Skills-based Jobs: How Top Companies Are Making the Shift in 2025

"Skills-based hiring is the #1 way to recruit, with 81% of companies now using it. While 94% agree that skills-based hiring is more predictive of on-the-job success than resumes." - According to TestGorilla's State of Skills-based Hiring Report 2024.

In this article, we explore skills-based jobs, their advantages, and how you can benefit from this evolving job market.

What we will learn together:

• The job market is shifting towards skills-based hiring, reducing the emphasis on college degrees to address skill shortages and promote diversity. 46% of middle-skill and 31% of high-skill positions transitioned away from demanding a college degree.
• Skills-based jobs allow employers to identify candidates based on relevant competencies, leading to increased job satisfaction and reduced turnover rates. Employers have witnessed a 74% reduction in hiring costs and an 89% increase in retention rates.
• Continuous upskilling and reskilling are vital for both job seekers and organizations to adapt to evolving job requirements and enhance workforce adaptability. Based on an MIT study, a 12-month workforce training program centered on soft skills achieved a 250% ROI within just eight months of completion.

The shift from degrees to skills-based hiring

The job market has seen a major shift from degree-based hiring to a focus on skills and competencies. This change addresses critical skill shortages in a rapidly evolving job market.

Organizations are adopting skills-based hiring practices to prioritize candidates’ abilities over educational qualifications.

A notable change in the hiring landscape is the reduction in college degree requirements.

Many companies have increasingly eliminated the college degree requirement, with a notable shift occurring between 2017 and 2019.

As reported by Harvard Business Review, during this period, 46% of middle-skill and 31% of high-skill positions transitioned away from demanding a college degree.

This trend recognizes that many job seekers have the required skills, regardless of their educational background. Almost half of university graduates end up in jobs that don’t need a degree.

The move towards skills-based hiring signifies a fundamental change in talent acquisition. Focusing on skill competencies allows organizations to access a broader talent pool and identify previously overlooked candidates.

This shift is reshaping the hiring process and creating new opportunities for both job seekers and employers.

Companies like Google, Revolut, and Catalyte have successfully adopted skills-based hiring, leading to improved talent acquisition and retention. They recognize that skills for specific roles often outweigh traditional qualifications. Removing degree requirements attracts a more diverse candidate pool and results in better hiring decisions.

The shift from degree-based to skills-based hiring benefits both job seekers and employers.

Job seekers find more opportunities, and employers enjoy a more diverse and skilled workforce. This change enhances the hiring process and fosters a more inclusive and equitable job market.

Why do skills matter more than ever?

Skills have become increasingly vital in today’s job market.

As technology evolves and industries change rapidly, the skills needed for many jobs are also shifting. According to TestGorilla's State of Skills-bases Hiring Report 2024, 81% of companies have now shifted to skills-based hiring while 94% of them agreed that it is more predictive of on-the-job success than resumes.

The need to address the skills gap is driving the transition to skills-based hiring. Facing critical skill shortages, companies seek skilled workers with the necessary skills and competencies for success.

Focusing on skills enables employers to build stronger talent pipelines and make more informed hiring decisions. Assessing candidates’ relevant skills helps companies identify the best fit for their positions and ensure they have the talent to thrive.

Why you should make the shift: Benefits of skills-based for employers

Skills-based hiring offers a multitude of benefits for employers, including:

1. Identification of Qualified Candidates: By focusing on skills rather than traditional resumes, hiring managers can zero in on the specific skills needed for each role.
2. Expanded Talent Pool: Removing degree prerequisites broadens the talent pool, enhancing diversity and skill availability. This approach attracts a wider range of candidates, including those from underrepresented groups, promoting inclusivity and helping to build a more diverse and dynamic workforce.
3. Cost Savings and Improved Retention: Companies that adopt skills-based hiring report significant cost savings and improved employee retention. Employers have witnessed a 74% reduction in hiring costs and an 89% increase in retention rates. Focusing on relevant skills ensures a better fit for roles, leading to higher job satisfaction and lower turnover rates.
4. Successful Implementation Examples: Companies like Revolut and Catalyte have successfully implemented skills-based hiring, resulting in better talent acquisition and retention.

