Talent over titles: Can skills-based hiring transform tech recruitment?
Are you a tech recruiter or hiring manager? Read our report to discover how skills-based hiring is impacting your industry, what emerging best practices are saying, and what tech candidates think.
01 Outlook: The state of tech recruitment
01.1
01.1
Is it getting harder to find tech talent?
The tech labor market has seen a tumultuous few years to say the least. With the mass layoffs that dominated 2022 and 2023 and non-stop rapid innovations in AI, tech employers and employees alike are having to evolve, innovate, and upskill fast. Our question is: How is this impacting tech recruitment?
TECH EMPLOYERS FIND IT HARDER TO HIRE GREAT TALENT THAN THE INDUSTRY AVERAGE
48%
37%
15%
48% of the tech employers we surveyed are finding it harder to find great tech talent in 2024 than 2023; 37% say it’s easier, and 15% say it’s unchanged. This is perhaps more balanced than expected. Although the tech industry is incredibly diverse and evades one sweeping diagnosis, we can credit this to a few things based on the data we’ve collected. Namely:
Candidates are keeping up with evolutions in AI and, generally, the new, up-and-coming skills that tech employers are hiring for are out there.
Employee retention is high. 78% of the tech employees we surveyed think it’s harder to find a job than it was last year, and 79% of employees across all industries plan to stay in their role for 3+ years in 2024. This is a big factor for employer satisfaction – employees who stay for less than a year are considered mis-hires, so higher retention rates generally lead to more satisfaction.
More employers than ever are using skills-based hiring. Hiring tools and processes are also evolving, and there are more solutions out there than ever to help tech employers hire top candidates.
Although opinions vary on whether it’s easier or harder to find great talent, 89% of tech employers are satisfied with the hires they have made in the last 12 months. This is 5 percentage points higher than the industry-wide average of 84%.
01.2
01.2
Hiring bias in tech is higher than the industry-wide average
56% of tech employees say it’s harder to find a job in 2024 than it was in 2023 (30% say it’s easier and 14% say it’s unchanged). This is 6 percentage points higher than the industry-wide average (50%), and reflects a challenging labor market for candidates across the board.
TECH EMPLOYEES SAY IT IS HARDER TO FIND A JOB IN 2024 THAN IT WAS IN 2023
56%
30%
14%
One statistic that does differ greatly for tech versus other industries is how many are experiencing hiring bias. 41% are experiencing conscious or unconscious bias during recruitment processes for tech roles – a 32% percentage increase from the industry-wide average of 31%.
Tech’s diversity problem is by now a well-known issue, and this highlights the hiring process as an important area for tech employers to focus on. Skills-based hiring will be key here: 84% of employees across all industries agree that skills-based hiring helps to reduce conscious and unconscious bias in the hiring process, and 93% of tech employers who use skills-based hiring see improved diversity.
0 %
improved diversity
0 %
agree that skills-based hiring reduces bias
02 88% of tech companies are using skills-based recruitment methods
02.1
02.1
Usage is 7 percentage points higher than industry average
88% of tech companies are using skills-based hiring in 2024. This is 7 percentage points higher than the industry-wide average of 81%.
0%
Finance
0%
Industry-wide
0%
Percentage points difference
Testing is definitely important, especially now in this age where the cognitive requirements for most tasks are increasing. That alone warrants an assessment tool measuring cognitive capacity. And then, of course, we need to test for specific skills that can’t be demonstrated in a resume, like coding. Someone can claim they’ve been coding for ten years, but the technology changes extremely fast.
02.2
02.2
Why do tech employers use skills-based hiring more?
Software development is the world’s most remote-friendly career option, and skills-based hiring lends itself well to remote working models because skills-based assessments are typically completed online. [1]
56% of business leaders in the tech sector identify skills-shortages as one of their biggest challenges, and skills-based hiring is an effective strategy for identifying candidates with the skills a company is missing. [2]
02.3
02.3
Which test types are most popular among tech employers?
Role-specific tests are most popular amongst tech employers, followed closely by cognitive ability tests. This is unsurprising given that technical skills are crucial to this industry, and online programming tests are increasingly being used to hire software developers.
