Bridging the skills gap with skills-based hiring

Riaz Moola at HyperionDev explains why a skills-based approach benefits both companies and individuals

More money than ever is flowing into UK tech, with new tech businesses launching on average every half hour around the country. That growth is helping the digital sector contribute more than £150 billion per year to the UK economy as a result. As this sector continues to grow, increasing the number of tech-savvy workers is therefore crucial.

But we have something of a problem in the UK. There’s currently a large skills gap, with many employees simply unable to meet the demands of the digital age. This digital skills gap is costing the economy around £63 billion annually. Continue in the same way and, by 2035, it’s predicted that up to 7 million workers could lack the essential skills for their jobs.  

It’s a wake-up call – and one that’s prompted the UK’s Labour government to take action.

The government has put forward the Skills England Bill, which aims to tackle the skills gap head-on by shaking up the Apprenticeship Levy, allowing companies more flexibility when meeting skills demands. The bill is also designed to curb skilled worker visas and begin a push for upskilling homegrown talent instead. 

The key element of the bill is the new focus on skills, which is so crucial for the growth of the digital sector. In fact, skills are what we should be putting first, whether in recruitment, team building or on an individual level. 

In this article, I’ll explain why.

Shifting towards skills-based hiring

There’s no doubt that the job market is undergoing a series of significant shifts right now. And one of those shifts has been a general move towards skills-based hiring. 

More and more companies are now prioritising what a candidate can do rather than what they have done. That is, they are prizing their skills rather than their experience or formal qualifications. This trend is reshaping how employers evaluate potential hires and build their teams.

Take the fact that 92% of employers are currently grappling with persistent skills gaps, according to Hays UK’s 2024 Salary and Recruiting Trends Guide. The impact of this is far-reaching, having heavy knock-on effects on areas such as productivity, employee morale, and project delivery.

Is it any surprise that, in light of this, many companies are rethinking their recruitment strategies? 

The advantages of skills-based hiring

Skills-based hiring is transforming the job market into one that’s more dynamic and focused on tangible competencies rather than formal qualifications. Everyone, from job seekers to employers and educational institutions are having to change.

One of the most significant impacts of this new approach is its potential to reduce degree-dependency, and therefore promoting diversity and inclusion in the workplace. Traditionally, university degrees were the golden ticket to many jobs, creating a ‘paper ceiling’ for those without formal qualifications. But this is changing. More organisations are now looking beyond degrees, even for roles once considered degree-dependent.

This shift is allowing companies to tap into a much wider talent pool, including people from underrepresented groups who have the skills but lack formal credentials.

By focusing on abilities rather than qualifications, skills-based hiring helps reduce biases in recruitment and create a more inclusive workplace. It also helps to diversify teams, which in turn encourages fresh perspectives and ideas.

Economic and social impact

The wider truth is that this new emphasis on skills isn’t just impacting recruitment; it’s having a deep impact on individuals, too.

Research shows that possessing strong skills at all levels, especially basic and essential ones, can significantly improve a person’s life. According to research by the OECD, it can lead to better-paying jobs, improved health, and greater social and political engagement. 

Studies by the Skills Builder Partnership reveal that having higher essential skill levels, particularly when moving from the lower to upper quartile in skill scores, could mean a wage increase of 12-18%, or up to £5,900 annually. This is especially true where the digital skills gap is concerned. 

And aside from money, there’s a clear connection between higher skill scores and greater life satisfaction. By focusing on skills, we’re not just filling jobs; we’re improving lives and strengthening our society as a whole.

Improving employee retention

Employee turnover is a challenge for just about all companies. People leave jobs for various reasons - low pay, limited growth opportunities, poor work-life balance, health issues, or conflicts with management. But skills-based hiring is proving to be a powerful tool in improving retention rates.

Why? Because when employees are hired based on their skills, they’re more likely to find themselves in roles where they can excel and grow. This alignment between skills and job requirements leads to increased job satisfaction and, consequently, better retention.

According to TestGorilla’s 2024 report on skills-based hiring, 89% of employers using this approach saw improved employee retention. Moreover, employees that had been hired through skills-based methods reported higher job satisfaction compared to their peers.

Interestingly, it’s not just employers who are seeing the benefits. The report found that 56% of employees actually prefer a skills-based hiring process. This mutual appreciation suggests it’s not just a passing trend, but a shift towards more effective, satisfying employment practices.

Policy reforms and the path forward

Looking ahead, it’s clear that bridging skills gaps in all areas will require collaborative effort - and that’s especially true in the digital sector. For the best outcomes, the government needs to connect educational institutions with tech companies and training providers. With proper backing, these partnerships can scale up quickly, adapting to technological changes and upskilling potential and current workers.

The results speak for themselves. As an example, at HyperionDev, our 2024 Graduate Outcomes Report shows that 88% of skills bootcamp graduates found employment within six months. 

Skills-based hiring offers numerous advantages: it promotes diversity and inclusion, has positive economic and social impacts, and improves employee retention. It’s a win-win for employers and employees alike.

As we move forward, we all have a role to play in bridging the skills gap. Whether you’re a tech enthusiast, a business leader, or a policymaker, your contribution matters. By embracing skills-based approaches, we can build a more resilient, equitable workforce and economy - one that’s ready for whatever the future holds.

Riaz Moola is Founder and CEO of HyperionDev

Main image courtesy of iStockPhoto.com and ipuwadol