THE STATE OF SKILLS-BASED HIRING 2024

Of the 1,100 employees we surveyed, 13% were from the US, 13% from the UK, 10% from Canada, and 9% from Australia, 18% were from France, 18% from Germany, 4% from Spain, and 15% from Latin America.

Of the 1,019 employers we surveyed, 22% were from the US, 13% from the UK, 9% from Canada, and 6% from Australia, 14% were from France, 17% from Germany, 4% from Spain, and 15% were from Latin America.

Their respective organizations ranged in size from from small and medium-sized enterprises to larger ones:

81% of employers use skills-based hiring (up from 73% in 2023 and 56% in 2022). Adoption rates are highest in Australia and Latin America and lowest in France, and mid-sized companies use it most. 

A higher percentage of skills-based employers than ever are seeing improved diversity, retention, mis-hire rates, and cost-to-hire with this hiring strategy. 94% agree that skills-based hiring is more predictive of on-the-job success than resumes.

US employers hiring for roles salaried at $60,000 are saving between $7,800 and $22,500 by reducing mis-hires with skills-based hiring. They’re also saving between 412 and 792 hours per senior management hire with skills-based hiring, and between 339 and 660 hours per hire for non-senior roles.

Employers see better benefits across all metrics when they do multi-measure testing, an approach that involves combining skills-based tests and assignments to measure multiple job-relevant skills. Assessment scientists recommend that this approach is most predictive of job success. [1]

More employees than ever prefer a skills-based hiring process (68%, an increase of 21% from last year). Candidate preference for skills-based hiring is strongest in the US and Latin America, where over 80% of employees prefer skills-based hiring. 

Hiring bias is up by 48%, and 84% of employees agree that skills-based hiring can help prevent it. 90% feel as though they’re more likely to secure their dream job because of it, and 81% say it’s helped them gain access to new employment opportunities.

Overall, skills-based hiring dominates hiring practices in every locale and industry we surveyed this year, and a vast majority see impressive benefits. Still, employers increasingly face the same challenges, chief amongst which is how to adopt a skills-based hiring process at scale. As skills-based hiring matures, employers and skills-based hiring solutions providers need to work hard to overcome challenges together, especially in a job market that’s proving challenging for employers and candidates alike. 

This year’s report data shows that best practices are indeed emerging (using multi-measure testing, for example, and using skills-based screening tools before screening resumes), marking a turning point in the skills-based hiring conversation. Skills-based hiring is, bluntly, here to stay – 81% of employers are using some form of skills-based hiring in 2024, and 95% agree that it’s the dominant recruitment method of the future. We can stop talking about it being ‘on the rise,’ and instead should start talking about how to do it best.

When hiring, 59% of employers say it’s more important for candidates to have degree requirements than it was five years ago, and the majority (70%) have not removed degree requirements.

Employer discourse around degree requirements has taken something of a U-turn recently: New research found that 47% of employers who remove them aren’t actually hiring more degree-less workers, and the majority of employers are not in favor of removing them. [6] 

With college fees getting more expensive and younger generations attending university at a lower rate than millennials, application rates are falling, degree programs are shutting down, and some institutions are struggling to get people through the door. This means employers need to think about what will happen to increasingly large cohorts of non-degree holders.

81% of employers are using some form of skills-based hiring in 2024 (up from 73% in 2023 and 56% in 2022), and 95% agree that it’s the dominant recruitment trend of the future. Skills-based hiring is well and truly here to stay.

It’s important to acknowledge that employers differ in how they do skills-based hiring: For example, 33% use skills-based assessments before screening resumes, and 67% use them after.  Additionally, only 30% of employers have removed degree requirements.

This highlights an important distinction that is often overlooked: Skills-based hiring and removing degree requirements are not synonymous. Skills-based hiring entails replacing (or adding to) traditional recruitment methods like degree requirements or resumes with a different indicator for candidates' skills. Such an indicator might be the results of a talent assessment or a work assignment, for example.

Today’s is a tough market for candidates to navigate. 31% of candidates report experiencing unconscious bias in the hiring process, an increase of 48% from last year. This is despite a 85% of companies reporting that diversity is an objective for them (85% of last year’s cohort also said it was a goal).

On top of that, 50% of the employees we surveyed told us that it’s harder to find a job in 2024 than it was last year (22% say it’s easier and 28% say it’s the same). Although caused by a combination of factors, increased hiring bias could certainly be at play. Many companies have a disconnect between their public stance on DE&I and their actual employee diversity, and “diversity washing” is on the rise.

