What is Employee Upskilling? Definition & Benefits

Employee upskilling is a strategic process of enhancing employees’ skills and capabilities through targeted training and development programs to meet evolving business needs and technological demands.

The modern workplace demands continuous adaptation to new technologies, processes, and market requirements. As companies increasingly go online for essential tasks like sales, customer support, and communication, HR teams need employees with the skills to thrive in this digital world.

Upskilling helps employees gain new skills, take on new responsibilities, and grow within the company. New information processing technologies like artificial intelligence (AI) are accelerating this evolution, changing how we work, and creating a growing skills shortage. As businesses struggle to fill talent gaps, many HR teams turn to upskilling or retraining their workforce.

A World Economic Forum report found that by 2027, 60% of professionals will need to acquire new skills to effectively do their jobs, yet only about half will have adequate training to do so.

This guide provides a detailed overview of the global skills shortage and explains how upskilling helps businesses fill key roles while improving employee productivity. Plus, discover an alternative hiring method for quickly securing top talent in a tightening labor market.

How is upskilling different from reskilling?

Upskilling is a workforce development strategy that provides training and education opportunities to existing employees, allowing them to broaden their skill sets, take on new responsibilities, and find new roles and opportunities within their company.

With the competition for top talent being more intense than ever, companies fill positions from within by upskilling or reskilling current talent. While the terms upskilling and reskilling are similar, they are not interchangeable:

Upskilling. If an employee upskills, they develop new skills, take on new responsibilities, and move upwards within their field in the same or a similar role.
Reskilling. Reskilling involves an employee learning a new skill set to prepare for transitioning into an entirely new role.

Examples of upskilling

Upskilling involves virtual and in-person training models based on external and internal expertise. These models include online courses, internal mentorship programs, and stipends for accredited university courses.

Below, we list the most common examples of upskilling:

Online training. Online training involves virtual education modules that offer storytelling, branching scenarios, reflective learning, step-by-step process breakdowns, webinars, podcasts, and quizzes. This method facilitates an immersive learning ecosystem that allows employees to learn when, where, and how they want.
In-person training. In-person training involves on-the-job training, seminars, workshops, and lectures from in-house or external experts. Employers can easily record lectures and seminars and upload them to their online training platform for employees to access at their convenience.
Blended learning. Blended learning combines online and offline learning modules, giving employees the freedom to create a personalized learning journey by choosing how and where they want to learn.
External training. Upskilling employees sometimes requires education from external organizations, such as universities or private coaching programs. While external training may involve a hefty investment, such as offering tuition coverage for university classes, it gives talent access to higher-quality accredited training when needed.
Internal mentorship. Teams already have the in-house expertise—all they need to do is match a mentor with a mentee. Internal mentorships allow talent to develop leadership, communication, and critical thinking skills in a one-on-one, hands-on environment with a senior colleague.
Community upskilling. Two employees can learn from each other regardless of their position in the team hierarchy. Community upskilling involves peer-led training platforms that allow employees to create courses and run mentorships for other employees to learn new skills inside and outside of their field.
Education stipends. Instead of offering employees specific courses and training programs, this approach involves creating a stipend for employees to use for training of their choice, such as university courses and certification programs.
Hands-on training. No training is complete without hands-on experience. This step allows employees to put what they’ve learned into practice and gain practical feedback by taking the lead on a new project or presenting a marketing plan to key stakeholders.
Job rotation. Employees can switch departments or teams temporarily to explore roles beyond their expertise and gain a comprehensive understanding of organizational operations.
Mentoring circles. In these group mentoring sessions, multiple employees learn skills together, improving their time to competency. Similarly, flash mentoring, or short-term focused sessions, offers an effective technique for transferring specific job skills and building relationships.

Why do employees need to upskill today?

Through upskilling, companies build an agile workforce that can adapt to changing market dynamics and fill evolving skills shortages from within, ensuring long-term growth and resilience.