TECH EMPLOYERS: WHICH TYPE OF SKILLS-BASED TEST DO YOU USE?
role-specific skills tests
59%%
cognitive ability tests
55%%
work samples
38%%
multi-measure testing
37%%
Our data shows that employers across all industries see higher retention, less mis-hires, and a lower cost and time-to-hire when they use multi-measure testing (where you different combine skills-based tests and assignments to measure multiple job-relevant skills).
Assessment scientists recommend that testing for multiple measures during skills-based hiring is the best way to predict job success, but only 38% of tech employers are using multi-measure testing – 2 percentage points less than the industry-wide average (40%). [3] Tech companies should consider testing for multiple measures if they want to improve the way they do skills-based hiring.
0 %
of tech employers are using multi-measure testing
0 %
is the industry-wide average
Multi-measure testing is research-backed: It’s empirically proven that it offers the most effective and reliable way of assessing a person’s capabilities for a specific job. So if you’re worried about making valid hiring decisions that lead to better job performance, I strongly recommend using multiple measures of assessment.
03 Skills-based tech recruitment and its benefits
03.1
03.1
Outstanding benefits across 5 key metrics
97% reduced mis-hires (8 percentage point increase from the industry-wide average)
84% reduced cost-to-hire (8 percentage point increase from the industry-wide average)
86% reduced time-to-hire (6 percentage point increase from the industry-wide average)
91% improved retention (same as industry-wide average)
93% improved diversity (3 percentage point increase from the industry-wide average)
This speaks again to how well-matched the tech industry is for a skills-based hiring approach. It’s an industry that lends itself well to remote work, and tech employers have a very clear need for specific skills (such as coding) that can be assessed online.
% tech employers who see improvements when they switch to skills-based recruitment
Reduced mis-hires
97%%
Reduced hiring costs
84%%
Reduced time-to-hire
86%%
Improved retention
91%%
Improved diversity
93%%
03.2
03.2
Companies could save millions on software engineer recruitment
According to oft-cited research by Dr. Bradford Smart, the cost of a mis-hire ranges from 5 to 27 times the amount of that hire’s salary. [4] Software engineers have some of the highest salaries around – the average salary is $144,332 in the US – so by that logic one mis-hired software engineer alone costs US employers between $721,610 and $3,896,964. [5]
Since 97% of tech employers reduce mis-hires when they switch to skills-based hiring (56% of them report reducing mis-hires by over 25% and 21% by more than half), transforming tech hiring processes could lead to hundreds of thousands, if not millions, of dollars saved.
0 %
reduce mis-hires with skills-based hiring
0 %
reduce mis-hires by over 25%
0 %
reduce mis-hires by more than half
03.3
03.3
Learning to do skills-based hiring at scale
When we asked tech employers about the challenges and concerns they’re encountering when trying to implement skills-based hiring:
told us it’s difficult to evaluate results from a large number of candidates
told us they’re concerned about adding an additional step to the hiring process
For me, the biggest problem was assessing and comparing the quality of the candidates. When you have to hire twenty people in one process, it’s difficult to remember how each applicant scored on their tests by the time they get to the interview.
04 Tech employees prefer a skills-based approach to recruitment
04.1
04.1
Why?
When we asked tech candidates why they prefer skills-based hiring, the top 3 reasons were:
Because they get an opportunity to demonstrate their skills (58%)
Because they get to see which skills they’ll be using on the job (49%)
Because it reduces hiring bias (49%)
Of the 20% of tech employees who don’t prefer a skills-based hiring process:
0 %
because it takes too much time
0 %
because it makes them anxious
0 %
because the tests are irrelevant
04.2
04.2
Solving tech's diversity problem with skills-based recruitment
Tech has a diversity problem. Just 17% of leadership positions in tech are held by ethnic minorities – in the UK this shrinks to a measly 2.6% – and only 26% of jobs in computer-related sectors are held by women. [6] To add to this, our data shows that tech employees are 10% more likely to experience hiring bias than employees in other industries.
A myriad of things need to change, but skills-based hiring could be part of the solution. 84% of employees across industries agree that skills-based hiring helps to reduce conscious and unconscious bias in the hiring process, and 93% of tech companies using skills-based hiring have improved diversity by doing so.
