that HR directors train employees and managers on these policies to ensure awareness and compliance. Many companies highlight their nondiscrimination policies to distinguish themselves in the marketplace. For example, Starbucks widely advertises the fact it has earned high marks from the HRC Foundation's CEI since 2002, the year that the HRC Foundation first started ranking companies' policies and procedures related to LGBTQ+ employees.
- Provide adequate health care coverage. Offer health care benefits that include coverage for gender-affirming procedures, medications and mental health services. Many large companies—including Amazon, Netflix, Wells Fargo and Salesforce—provide transgender health care benefits, ensuring these employees can access the care they need without financial barriers.
- Respect name and pronoun usage. Providing resources and support for employees seeking to change their names or update their legal documents to reflect their gender identity can make them feel more valued and supported in the workplace. In 2021, Cisco launched its optional Self ID initiative, which enables employees to share key aspects of their identity that include "expanded gender identity, expanded race and ethnicity, sexual orientation, pronouns, and military and/or veteran status." Such data, states Cisco, "allow[s] us to gain deeper insights on topics including fair pay and compensation, benefits, and employee engagement across the talent lifecycle."
- Provide "all gender" restrooms. Some companies, including Pillsbury Winthrop Shaw Pittman, are re-designing bathroom configurations in their new offices to include "all-gender," single-person bathrooms. All-gender restrooms can help ensure all employees feel comfortable and safe when using these facilities, which can help create a more inclusive work environment in which transgender, nonbinary and LGBTQ+ employees feel respected and valued.
- Implement sensitive dress code policies. Make sure any dress codes allow for gender expression, enabling employees to dress according to their gender identity. HRC advises, "If an employer has a dress code, it should modify it to avoid gender stereotypes and enforce it consistently."
- Participate in diversity initiatives. Include gender identity and expression in your organization's diversity and inclusion initiatives. This shows that leadership recognizes and supports transgender, nonbinary and LGBTQ+ employees within the company. Google, for example, is one of many companies that explicitly include gender identity and expression in their diversity and inclusion programs.
- Provide employee resource groups (ERGs). Support the creation of ERGs for LGBTQ+ employees. These groups provide a safe space for employees to connect, share experiences and advocate for LGBTQ+ issues within the company. For example, Johnson & Johnson's Open&OUT ERG represents the interests of a global network of LGBTQ+ employees and their allies.
- Recognize LGBTQ+ families. Employers should treat all LGBTQ+ employees with children equally in the workplace, regardless of how they became parents. Employers can demonstrate support by offering health care benefits to LGBTQ+ employees who have children through surrogacy and by creating an inclusive work environment in which LGBTQ+ parents feel comfortable introducing their families.
The growing prioritization of diversity and inclusion in employment practices is an encouraging trend. Nearly 1,300 companies participated in the HRC Foundation's 2022 CEI, compared to 319 companies when the HRC Foundation launched the CEI in 2002. A record 842 employers achieved a perfect score on the 2022 index, up from 13 two decades ago. A full 91 percent of the Fortune 500—including companies that both do and do not participate in the CEI survey—include gender identity protections in their nondiscrimination policies (up from 3 percent in 2002).
A New, More Diverse Generation
As younger generations continue to enter the workforce, the expectation for companies to prioritize diversity and inclusion will grow. A 2021 Gallup poll found that 20.8 percent of Generation Z and 10.5 percent of Millennials identify as LGBTQ, compared to 4.2 percent of Generation X and 2.6 percent of Baby Boomers.
HR executives who fail to prioritize support for transgender, nonbinary and LGBTQ+ employees may face challenges attracting and retaining top talent from younger generations. If they perceive that a potential employer may not be tolerant of their identities, transgender, nonbinary and LGBTQ+ individuals tend to look elsewhere. Nearly 40 percent of all respondents to the 2020 McKinsey survey said they had rejected a job offer or decided not to pursue a position because they felt that their potential employer was not inclusive.
Newer generations of workers are more actively engaged when they believe their employers foster an inclusive culture. This is crucial, as data from Gallup indicate that companies with an engaged workforce can enjoy 17 percent higher productivity and 21 percent higher profitability.
By prioritizing HR support for an increasingly diverse pool of employees, organizations can attract top talent, boost revenue and foster a workplace culture that not only helps employees feel valued and respected, but also contributes to the overall success of the company.
Kathleen Pearson, SPHR, is the chief human resources officer at Pillsbury Winthrop Shaw Pittman LLP.