The world of work is becoming increasingly digital—a world in which HR teams need to fill new roles. By 2023, nearly 40% of jobs worldwide will change due to industry transformations, with employers citing the skills gap as their primary challenge.

Technological advancements like generative AI are the most impactful force changing the modern workplace. Broadening digital access is expected to transform 60% of businesses by 2030. While 40% of employers anticipate reducing their workforce due to AI automation, 80% plan to upskill workers with AI training, and two-thirds intend to hire specialized AI talent.

Uncertain times call for an agile workforce. By investing in upskilling programs and allowing talent to set aside more time in their workday to focus on professional development, businesses can set themselves up for accelerated growth in the coming years.

Plus, the potential for upward mobility gives employees a sense of job security and makes them feel valued at work, boosting their motivation and productivity in the long run.

Benefits of employee upskilling

Employee upskilling is a win-win for both employees and employers. Its benefits include bulletproofing companies against evolving labor market dynamics and talent shortages while creating a more motivated and productive team.

Below, we discuss the benefits of upskilling in detail:

Equip employees with needed skills. No one understands a company’s needs better than itself. 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 changes over time. By upskilling talent before changes occur, companies ensure skills gaps don’t arise when employees retire, change positions, or change employers.
Enhance productivity and ROI. Research from Deloitte shows that companies with strong learning cultures experience 52% higher productivity compared to their peers. Organizations that invest in comprehensive upskilling programs see substantial returns, with businesses reporting $2.5 billion in cost savings. They also experience revenue-generating activities from employees who completed data science, software development, and analytics training programs.
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. Upskilling employees allows companies to promote from within and bypass the lengthy and costly talent acquisition process.
Increase employee attraction and retention. A LinkedIn survey found that opportunity for internal upward mobility was one of the top five factors for job selection. Upskilling programs increase company appeal to top candidates and talent retention.
Improve employee engagement and job satisfaction. Research from TalentLMS found that 71% of employees report being satisfied with upskilling and reskilling training, while 77% say learning new skills gives them a sense of purpose. Additionally, employees who strongly agree that their organization encourages them to learn new skills are 47% less likely to search for another job, according to Gallup.

Drawbacks of employee upskilling

Despite its numerous benefits, upskilling is not a cure-all solution for companies fighting the skills shortage. Some challenges businesses face when upskilling their workforce include time constraints, budget limitations, talent retention, and employees’ resistance to change.

We discuss each of these challenges in detail below:

Time constraints. HR leaders at major corporations, such as Google, Genentech, and 3M, believe in the 20% time rule: spending 20% of each workweek experimenting and skill-building. That’s about one day per week, which reduces employees’ workweek to four days.
Budget limitations. For example, Amazon recently pledged $1.2 billion to an employee upskilling initiative that will last through 2025. While Amazon expects to see a strong return on its investment, not every company can afford such expenses.
Talent retention. When teams are equipped with the latest skills in their field, competing HR teams employ headhunters to poach top talent. Offering competitive supplemental benefits and a healthy work-life balance keeps teams happy and reduces churn.
Resistance to change. Upskilling involves breaking old habits and adopting new processes. People who have been doing things one way for a long time may resist change.
Misalignment of priorities. While 80% of employers offer upskilling benefits, only 51% of employees actually use them, according to a DeVry University report. Additionally, 40% cited a lack of time during the workday, and 35% reported that family and other priorities take precedence over learning and development.
Limited application opportunities. One of the main reasons upskilling initiatives fail is that there are few opportunities to apply newly acquired skills in real work situations. Without practical application, employees often struggle to retain and effectively use their new knowledge.

How to upskill employees

Developing an employee upskilling program involves careful planning and preparation. HR teams must identify skills gaps, consider changing market dynamics, and draw on employee feedback to establish an educational framework that facilitates learning and provides ongoing employee support.