Over 17 million Gen Zers entered the workforce last year, and by the end of this year they’re are expected to make up more of the workforce than baby boomers. [7] A new generation in the workforce brings new challenges, and data shows employers are finding it hard to hire and retain Gen Z – a challenge they’ll need to overcome in the near future. 

Luckily, Gen Z have some clear preferences for how they like their hiring. Our data shows that GenZ are amongst skills-based hiring’s biggest advocates, a fact that’s unsurprising given that a) diversity is so important to this ‘radically inclusive’ generation of people, and b) they are, on average, more skeptical of higher education than other generations. [8][9] 82% of 25-34 year olds prefer a skills-based hiring process.

An aggressive wave of AI has hit the world of work’s coastlines in recent years, and most employers have their surfboards out. They’re rising to the challenges that such rapid technological advances bring, and adding AI-related skills to job requirements is high on the list of things they’re doing. 

84% of employers are taking steps to help their workforce embrace the rise of AI. 64% are integrating AI tools into workflows, 55% have implemented upskilling initiatives for employees, and 52% are hiring for AI-related skills. Interest in AI skills is growing exponentially, and there are a huge range of new skills that need to be developed and hired for, rapidly. Employers need not worry: this is something that skills-based hiring solution providers have their eyes on. (Learn more about TestGorilla’s AI-related skills tests)

89% of employers think it’s more important for candidates to have soft skills than it was five years ago. This is the third year in a row that our data has demonstrated an almost unanimous agreement that soft skills matter. 

It’s a pattern that we can’t ignore, and the case for measuring and accounting for soft skills as well as technical skills and cognitive abilities in the hiring process is as strong as ever. This, alongside the rise of AI and high demand for all sorts of new technical skills, underlines why multi-measure testing is the optimal way to approach skills-based hiring. Employers can’t afford to overlook soft skills in favor of hot-topic technical skills – and they don’t need to since there are straightforward ways of identifying both in one go.

More employers than ever are using skills-based hiring. 81% of employers are using skills-based hiring in 2024, up from 73% last year and 57% in 2022. 59% of those employers started using skills-based hiring in the last two years.

This steady increase across three years includes the adoption of all forms of skills-based hiring – from cognitive ability and personality tests, to role-specific tests, combinations of different tests types (known as multi-measure testing) and skills-based work assignments.

Cognitive ability tests have seen the greatest increase in usage compared to last year, and 40% of employers told us they are using multi-measure testing (where multiple test types are combined in a holistic talent assessment that’s used for hiring).

Marketing, scientific and technical services, and construction are the industries using skills-based hiring the most in 2024.

Due to increased availability and quality of online skills-based testing tools, skills-based hiring has historically seen higher usage amongst hybrid and remote-only companies that operate entirely online. Last year, for example, we found that over 20% more hybrid organizations than in-person ones were using skills-based hiring. 

Slowly this is changing, and this year we’re seeing the greatest increase yet in skills-based hiring usage at in-person companies.

When it comes to company size, adoption rates are fairly consistent – at least 70% of all company sizes are using skills-based hiring. That said, companies with between 250 and 1000 employees are using skills-based hiring the most in 2024.

Overall, more employers are facing multiple challenges when adopting skills-based hiring. Despite high adoption rates, skills-based hiring is still a relatively new approach to hiring, and anything new comes with its teething issues. 

Below is a breakdown of the challenges employers are encountering and the percentage of employers who are experiencing each challenge with annual comparisons.

We asked employers to compare their hiring with skills-based hiring to times when they hired using more traditional hiring methods. Of those employers who are now using skills-based hiring practices:

• 90% are seeing improved diversity, up from 85% last year

• 91% are seeing improved retention, up from 89% last year

• 81% have reduced time-to-hire, down from 82% last year

• 78% have reduced cost-to-hire, up from 74% last year

• 90% have reduced mis-hires, up from 88% last year

The cost of a mis-hire is notoriously hard to calculate, but a recent SHRM study states that “employers will need to spend the equivalent of six to nine months of an employee’s salary in order to find and train their replacement. [11] That means an employee salaried at $60,000 will cost the company anywhere from $30,000 to $45,000 to hire and train a replacement.”

The largest proportion our respondents told us that, after implementing skills-based hiring, they reduced their mis-hires 'significantly' (a 26-50% improvement) This could mean US employers hiring for roles salaried at $60,000 will, on average, save between $7,800 and $22,500 by reducing mis-hires with skills-based hiring.

The average cost-to-hire in the US, according to SHRM’s 2022 benchmarking report, averages at $4,683. [12]

Since the largest proportion of our employer respondents cut cost-to-hire by 26-50% by switching to skills-based hiring, this hiring strategy could save US employers, on average, $1,218 to $2,342 per role.