What are the essential skills in the job market today?

In today's competitive job market, a diverse set of skills is crucial for success.

These skills can be categorized into six main types:

Hard skills (or technical skills)

Hard skills, also known as technical skills, are specific abilities required for certain tasks, often acquired through education and training.

However, their lifespan is shortening due to rapid technological advancements. This change highlights the need for continuous learning and adaptation to stay competitive.

Organizations should focus on upskilling and reskilling to ensure their workforce remains equipped with relevant skills, fostering a culture of lifelong learning to thrive in a dynamic job market.

Soft skills

These interpersonal skills are essential for effective communication and collaboration in the workplace. According to recent reports, 91% of employers have emphasized the growing importance of soft skills over the past five years.

Key soft skills include:

• communication
• creativity
• teamwork
• problem-solving

The rise of team-based environments has led to an increased need for these skills.

Power skills (or influence skills)

Sometimes referred to as leadership or influence skills, power skills are crucial for driving change and innovation within organizations.

They include:

• leadership qualities
• emotional intelligence
• adaptability
• the ability to inspire and motivate others

Power skills are becoming vital as businesses seek leaders who can navigate complex challenges and foster a positive work culture.

Human skills

Human skills have become more vital than ever due to the rise of AI.

These are the abilities that enable individuals to connect and empathize with others, fostering a supportive and inclusive work environment.

Human skills include:

• empathy
• active listening
• cultural awareness

which are increasingly important in diverse and globalized workplaces.

AI skills

On the other hand, AI skills are becoming increasingly important due to the rise of technology.

These skills involve understanding and leveraging AI tools and technologies to enhance productivity and innovation. Proficiency in AI-related areas such as machine learning and data analysis is in high demand.

Durable skills (or transferable skills)

Also known as transferable skills, durable skills are those that remain relevant and valuable across various industries and roles.

They include:

• critical thinking
• adaptability
• creativity

As job requirements evolve, these skills ensure long-term career resilience and success.

To thrive in today's job market, job seekers must develop a balanced mix of these skills. Continuous learning and adaptability are essential as job requirements constantly evolve.

Staying current with industry trends and enhancing these skills can significantly improve career prospects and competitiveness.

How do top companies implement skills-based hiring?

In today's rapidly evolving job market, leading companies are increasingly recognizing the advantages of skills-based hiring and actively taking steps to implement it.

By conducting comprehensive skills self-assessments, organizations can better understand their current workforce capabilities, identify existing skills gaps, and develop targeted training programs to address these deficiencies.

Adopting skills-based hiring works well in the workplace and it enhances agility, empowers employees, and promotes equity.

By focusing on skills as the cornerstone of workforce talent, companies can build more dynamic and resilient organizations that are well-equipped to adapt to the ever-changing job market landscape.

Aside from skill assessments, companies can implement skills-based hiring approach through:

1. Creating skills-focused job postings and job description

Effective job postings focusing on skills attract qualified candidates.

Including specific skills in descriptions targets the right candidates. Emphasizing skills over educational requirements attracts a more diverse and inclusive applicant pool.

Prioritize both technical and soft skills relevant to the position in job postings.

This offers a comprehensive view of candidate expectations and helps job seekers understand role requirements. Focusing on skills ensures attracting candidates with the needed competencies.

2. Screening and interviewing candidates based on skills

Skill assessment tools evaluate both hard and soft skills, streamlining screening by filtering candidates based on proficiency. This enhances the candidate experience by reducing application time.

Skills assessment tests help employers identify candidates with the practical competencies needed for specific roles. These assessments can significantly reduce hiring time and costs.

AI can reduce bias in candidate screening by using algorithms that focus solely on skills and qualifications. AI-driven skill assessments standardize candidate evaluations, minimizing biases present in traditional evaluations.

Standardized hiring practices facilitated by AI ensure all candidates are evaluated using the same criteria, reducing bias in the selection process.

3. Upskilling and reskilling: preparing for the future

Investing in upskilling offers remarkable returns. According to a study by the MIT Sloan School of Management, a 12-month workforce training program centered on soft skills achieved a 250% return on investment (ROI) within just eight months of completion.

