The rise of skills-based hiring and how this will impact your HR.

As businesses adapt to an evolving workforce, one thing is clear: traditional hiring models are no longer enough. Talent shortages are driving the adoption of new hiring practices. Skills shortages present an ongoing challenge for organisations seeking qualified candidates. Job titles and degrees don’t always reflect someone’s ability to do the work. Modern hiring practices, such as skills-based hiring, differ from traditional methods by focusing on what candidates can do rather than what’s on their CV. That’s why skills-based hiring is gaining momentum, an approach that focuses on the actual competencies a candidate has and not just what is on their CV. Skills-based recruiting is emerging as a modern approach to talent acquisition. The World Economic Forum predicts future skills needs and workforce trends, highlighting the importance of adapting hiring strategies. A skills based approach is a modern recruitment strategy that emphasises evaluating candidates based on their actual skills.

Skills-based hiring is transforming the way companies approach talent acquisition. Rather than relying solely on traditional markers like degrees or years of experience, this recruitment strategy puts the spotlight on what candidates can actually do. By focusing on demonstrated skills—both soft skills such as adaptability, communication, and problem solving, and hard skills specific to the job, employers can tap into a much more diverse talent pool.

This skills-based hiring approach allows businesses to identify talent that might otherwise be overlooked, including those who have gained their expertise through non-traditional paths or on-the-job learning. As the business landscape evolves at a rapid pace, companies are realising that having employees with the necessary skills is crucial for staying competitive. By prioritising skills over formal education, employers can ensure they are hiring people who are ready to contribute from day one, leading to better job performance and a stronger, more adaptable workforce.

Ultimately, skills-based hiring is about finding the right fit for the job by focusing on the skills needed for success. This approach not only benefits employers by improving the quality of their hires, but also opens doors for candidates from all backgrounds, making the hiring process more inclusive and future-ready.

Why Is Skills-Based Hiring Gaining Traction?

By removing rigid requirements like specific degrees or years of experience, organisations can consider talented candidates from non-traditional backgrounds, including career changers, self-taught professionals, and those returning to work after a break. Transferable skills are especially valuable in fast-evolving industries where adaptability is key. This approach helps attract top talent from diverse backgrounds. Organisations can hire people based on their abilities rather than credentials.

Improved Job Performance

When people are hired for their actual skills rather than their qualifications alone, performance often improves. The benefits of skills based hiring include better prediction of employee performance. They’re equipped to hit the ground running and they’re more likely to feel confident and capable. Hiring based on skills, rather than experience alone, ensures a stronger fit for the role. Experience based hiring has limitations, as it may overlook candidates with the right skills but non-traditional backgrounds. Organisations should actively hire individuals based on skills and potential.

Higher Retention Rates

People hired for their skills tend to be more engaged, because they’re using their strengths daily. This leads to greater job satisfaction and lower turnover rates. Hiring based on potential can boost employee satisfaction. Focusing on potential and soft skills can improve the quality of new hires.

1. Re-evaluate Job Descriptions

Most job ads still default to phrases like “must have 3+ years of experience” or “degree required.” These requirements can eliminate great candidates before they even apply. There is a shift from listing job requirements to focusing on the skills and responsibilities needed for the role.

How to improve it:

  • Focus on the outcomes of the role: What will this person need to achieve?
  • Identify essential skills, both technical and soft, and distinguish them from “nice to have” qualifications.
  • Use inclusive language that welcomes diverse backgrounds.

Example:

Instead of “Bachelor’s degree in HR and 5 years of experience,” try: “Experience managing employee lifecycle and performance reviews, with strong communication and organisational skills.”

2. Adopt Competency-Based Assessments

A CV only tells part of the story. Candidates may have impressive experience but still lack the key skills for your role. Competency-based assessments let you see those skills in action. The interview process is a critical stage for evaluating skills, involving structured questioning, skills assessments, and interviewer training.

How to implement:

  • Use practical tasks during interviews (e.g., roleplays, problem-solving exercises, written tasks). Assessment of emotional intelligence can be included as part of the evaluation process.
  • Introduce structured interview questions that assess behaviour and situational judgment (“Tell me about a time when…”). Structured interview questions can help identify high performers.
  • Use pre-employment testing tools to assess specific skills, for example, numerical reasoning, software proficiency, or customer service scenarios.

A focus on candidate experience can be improved through skills-based hiring, streamlining the process and providing clear feedback. You therefore, get a clearer picture of how a candidate will actually perform in your workplace.

