Global business is more reliant on technology than ever before. As companies increasingly go online for essential tasks like sales, customer support, and communication, HR teams look for employees with the skills to thrive in a digital world. When companies have trouble finding the right talent for their needs, they focus on upskilling, or retraining, their workforce.
Read on to learn more about the global skills shortage, how upskilling helps organizations fill key roles, and one alternative hiring method companies use to quickly secure top talent.
Is There Really a Shortage of Skilled Workers?
While digital transformation accentuates the skills gap, companies have faced worker scarcity for decades. In 1997, Steve Hankin of McKinsey & Company introduced the term “war for talent” to describe the hyper-competitive hiring landscape.
Manpower Group’s most recent Closing the Skills Gap: What Workers Want survey polled company executives in 44 countries. In 36 of those markets, respondents said it was more difficult to find top talent in 2019 than in 2018. At the same time, 54% of companies reported experiencing an overall skills shortage, with the United States (69%), Mexico (52%), and Italy (47%) leading the way.
The COVID-19 pandemic led to mass job losses worldwide, but it also made the labor shortage more acute. To compete in an increasingly virtual business world, companies need employees with skills in fields like artificial intelligence (AI), cybersecurity, and information technology (IT). The increased demand for these workers made the talent gap more pronounced than ever: more than six out of 10 HR executives responding to an October 2020 IBM survey reported that their employees lacked the skills necessary to fulfill their organizational goals.
Experts expect the skills gap to widen even as the world emerges from the pandemic. A new study by global consulting firm Korn Ferry estimates that 85 million positions will remain unfilled by 2030 simply because the workforce lacks the right skills to fill them. The labor shortage will cost companies about $8.5 trillion in revenue.
What Is Upskilling and Reskilling?
With the competition for top talent more intense than ever, companies fill positions from within by upskilling or reskilling current workers.
While the terms upskilling and reskilling are similar, they are not interchangeable:
- Upskilling refers to a worker learning additional skills needed to advance in his or her current field.
- Reskilling describes a worker learning the skills necessary to take on an entirely different job.
For example, a software developer learning a new programming language is considered upskilling. On the other hand, reskilling consists of a sales professional learning how to become a software developer.
The Pros and Cons of Upskilling
Researchers at the World Economic Forum say that at least 54% of all professionals will need upskilling or reskilling by 2022—and companies are taking action. Carrie Duarte, Organization and Workforce Transformation Partner at PwC, predicts the majority of Fortune 500 companies will create employee upskilling programs by the end of the year. PwC is currently upskilling its entire U.S. workforce, which consists of approximately 50,000 employees.
There are good reasons companies like PwC invest in upskilling. By providing internal training programs for their employees, companies:
- Ensure employees have in-demand skills: No one understands a company’s needs better than its own teams. When employers upskill their employees, they give them the exact skills required to drive future organizational success.
- Promote operational continuity: Forward-thinking HR teams anticipate how their workforce composition will change over time. By upskilling their teams before changes occur, companies ensure there is no skills gap when employees retire, move to new internal positions, or take other jobs.
- Optimize the talent acquisition process: In today’s fiercely competitive hiring landscape, HR teams spend months sourcing, screening, and onboarding the right talent for their needs. This lengthy process drives up acquisition costs and increases the workload for HR teams that already have their hands full overseeing employees. Upskilling employees allows companies to promote from within so they can bypass the lengthy and costly talent acquisition process.
- Increase employee attraction and retention: Job seekers increasingly value companies that provide them with room to grow. A recent Gallup survey found that 87% of millennials prioritize “professional or career growth and development opportunities.” As a result, companies that offer upskilling programs make themselves more appealing to top talent. At the same time, they increase retention by allowing current employees to advance their careers within the organization.
Despite its numerous benefits, upskilling is not a cure-all solution for companies fighting the skills shortage. Teaching workers new skills is a time-consuming process. According to research by upskilling provider Learn In, employees looking to thrive in an increasingly automated workplace must devote 480 hours per year to skills development. That’s an average of nearly 10 hours per week, or about 25% of the typical employee’s workload.
Upskilling programs also require a substantial initial investment. For example, Amazon recently pledged $700 million to an employee upskilling initiative for its workers. While Amazon expects to see a strong return on its investment, not every company is financially able to take on the substantial up-front investment required of upskilling.
How to Handle a Labor Shortage Without Upskilling Employees
Companies without the time or financial resources to devote to upskilling programs need a faster and less costly solution. These companies broaden their talent pools by hiring in foreign markets.
While the pandemic has tightened the global labor market, it has also ushered in a new era of remote work—and changed the international hiring landscape. HR teams worldwide are now adept at managing employees virtually, meaning companies no longer need teams to work from one centralized location. These companies source top talent from across the world rather than being restricted only to their home market.
Companies that hire globally increase their ability to find workers that meet their specific budget and needs. For example, a fintech company looking for an alternative to London’s highly competitive hiring landscape can turn to an emerging market like Lithuania. Meanwhile, companies seeking web developers look beyond saturated markets like Silicon Valley and focus on up-and-coming markets like Ukraine.
Not every global hiring method offers time and costs savings compared to upskilling programs. Companies that use entity establishment to legally hire foreign workers face a months-long setup process that can cost up to $20,000 in initial investment and require $200,000 in annual maintenance. HR teams seeking a faster, more cost-effective upskilling alternative turn to an Employer of Record solution.
An Employer of Record enables companies to hire in new markets quickly and compliantly, saving them time and money when bringing in professionals with hard-to-find skills. An Employer of Record is 60% more cost-effective than entity establishment, giving HR teams the ability to hire in a foreign market in as little as 48 hours. When companies choose an Employer of Record provider, that partner ensures foreign compliance while handling payroll, benefits, taxes, and global workforce support. As a result, Employer of Record is not only a faster alternative to upskilling or entity establishment. It’s a full-service international expansion solution.
Hire the World’s Best Talent With Velocity Global
Hiring workers with the right skills for your company’s needs is no small feat. Velocity Global has the expertise to help. With unparalleled experience helping companies quickly and compliantly hire workers in over 185 markets, Velocity Global breaks down international employment barriers. Reach out today to find out how our expertise can help your company overcome the global skills shortage.