Below are key steps HR teams should take when creating an upskilling program:

Identify current skills gaps. Organizations should identify current skills gaps and anticipate long-term needs to determine where upskilling would be most beneficial.
Assess changing market dynamics. Organizations must identify industry opportunities created by new technology like AI and determine which skills teams need to capitalize on them.
Conduct employee surveys. HR teams should survey employees to understand their goals and expectations for personal and professional development within the organization.
Choose training programs. Establish a training framework where employees can access online and offline resources and participate in ongoing training for long-term growth.
Encourage continued learning. Keep employees motivated as they learn new skills by helping them track progress. Offer rewards and promotions for achieving goals and completing programs.
Gather employee feedback. Regularly consult with employees participating in upskilling programs to identify areas for improvement.

How to handle a labor shortage without upskilling employees

While upskilling is the most efficient way to develop an agile workforce, some companies lack the time and financial resources needed to create internal learning and development programs. For teams needing a faster and more budget-friendly solution for sourcing qualified talent, consider sourcing employees internationally.

Today, HR teams worldwide are adept at managing employees virtually. Businesses no longer need teams to work from one centralized location. Many companies go beyond their home market to source top talent worldwide and quickly find employees who meet their specific budgets and needs.

For example, a British 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 can look beyond saturated markets like Silicon Valley and focus on up-and-coming markets like Ukraine.

Businesses have two options for engaging global talent: establish a local entity in their target market or partner with an employer of record (EOR). Below, we discuss these approaches in detail and outline the pros and cons of each.

Entity establishment

Entity establishment is the traditional approach to hiring talent internationally and building a long-term local presence in a foreign market. This approach involves several benefits: with a legal entity in a specific target market, recruiters can engage talent directly while simplifying the hiring process and reducing risk exposure.

Still, entity establishment doesn’t offer the time and cost savings that upskilling programs do. Companies that use entity establishment to legally hire foreign talent face a months-long setup process that can cost up to $20,000 in initial investments and require $200,000 in annual maintenance.

“Foreign entity establishment requires a hefty investment in time, resources, and capital. The research phase alone might take months, if not years,” adds Peter Dixon, a Global Employment and Workforce Mobility Advisor.

Entity establishment only makes sense if a company plans to hire a large team overseas and anticipates a long-term presence in its target market. HR teams seeking a faster, more cost-effective upskilling alternative can turn to an EOR instead.

Partnering with an EOR

An EOR allows global companies to hire talent quickly and compliantly in new markets, saving them time and money when bringing in professionals with hard-to-find skills.

The main advantage of partnering with an EOR is the ability to quickly source talent worldwide without setting up legal entities or worrying about violating local employment regulations.

As the legal employer of a global workforce, an EOR handles hiring, onboarding, compliance, immigration, and global payroll while offering ongoing HR support. This approach allows companies to build a global workforce without delaying day-to-day business operations.

In addition, an EOR helps craft market-specific supplemental benefits packages featuring perks like global equity awards and flexible workspaces. These benefits help teams attract and retain top talent worldwide.

Hire and retain top talent in 185+ countries with Velocity Global

Hiring talent with the right skills is no small feat, and Velocity Global has the expertise to make it happen. We help companies overcome the global skills shortage by making it easy to quickly and compliantly hire talent in more than 185 markets without establishing local entities.

Partnering with an EOR like Velocity Global allows companies to hire skilled global talent quickly, bypassing the time and cost of internal upskilling programs. Our EOR solution handles the heavy lifting of engaging international talent, from hiring, onboarding, immigration, and risk mitigation to running compliant global payroll and administering global benefits.

Our workforce management platform integrates with top HRIS and ATS systems, consolidating distributed HR into one platform and making it easy to manage teams across markets. Plus, we offer local HR support across a range of native languages no matter where they reside, ensuring a top-tier employee experience and improved talent retention.

Turn the hiring pool into an ocean and overcome the global skills shortage with ease by partnering with Velocity Global—contact us today to get started.