Navigating the Shift to Skills-Based Hiring: What Businesses Need to Know

Have you noticed how the job market is shifting from degree-based hiring to skills-based hiring? This change is reshaping how businesses find and hire talent, and it’s something you should be aware of.

Traditionally, companies would look at a candidate’s resume to see where they went to school and what degrees they have. But now, more and more businesses are focusing on what skills a candidate actually brings to the table. This is called skills-based hiring, and it’s becoming the new norm. According to a January 2025 report from Upwork, 81% of C-suite executives are now turning to skills-based hiring practices to fill critical roles, including removing degree requirements and emphasizing skills assessments.

So, why is this happening? There are a few key reasons. First, there’s a significant talent shortage in many industries. According to a 2024 Society of Human Resource Management Talent Trends Report, more than three-quarters of 2,366 HR professionals surveyed faced recruitment difficulties for full-time regular positions in 2024.

Additionally, the 2025 Jobberman report states that by 2030, there will be a global talent shortage of more than 85 million skilled workers, resulting in an estimated $8.5 trillion loss of revenue. The technology sector, in particular, is grappling with a 76% shortage of skilled workers due to the advancement of technologies such as AI and cybersecurity. According to the report, technology, healthcare, manufacturing, education, and financial services are some of the key industries facing an acute shortage of talent.

Secondly, companies need people who can hit the ground running, and sometimes, a degree doesn’t tell the whole story. For example, if you’re hiring for a tech role, knowing that a candidate has hands-on experience with specific programming languages or tools can be more valuable than knowing they have a computer science degree.

A third reason is the rapid pace of technological change. New tools and software are constantly emerging, and businesses need employees who can adapt quickly. By focusing on skills, you can find people who are ready to learn and grow with your company. The Upwork report highlights that AI and machine learning skills are particularly in demand as these technologies continue to shape the future of work.

So how does a business adapt to skills-based hiring?

Update Job Descriptions

Update job descriptions to focus on the specific skills needed for each role rather than traditional degree requirements. This can help attract a broader and more diverse talent pool, ensuring that candidates have the practical abilities required to excel in their positions.

Invest in AI and Technical Skills

With the explosive demand for AI skills such as generative AI modeling and AI data annotation, businesses should prioritize hiring and training in these areas. Offering ongoing training programs can help current employees stay current with the latest technologies and maintain a competitive edge. Additionally, partnering with educational institutions or online platforms to provide specialized AI courses can be beneficial.

Leverage Freelancers for Flexibility and Innovation

According to Upwork, nearly half of those surveyed are turning to freelancers to address critical skill gaps. Freelancers can provide the flexibility needed to adapt to changing market demands and drive innovation quickly. By incorporating freelancers into your workforce, you can access a range of expertise without the long-term commitment of full-time hires.

Adapt to Rapid Technological Changes

The rapid pace of technological change requires businesses to be agile and adaptable. By focusing on skills-based hiring and continuous learning, companies can ensure that their workforce is prepared to navigate these changes. Encouraging a culture of learning and innovation can help employees stay ahead of industry trends and contribute to the company’s success.

Skills-based hiring is all about finding the right people with the right skills, no matter where they got them. It’s a win-win for both businesses and job seekers. Companies get talented employees who can do the job well, and job seekers have more opportunities to showcase their abilities. Businesses that adapt to these trends by focusing on skills-based hiring and leveraging freelance talent will be better positioned to thrive in the future. So, next time you’re looking to hire, think about what skills you really need and how you can find the best person for the job.