By investing in upskilling programs, companies can enhance employee retention and save on operational costs through comprehensive Learning and Development (L&D) training programs. Upskilling ensures that employees stay current with the latest industry trends and technologies, thereby increasing their productivity and efficiency.

For employees, upskilling provides opportunities for career advancement and personal growth, enabling them to acquire new competencies and remain competitive in the job market.

It also boosts job satisfaction and morale, as employees feel more valued and engaged in their roles.

For organizations, upskilling helps bridge skills gaps, ensuring that the workforce possesses the necessary skills to meet evolving business demands.

This leads to improved performance, innovation, and a stronger talent pool. Additionally, by fostering a culture of continuous learning where many employers can attract and retain top talent, ultimately driving long-term success and sustainability.

How to overcome challenges in a skills-based approach?

While skills-based hiring offers numerous benefits, it also presents challenges, including:

• Identifying Specific Skills: Determining the precise skills needed for each job role can be difficult.
• Bias Elimination: Pre-employment assessments help eliminate biases by focusing on candidates’ skills rather than backgrounds. Standardized assessment tests ensure all candidates are evaluated against the same criteria, leading to fairer hiring decisions.
• Addressing Bias in Hiring: Both conscious and unconscious biases can undermine diversity, making it essential to address these biases during recruitment.
• AI Bias: AI systems can unintentionally perpetuate biases from their training data, necessitating regular audits to mitigate this risk.
• Rigorous Assessments: Implementing rigorous assessments and clearly defined criteria is crucial for overcoming challenges in skills-based hiring.

Real-world examples of skills-based hiring success

Skills-first hiring model emphasizes candidates' competencies over traditional credentials like degrees. Several organizations have successfully implemented this approach:

Cisco Systems

Cisco adopted a skills-first hiring model to diversify its talent pool and address skill shortages. This strategy led to increased hiring of individuals without four-year degrees, enhancing workforce diversity and retention rates.

IBM

According to Harvard Business School, IBM's "New Collar" initiative focuses on hiring based on skills rather than degrees, particularly for roles in technology and AI. This approach has expanded job opportunities and facilitated career advancement for non-traditional candidates.

Johnson & Johnson

Johnson & Johnson implemented a skills-based talent strategy to bridge skill gaps and promote internal mobility. By assessing employees' competencies, the company effectively aligned talent with business needs, enhancing employee engagement and retention.

Implement skills-based jobs. Upskill to prepare for the future! 🪩

As the job market continues to evolve, implementing skills-based jobs has become essential for both employers and job seekers.

By focusing on a candidate's skills and competencies, organizations can better match talent to roles, ensuring a more effective and dynamic workforce.

Embracing skills-based hiring practices not only enhances talent acquisition but also fosters a culture of continuous learning and development, preparing both employees and companies for future challenges.

If you're a hiring manager, consider enhancing your workforce's skills by focusing on upskilling alongside skills-based hiring. Try Disco for a 14-day free trial and book a demo to experience the platform in action.

FAQs on skills-based jobs and hiring

What is skills-based hiring?

Skills-based hiring prioritizes a candidate's specific skills and competencies over traditional qualifications like degrees, allowing for a more relevant assessment of their capabilities for the role. This approach ensures that the best candidates are selected based on their actual abilities.

Why are companies shifting from degree-based hiring to skills-based hiring?

Companies are increasingly favoring skills-based hiring to effectively address skill shortages and enhance diversity, while also reducing costs and ensuring candidates are accurately matched to job roles based on their abilities. This shift not only streamlines the hiring process but also promotes a more inclusive workforce.

How can job seekers benefit from skills-based hiring?

Job seekers can greatly benefit from skills-based hiring as it opens doors to more job opportunities for those with relevant skills, regardless of formal educational background. This approach allows individuals to showcase their abilities and increase their chances of employment.

How can employers create effective job postings focused on skills?

Employers should prioritize specific technical and soft skills in job postings, focusing on actionable competencies rather than solely educational qualifications. This approach ensures candidates clearly understand the expectations and requirements for the role.