3. Create Inclusive Talent Pipelines

Skills-based hiring naturally leads to more diverse, inclusive workplaces. By removing rigid credentials, you open opportunities for:

  • Candidates from underrepresented groups
  • Career changers
  • Those without formal education but with practical experience
  • Returners from career breaks (e.g. maternity leave, long-term illness)

Skills-based hiring expands and diversifies talent pools.

How to do it:

  • Partner with bootcamps, adult learning centres, and community training schemes.
  • Offer apprenticeships and structured entry-level roles with on-the-job learning.
  • Build structured return-to-work programmes and mentorship opportunities.

A skills-based approach enables organisations to consider a wider range of potential applicants.

This not only widens your hiring pool, but strengthens your company’s commitment to equity and inclusion. A company can use skills-based hiring to address talent shortages and optimise recruitment processes.

4. Invest in Upskilling and Internal Mobility

Skills-based hiring doesn’t stop at recruitment. The same mindset should be applied internally to develop your existing workforce. Understanding the current workforce’s skills and capabilities is essential for effective workforce planning.

The Hiring Process

Implementing a skills-based hiring process starts with a clear understanding of the specific skills required for each role. Hiring managers work closely with team leaders to identify both the technical and soft skills that are essential for success in the position. Once these skills are defined, job descriptions are crafted to highlight the skills required, rather than defaulting to generic requirements like years of experience or educational attainment.

During the recruitment process, employers use a range of tools to assess candidates’ abilities. Skills tests, practical exercises, and structured interviews are designed to evaluate how well candidates can apply their skills to real-world scenarios. This approach helps hiring managers focus on the actual competencies needed for the job, ensuring that only the most qualified candidates move forward.

By centering the hiring process around skills, companies can reduce unconscious bias and open up opportunities to a wider range of applicants. This not only helps to fill hard-to-fill roles but also ensures that the recruitment process is aligned with the business’s current and future needs. Ultimately, a skills-based hiring approach leads to better hiring decisions, a more effective workforce, and a recruitment process that is both fair and efficient.

Hard Skills and the Application Process

In a skills-based hiring approach, hard skills take center stage during the application process. These are the specific, measurable abilities, like coding, data analysis, or technical writing, that are essential for performing the tasks required in a given job. Employers use targeted skills assessments, practical tests, and other evaluation tools to ensure that candidates possess the necessary skills to succeed.

By focusing on hard skills, the application process becomes more objective and efficient. Candidates are evaluated on their ability to perform the tasks that matter most, rather than on their educational background or previous job titles. This not only helps employers find candidates who are truly qualified, but also streamlines the hiring process by quickly identifying those with the right skill set.

Prioritising hard skills in the application process reduces the risk of hiring someone who may not be able to meet the demands of the role. It also saves time and resources by ensuring that only candidates with the required skills move forward. For businesses, this means building teams that are better equipped to meet current and future challenges, while providing candidates with a fairer, more transparent path to employment.

What HR can do:

  • Offer personalised development plans tied to employee strengths and career goals.
  • Encourage lateral movement across departments so employees build new skills.
  • Use performance reviews to identify hidden talent and training needs.

With Activ People HR, for example, you can:

  • Set and track learning goals
  • Monitor performance improvements over time
  • Provide structure for growth conversations between managers and team members

Upskilling improves morale, drives retention, and fills skill gaps, all while saving time and money on external recruitment. Skills-based hiring helps address skills gaps efficiently.

Data and Automation Make It Possible

To implement a skills-first approach, HR needs the right tools:

  • Track competencies: Use software that lets you document, update, and search for skills across the business.
  • Generate reports: Spot skill gaps, assess internal mobility potential, and plan for succession. Skills first hiring prioritises skills over traditional credentials, improving job performance and diversity.
  • Automate admin: Free up time spent on repetitive tasks so you can focus on strategy.

The final stage of the hiring process involves evaluating and refining selection methods for continuous improvement. Skills-based hiring helps future proof the workforce by ensuring adaptability to changing needs.

Retention Starts with Recognition

When employees feel their skills are seen and valued, and that there’s a path to grow, they’re more likely to stay.

Younger generations especially prioritise:

  • Ongoing development
  • Regular feedback
  • Purpose-driven work
  • Flexibility and wellbeing

HR software like Activ People HR helps make this possible by giving you the data and tools to:

  • Run consistent performance reviews
  • Identify high-potential employees early
  • Automate low-value admin so HR teams can focus on people-first strategy

Skills-based hiring is a strategic approach to building resilient, high-performing teams. By focusing on skills instead of outdated qualifications or rigid job histories, you unlock access to a broader range of talent, make smarter hiring decisions, and create a more inclusive workplace culture.

Ready to lead the change in your organisation? Activ People HR helps you track performance, manage skills development, and automate admin, so you can build the workforce of the future.