According to SHRM’s 2022 talent access benchmarking research, time-to-hire in the US averages at 66 days for senior managers and 55 days for other roles. [13] The majority of employers we surveyed told us that they reduced their time-to-hire by 26-50% with skills-based hiring, which translates to:

67% of the employers we surveyed this year told us that they’re using skills-based hiring tools after screening their applicants’ resumes and using them to shortlist. This is a comfortable majority, but our data shows that the 33% who use skills-based hiring first are happier with their hires.

87% of employers who use skills-based assessments before resumes are satisfied with their hires, versus 78% of those who use them after resume screening. That’s a 12% improvement in hiring satisfaction if you use skills-based hiring in the right place.

Another way of using skills-based hiring that leads to better results across the board is the use of multi-measure testing. Only 40% of employers are using multi-measure testing in their hiring processes, but 92% of employers who use multi-measure testing are satisfied with their hires. This is compared to the 84% of employers who are satisfied on average.

Not only are employers who are using multi-measure testing more satisfied: A higher percentage of them see improvements in retention and diversity and a reduction in mis-hires, cost-to-hire, and time-to-hire.

This result supports a consensus amongst assessment scientists that testing for multiple job-relevant measures – cognitive ability, soft skills, and job-relevant technical skills, for example, rather than for job-relevant technical skills alone – is the best way to predict job success. [1]

68% of the employees we surveyed told us that they prefer a hiring process that includes skills-based assessments, an increase of 12% from last year’s survey cohort.

We asked the employees who do prefer a hiring process that includes skills-based assessments why they feel this way. Three reasons stood out:

As well as appreciating a chance to demonstrate their skills, exercise job-relevant skills, and avoid hiring bias, 90% of the employees in this year’s survey cohort feel as though they’re more likely to secure their dream job with skills-based hiring.

Of the 15% of candidates who prefer a hiring process that does not include skills-based assessments:

To be clear, skills-based hiring is not a silver bullet for diversity and inclusion. Meaningful commitments to DE&I go beyond how you hire. However, 90% of employers who use skills-based hiring report improvements in diversity, with 34% reporting a significant positive impact (26-50%). What’s more, 84% of the employees we surveyed agree that skills-based hiring helps reduce conscious and unconscious bias in the hiring process.

Employers in France and Spain are seeing the most improvements in diversity with skills-based hiring.

92% of companies who use skills-based hiring have documented processes, training, and/or data collection in place to prevent unconscious bias from impacting their hiring decisions, compared to 70% of companies who don’t use skills-based hiring – an increase of 31%. This is a bigger gap than in previous years (14 percentage points in 2023 and 11 in 2022).

68% of employees want skills-based hiring usage to increase in the future. 25% want it to stay the same, and only 7% want to see it decrease.

The message is loud and clear: Candidates prefer skills-based hiring, recognize its benefits, and want to see more of it. This is crucial at a time when 50% of them are finding it harder to find work, and 31% of them are experiencing hiring bias.

Luckily employers are aligned here: 60% of them expect their budget for skills-based hiring to increase in the next 12 months, and 35% say it will stay the same. This, on top of the fact that 94% of them agree that it’s the future of hiring, indicates that employer commitments to skills-based hiring will continue to strengthen and deepen.

The future of skills-based hiring, then, is secure: It’s the dominant hiring practice in 2024 with an 81% majority of employers using it, the benefits are consistently significant for employers, and every year more and more candidates say that they prefer it. The next step is for employers to understand how it’s done best, so that hiring processes continue to adjust and evolve in a positive direction.

This year’s report found that using multi-measure testing and using skills-based hiring before screening resumes brings the best results for employers; but only 40% of them use multi-measure, and only 33% use skills-based hiring before screening resumes.

4 clear best practices for skills-based hiring from our data:

Employers are consistently running into the same challenges when implementing skills-based hiring – a point that emphasizes the need for continued research that incorporates candidate experiences and the expertise of skills-based hiring experts and can help companies evolve their approach effectively.

Using skills-based hiring to evaluate a large volume of candidates is consistently a problem for employers, with more of them than ever citing it as a concern this year. As skills-based hiring matures, equipping employers with the tools and education to overcome this is crucial. If employers aren’t confident in how to evaluate a large number of candidates with skills-based hiring, it won’t become the standard to use it at the top of the hiring funnel – which is ultimately where it’s best used.

The same goes for challenges within candidates’ experiences of skills-based hiring. Designing hiring processes that are transparent, job-relevant, and don’t exacerbate anxiety should be a focus for the year ahead.