0%
agree skills-based hiring reduces bias
0%
of tech companies improve diversity with skills-based hiring
0%
more likely to experience bias
0%
0%
0%
I’m a staunch supporter of skill-based hiring. It ensures that candidates are evaluated based on their actual abilities and competencies rather than traditional metrics like education or experience, leading to more qualified and diverse teams.
05 What's next for tech recruitment?
05.1
05.1
Tech recruitment expected to accelerate
According to projections from the U.S. Bureau of Labor Statistics and Lightcast, the tech workforce will grow twice as fast as the overall U.S. workforce in the next ten years. [7] Since skills-based hiring is now the #1 recruitment method across industries, it’s crucial that tech employers learn how to use it effectively at scale.
The tech workforce will grow twice as fast as the overall US workforce in the next ten years.
Skills-based hiring is the #1 recruitment method across all industries
05.2
05.2
Tech employers will use skills-based hiring more
TECH EMPLOYEES: DO YOU WANT TO SEE SKILLS-BASED HIRING USAGE INCREASE?
75%
20%
5%
05.3
05.3
But they should hone in on how they’re doing skills-based hiring
The data we’ve gathered across countries, industries and company sizes this year paints a clear picture. Skills-based hiring is the #1 way to hire, although employers are not yet sure how to do it best. Luckily, best practices are emerging. Our data shows that employers see better results when they:
Measure for multiple job-related skills (i.e. practice multi-measure testing). Employers who make it multi-measure see better results according to our data, and it has been empirically proven that this is the best way to predict job success.
Screen resumes after testing for skills. This reduces the chances of hiring bias creeping in, and our data shows that employers who use resumes beforehand are less satisfied with their hires than those who use them after.
Automate assessment evaluation at the top of the hiring funnel. This will help employers overcome the challenges with evaluating a large number of skills-based assessments.
Are transparent with their candidates about what the hiring process entails. Anxiety is the top reason for candidates who don’t like skills-based recruitment. Good communication is crucial to alleviating this.
Empathy is key when utilizing skills-based recruitment. Companies should create a transparent, low-pressure environment that empowers candidates to showcase their abilities without undue stress.
06 Sources
Wickersham, Preston. ‘Industries with the Most Remote Opportunities’ (2024)
Beamery, ‘The Talent Revolution in Technology: Navigating the Changing Landscape’ (2023)
Sackett, P. R., Zhang, C., Berry, C. M., & Lievens, F. ‘Revisiting meta-analytic estimates of validity in personnel selection: Addressing systematic overcorrection for restriction of range.’ Journal of Applied Psychology (2022)
Smart, Bradford D. PhD. Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the Best People (2012)
Glassdoor.com, software engineer salaries (May 2024)
Jefferson Frank, ‘Diversity in Tech: How Diverse is the Tech Industry in 2023?’ (2023)
CompTia, ‘State of the Tech Workforce in 2024’ (2024)
07 Methodology
For this report we surveyed 119 employers and 81 employees in the tech industry (defined as scientific or technical services, information services, or data and software) from the UK, US, Canada, Australia, Latin America, Spain, Germany, and France in March 2024. This was part of the 1,100 employees and 1,019 employers we surveyed for The State of Skills-Based Hiring 2024. All data was collected through independent channels and analyzed by our team.
08 About TestGorilla
TestGorilla is a talent discovery platform that is shaping the future of work through skills-based hiring. Our library of over 400 scientifically validated, skills-based tests offers a scalable way for companies to hire better, faster, and without bias. Meanwhile, candidates use TestGorilla to discover and showcase their skills and potential, ensuring all talent gets a shot at landing their dream job.
Our globally distributed team provides over 10,000 customers and millions of candidates with skills-based testing and talent discovery solutions. TestGorilla is ranked number 1 on G2 for talent assessment software, and has been recognised globally for its growth and impact – we’ve been named twice in Sifted's B2B SaaS Rising 100, and regularly top G2's list of fastest growing software.
Try skills-based hiring today to up your tech recruitment game
TestGorilla is a comprehensive skills-based hiring solution designed to help you hire top tech talent. Our tests offer an accurate and reliable way to measure multiple job-relevant skills, and you can assess unlimited candidates using our platform. Book a consultation or check out our coding tests!