Skills-based hiring is a recruitment method that prioritizes a candidate’s skills and competencies over traditional credentials like degrees and past job titles.
This hiring practice is gaining popularity due to three main factors: the rise of AI coupled with evolving job requirements, the widening skills gap in industries requiring specialized expertise, and the growing need for inclusive hiring practices to attract diverse talent.
Key elements of skills-based hiring
Recruiters and hiring managers who practice skills-based hiring do not rely on previous job titles or educational accomplishments to assess a candidate’s fit for a position. Instead, they rely on metrics like skills assessment results.
Skills assessments
Skills assessments involve administering practical tests, role-based tasks, and simulations to candidates to evaluate their current abilities.
- Practical tests. These tests are helpful for jobs where a candidate must have specific skills to succeed. For instance, a salesperson may be quizzed on their ability to use Salesforce, a software that efficiently manages the end-to-end sales cycle.
- Role-based tasks. For candidates requiring specialized skills, completing role-based tasks can show hiring managers the breadth of their abilities. For instance, a copyeditor applying for a job may be asked to proofread a document to gauge their editing skills. Assessing potential software engineers’ coding abilities through coding challenges has also become popular among hiring managers, although not necessarily with coders.
- Simulations. Simulations mimic situations that a candidate will encounter in their work. They are particularly useful for assessing a candidate’s leadership ability. For example, those applying to senior leadership positions in the Canadian government may be asked to participate in a simulation to evaluate their technical and soft skills, as well as how they would manage “problems involving services and programs, production, decreasing resources, irregularities in performance, labor relations, clients, management information systems and policies.”
Competency-based job descriptions and alternative credentialing
HR professionals who use a skills-based hiring approach craft job descriptions that focus on candidates’ current abilities, not their work experience or educational background. For example, a job description for a salesperson will not state that an associate’s or bachelor’s degree is required. It will, however, enumerate the specific skills the salesperson must have, such as adeptness with a particular sales methodology.
A skills-based approach to hiring may also recognize certifications, micro-credentials, and self-taught skills as valid qualifications, particularly given the hefty cost of education in some countries. This method creates a larger, more diverse talent pool inclusive of candidates who have not attended college, pursued advanced degrees, or have less typical work histories.
According to a 2021 report on alternative credentialing by the Society for Human Resource Management, alternative credentials are “popular with jobseekers who are often excluded from the talent market.” These individuals include “older workers, people without formal higher education, and others with nonlinear or nontraditional work histories, like veterans, people who were formerly incarcerated, and those who have been out of the workforce for some time.”
AI and data-driven hiring
AI technology has spawned data-driven hiring. In practice, this means that AI-powered talent acquisition programs can search inside a candidate’s resume, cover letter, and hiring materials for their skills. This is a shift from using programs to flag whether candidates use keywords associated with the role in their resume.
Benefits of skills-based hiring
The benefits of skills-based hiring are myriad, both for employers and candidates. Candidates are hired for their skills, not their pedigree. Meanwhile, employers enjoy having talent who are truly suited for the job.
Expanded talent pool, reduced hiring bias
Skills-based hiring presents opportunities to candidates without traditional educational backgrounds. In the U.S., for example, advanced degree requirements negatively affect Black and Hispanic candidates the most.
Improved job performance and retention, greater internal mobility
Hiring based on skills, as opposed to education or experience, ensures that new hires have the skills to hit the ground running.
In addition, when an employee’s skills and job demands are aligned, they are more likely to stay with the organization (whether that means they decide not to leave for another organization or are terminated due to poor performance). This effect on retention is especially true for employees without degrees. A Harvard Business Review report noted, “Skills-based hiring boosts retention among non-degreed workers hired into roles that formerly asked for degrees.”
In addition, skills-based hiring allows companies to upskill and reskill existing employees for new roles, saving time and resources on finding, hiring, and onboarding external candidates.
Future-proofed employees
According to the World Economic Forum’s 2025 Future of Jobs Report, “The inability to meet evolving skills demands is slowing down progress across industries and creating new pressures for workers and employers alike.” Skills-based hiring can alleviate these issues, as hiring candidates based on their skills (and willingness to learn new ones) can help organizations adapt to rapidly changing job requirements.
Examples of skills-based hiring
The skills-based hiring approach can be used in a variety of industries. The following are examples of how skills-based hiring can be retooled to fit the needs of a specific industry and employee demographic.
Technology
IBM’s cybersecurity team demonstrates the transformative impact of skills-based hiring. In 2017, after noticing a shortage of qualified candidates, the company shifted from requiring degrees to evaluating candidates’ cybersecurity capabilities. This strategic change improved employee retention, team performance, and candidate diversity.
Healthcare
Some players in the healthcare industry are moving toward hiring based on skills and abilities rather than experience. Pharmaceutical giant Bristol Meyers Squibb (BMS) employs this approach to recruit talent for cell therapy teams.
BMS uses its AI talent platform, MyGrowth, to identify internal and external candidates who might be well-suited for the cell therapy teams. In 2024, Céline Raffray, vice president of talent acquisition, said that for BMS, skills-based hiring means “focusing on a comprehensive review of talent, one focused beyond the traditional approaches of making talent interview and hiring decisions solely based on education, experience, and credentials.” According to Raffray, the skills-based approach has also reduced hiring times.
Manufacturing and skilled trades
In response to the COVID-19 pandemic and associated difficulties finding skilled talent, Carlisle Construction Materials, a building parts manufacturer, created a skills-based hiring program to attract employees who desired flexibility and part-time work. The company created four-hour shift positions and provided targeted training, which proved especially successful in attracting mothers returning to the workforce.
Sales and customer services
JetBlue’s transformation of its reservation agent hiring process showcases the power of skills-based hiring in customer service recruitment. The airline revamped its approach by implementing call simulation tests that evaluated critical skills identified through focus groups, interviews, and job shadowing of successful agents. This strategic shift to skills-based assessment resulted in a 25% decrease in training attrition and created reliable performance indicators for future hires.
Engaging skilled talent globally
Skills-based hiring can be part of a broader global recruitment and hiring strategy. Organizations expanding into international markets and hiring local talent don’t always want to set up a legal entity there. So, many of them partner with a global employer of record (EOR) that serves as a legal employer, managing all of the administrative and compliance responsibilities related to HR. As an EOR, Velocity Global can help businesses efficiently and compliantly onboard skilled talent in 185+ countries. Get in touch to learn more.
