Skills-Based Hiring and How It Can Benefit Your Company

More and more companies are rethinking how they evaluate talent. Degrees may not be the first priority anymore. What may matter most is whether someone can actually do the job — and do it well.

"Skills-based hiring isn't a trend. It's about looking at what someone can do and building teams that are stronger, smarter, and more inclusive because of it," says Megan Burdett, Talent Enablement Partner at Paychex.

What Is Skills-Based Hiring or a Skills-First Approach?

Skills-based hiring involves candidate screening according to what they can do and what they have done rather than their degrees, job titles, or years of experience. While conventional hiring often assumes that a diploma means someone has the proper knowledge, that's not always the case. Real-world abilities can be far more valuable than educational pedigree.

"Transferable skills will always be valuable," says Burdett. "Take adaptability, your ability to pivot on a dime. That's critical for certain jobs, and it's not necessarily something that can be taught — it's something that comes from practical experience." Whether someone developed these abilities in healthcare, oil and gas, or any other field matters less than their proven capability to deliver results.

Why Are More Companies Prioritizing a Skills-Based Hiring Approach?

The move toward prioritizing skills started in the tech industry years ago, but more companies across many sectors are recognizing the importance of skills-based hiring as traditional approaches fall short. According to Paychex's 2025 Priorities for Business Leaders, 57% of leaders are struggling with talent acquisition.

A skills-based recruitment approach can help address multiple pain points that traditional hiring methods may not.

The benefits of skills-based hiring can include:

• Access to more talent: Companies may discover non-traditional candidates they would have overlooked. Modified degree requirements can open the door to folks who've taken different paths, such as bootcamp grads, veterans, or career switchers.
• Improved employee engagement and retention: Organizations create internal career progression by evaluating existing staff on actual capabilities, which may help keep people from leaving.
• Workforce diversity gains: This approach can help you build more diverse teams naturally.
• Cost efficiency: Competency-based hiring can help reduce time-to-hire and ensure new employees can perform their job effectively from day one.
• Stronger job performance: New hires succeed more often because their employee qualifications match what the role demands.

Skills-Based Hiring vs. Traditional Hiring Methods

Hiring doesn't need to be 100% skills-first across the board. First, ask yourself why you're hiring. Are you looking for someone who can hit the ground running — or someone you can train up?

And if you're someone who likes to see the difference laid out clearly, here's a side-by-side comparison of traditional hiring methods and a skills-based approach:

Challenges of Skills-Based Hiring

Choosing candidates for their skills comes with its own set of hurdles to understand and overcome. Most obstacles stem from change management. "When you change a fundamental process like how you hire, that affects a lot of teams, so communication is really important," says Burdett.

Here are the most common challenges you'll likely encounter and how to address them:

• Inconsistent evaluation methods: Without clear standards, skills-based recruitment strategies can become subjective. The fix is to establish clear rubrics and consistent questions that focus on demonstrable abilities rather than gut feelings.
• Manager training gaps: Hiring managers need tools and guidance to know what to look for when hiring for soft skills and technical capabilities. Teach your team how to spot skills in real time, ask meaningful questions, and document their reasoning for moving candidates forward or not.
• Lack of proper assessment tools: To evaluate skills effectively, you may need to incorporate work samples, skill-based scenarios, or practical demonstrations into your process. The debate between hiring for cultural fit vs. hiring for skills often comes down to having concrete ways to measure both.
• Internal resistance to change: People naturally gravitate toward familiar processes, especially leaders who succeeded through traditional hiring methods. Combat this by clearly communicating the "why" behind the change and addressing concerns about inclusivity. Many assume performance-based hiring won't lead to diverse outcomes, but explaining how removing educational barriers opens opportunities and helps build buy-in.
• Outdated job descriptions: Your current job postings may not reflect what the role requires. Start by talking to people currently doing the job, then review existing descriptions to ensure they describe real needs rather than generic requirements.

How To Implement a Skills-Based Hiring Process

Learning how to adopt skills-based hiring practices is about building new processes step by step rather than overhauling everything at once. The crucial first step is to clarify each role's requirements, then establish evaluation methods around those real needs.

1. Identify Core Skills for Each Role

Start with a basic skills gap analysis: what skills do top performers have, and what's missing on your team today? "Whether it's a new or existing role, talk to the people doing the job today. Do not just copy and paste a job from Google," says Burdett. "Make it real and make it yours." This helps you understand which employee skillsets can be taught versus those that need to come through the door.

2. Review Job Descriptions

Put the insights you gained about core skills into job descriptions. List the technical requirements and soft skills that will strengthen your team. Question every traditional requirement — does that master's degree really matter, or have you just always included it? Someone with eight years of experience but no formal credentials might be exactly what you need.

3. Implement Skills Assessments Early

Moving beyond interview-only evaluations to include work samples, realistic scenarios, or brief skill demonstrations can be helpful when hiring people based on their skills. Make sure the assessments connect to what people will do in the job and balance your vetting process with respect for candidates' time — nobody wants to complete a five-hour skills inventory for a potential opportunity.

4. Train Hiring Managers

Your hiring team needs specific guidance on how to spot skills in the moment. It's also essential to write things down, not just for legal reasons, but so your team can improve over time. Cover evaluation techniques for hard skills, soft skills, and cultural alignment. Provide your managers with consistent frameworks and question banks so that everyone evaluating candidates uses the same standards.

5. Leverage Technology

Find ways to use your existing systems more effectively instead of investing in new tools. You might reconfigure your applicant tracking system to prioritize hiring for potential over degree filters. Keep in mind that sometimes the best tools are surprisingly simple. Structured interview templates or basic scoring sheets can dramatically improve hiring decisions.

Measuring the Impact of Skill-Based Recruitment for Success

This is where many companies tend to lose clarity, but tracking the right HR metrics is crucial for understanding whether your skills-based approach actually improves hiring outcomes. It lets you see what's working, spot areas for improvement, and make data-driven adjustments to optimize your approach over time.

The metrics that help tell a story about your hiring success are:

• Time-to-hire: A shorter hiring process means less business disruption and faster results. When skills-based evaluation helps you move confidently through decisions, you'll see this number improve.
• Quality of hire: Track whether new employees meet skill development expectations earlier than previous hires. Follow up with managers at 30, 60, and 90 days to gauge their satisfaction with the new talent and identify any patterns in performance.
• Candidate satisfaction: Skills-first hiring often feels more human and less like a gatekeeping process for applicants. Higher satisfaction scores enhance your employer brand and create positive word-of-mouth that attracts better candidates.
• Retention rates: People tend to stick around longer when their skills match job requirements. Monitor how long skills-based hires stay with your company compared to traditionally hired employees.
• Diversity and inclusion: Removing arbitrary requirements opens the door for candidates from diverse backgrounds. Monitor who's applying and who you're hiring.

"Here's the reality that most leaders are living in: 48% struggle with talent management, 90% are worried about engagement and retention, and 93% deal with performance issues," says Burdett. "That's a lot of pain. And what these numbers tell us is that the way we've always hired isn't working anymore."