Skills-based hiring, a strategy that evaluates candidates based on practical abilities and competencies rather than solely on traditional markers such as academic qualifications, has become a key solution for addressing workforce challenges in a tight labour market. This approach broadens the talent pool by incorporating self-taught individuals, job transitioners, and candidates with varied backgrounds, improving efficiency and diversity within the recruitment process. Career paths are no longer linear, and hiring practices should be flexible to ensure a strong talent pipeline. Limiting tasks to specific job functions and basing candidates solely on the career ladder can hinder businesses from reaching their project goals.
Given the volatility of the global talent market, combined with technological advancements, climate change goals, and demographic shifts, skills-first recruitment is becoming an essential strategy for businesses worldwide.
Why adopt a skills-based approach?
Adopting a skills-first approach offers measurable benefits across the recruitment spectrum, and there are numbers to back it up. According to the ‘The State of Skills-Based Hiring 2024’ by Test Gorilla, 81% of companies now use skills-based hiring, up from 73% in 2023 and 56% in 2022. They also found:
- 90% of companies report improved diversity after adopting skills-based hiring,
- 91% have seen improved employee retention,
- 90% of businesses have reduced mis-hires,
- 78% have reduced cost-to-hire,
- And 81% have decreased time-to-hire
By removing credential requirements and assessing candidates based on their skills, businesses can expand their talent pool, improve hiring efficiency, and secure professionals who can perform effectively from day one.
In addition, the global workforce is positioned for dramatic shifts. With technology and economic changes forecasted to create 170 million new jobs this decade, employers must adapt quickly to meet pressing demands. In a recent World Economic Forum report, employers predict that 39% of key job skills will change by 2030, underscoring the growing importance of upskilling, reskilling, and implementing a skills-based hiring model. This forward-thinking strategy is especially relevant in sectors such as oil & gas, chemicals, and advanced materials, where specialised technical and environmental stewardship skills are increasingly critical. Over the years, these industries have received growing federal funding and investments to adopt clean energy solutions, leading to a high demand for skilled engineers and technical professionals to meet energy targets. In 2022, hiring for positions such as robotics engineers, energy engineers, and manufacturing roles was 24% higher than in 2021, and this trend is expected to continue across all verticals, with renewables necessitating engineers specialising in wind energy and solar.
The introduction of new climate policies and the adoption of advanced technologies have significantly changed what employers seek in the workforce. As the world experiences tight labour conditions, businesses are increasingly adopting a skills-based approach to expand their talent pool and fill niche roles. In an episode of the McKinsey Talks Talent podcast, McKinsey partner Bryan Hancock states:
‘We’re also seeing skills-based hiring come to the fore because organisations in many technical roles are having trouble finding the people that they need. If they can eliminate formal job requirements, they can peel that back and say, “What we need are these underlying skills”.’
Requiring specific degrees and lengthy tenures at previous companies can create barriers and deter businesses from finding exceptional candidates who can do the work. Furthermore, a skills-first model can benefit workers by facilitating a smoother transition between roles, industries, and regions. It encourages them to pursue new opportunities they might’ve previously avoided due to insufficient qualifications.
Global Progression
Around the world, skills-based hiring is gaining traction for different reasons:
- United States & Europe: Companies are leveraging this approach for inclusive talent sourcing to promote diversity and inclusivity, particularly in industries where degree requirements have historically been barriers to entry. In the US, nearly two-thirds of adults lack a university education, with fewer Black and Hispanic individuals holding degrees compared to white and Asian peers. Adopting skills-based hiring can create opportunities for those facing employment limitations, creating an ethnically diverse team that is 35% more likely to outperform financially.
- Latin America & Australia: These regions have some of the highest adoption rates of skills-based hiring, with over 80% of employees preferring it over traditional methods.
- UK: In the UK, 80% of employers say that graduates lack skills needed for the workplace, prompting businesses to focus more on skills than on degrees.
APAC: A leader in skills-based, volume-hiring
The Asia-Pacific region is at the forefront of skills-based hiring, particularly in high-growth industries like engineering, manufacturing, technology, and energy. LinkedIn’s Future of Talent Report states that 79% of APAC companies prioritise skills over experience and education. Many are also open to hiring talent from different industries if they have transferable skills.
- India & China: With their large talent pools, skills-based hiring helps streamline high-volume recruitment and optimise talent acquisition efficiency.
- Singapore & Malaysia: Governments are supporting skills-based hiring through initiatives like the Skills for Prosperity Programme, which enhances workforce employability.
- Japan & Australia: These regions are integrating data-driven hiring technologies, which enable employers to identify and evaluate candidates based on their competencies.
Companies embracing skills-based recruitment strategies are gaining a competitive advantage in securing specialised talent in industries facing acute skills shortages, such as engineering, oil & gas, cybersecurity, AI, and tech.
How to Implement Skills-Based Hiring Through Project RPO
Transitioning to skills-based hiring requires a strategic and structured approach. Project RPO (Recruitment Process Outsourcing) provides a tailored solution to help businesses integrate a skills-first recruitment model, particularly for scalable project hiring needs. Here’s how:
1. Define Role-Specific Skills & Competencies
To attract the right talent, avoid using outdated job descriptions. Start by identifying the essential skills needed for each role and consider removing barriers related to degrees and prior experience. Project RPO providers assist companies with talent mapping, helping to identify and match candidates with the necessary technical, digital, and soft skills for specific job functions. This approach leads to skills-first job descriptions that appeal to the right candidates. Instead of screening applicants solely based on their resumes, implement skills assessments, simulations, and competency-based interviews to evaluate their abilities accurately. Adopting this process can reduce the risk of mis-hires and ensure a more comprehensive evaluation of candidates right from the start.
2. Use AI and Data Analytics
AI-driven recruitment tools can match candidates based on skills instead of job titles. By using AI to identify key skills linked to success, businesses can implement filters that prioritise capabilities, allowing them to consider applicants without similar job experience. This approach opens up opportunities for millions who may have been excluded from the job market (Deloitte). A project RPO provider will help to ensure your business implements the best tools that use predictive analytics to assess skill proficiency, cultural fit, and long-term success potential.
3. Scale Workforce Planning with Project RPO
Project RPO is a strategic solution for high-volume hiring in regions like APAC, where many positions must be filled quickly on a project basis. It enables businesses to quickly deploy recruitment resources to source and assess talent at scale, optimise hiring costs, and reduce time-to-hire while maintaining high-quality candidate selection. Through project RPO, companies can integrate skills-based hiring into their global workforce strategy, ensuring they secure the best talent – not just the best resumes.
Take the Next Step with NES Advantage
With skills shortages increasing across industries, adopting a skills-based hiring approach is essential. Businesses that prioritise skills over credentials can expand their talent pool, improve workforce diversity, and secure competent employees. 85% of HR executives plan to redesign their talent strategy to prioritise skills, so why don’t you?
NES Advantage specialises in project RPO solutions tailored to engineering and technical industries. Whether you’re operating in an established or emerging market or want to outsource part or all of your direct hiring function for a new project, we can help your business efficiently hire the right talent at scale.
Contact us today to explore how we can transform your recruitment strategy and position your company as an industry leader through skills-based hiring.
