Employers are moving away from qualifications-based hiring and towards skills-first recruitment, as artificial intelligence reshapes jobs at unprecedented speed, new research suggests.
A study by Top Employers Institute, a global HR certification body covering 2,300 organisations across 26 industries and 125 countries, found that companies prioritising skills over formal qualifications are outperforming peers in retaining high-performing staff and maintaining competitiveness.
The report, Building a Skills-First Workforce, found that highly profitable employers were 4–5 percent more likely to have adopted skills-first practices. Organisations using this approach were also 7 percent less likely to lose top performers and recorded stronger internal promotion rates alongside broader access to diverse talent pools.
Business case for skills-first
With employee turnover costing between 30 and 200 percent of salary, the report said a skills-first approach was becoming “a critical bottom-line safeguard”.
“AI and automation are redefining the skills organisations need faster than traditional hiring models can adapt,” said Adrian Seligman, executive board member at the Institute.” Employers who embrace skills-first practices are not only future-proofing their workforce; they’re also seeing rapid returns in employee engagement, retention and business performance. This is becoming a business-critical strategy for success in an AI-accelerated economy.”
The research showed that employers embedding skills data across HR functions were achieving productivity gains of up to 15 percent. Those that shared information on future skills requirements were also 7 percent less likely to lose high-performing staff, helping strengthen retention in tight labour markets.
AI-driven talent platforms
One way organisations are adopting skills-first models is through digital talent marketplaces, which use AI to match employees with internal projects and roles. These platforms allow companies to redeploy staff quickly to priority areas, cutting the need for costly external hiring.
Adoption is highest in technology-driven industries, with 59 percent of IT firms using such marketplaces, compared with 30 percent in consumer goods and services and just 22 percent in retail.
With 74 percent of employers globally struggling to find the skills they need – a rise of 36 percent over the past decade – the study found that demand for these tools was increasing across sectors.
The report cited examples of early adopters, including drinks manufacturer Molson Coors UK, which recorded a 385 percent increase in applications for manufacturing roles after introducing skills-first hiring. Notably, 30 percent of the final candidates were women, in what has traditionally been a male-dominated area of work.
Diversity and mobility benefits
According to the research, skills-based hiring is widening access for underrepresented groups by reducing barriers linked to formal qualifications. Organisations prioritising skills also saw significantly higher internal promotion rates, with late adopters three percentage points below average.
The report said 84 percent of leading employers were already using skills data to communicate with staff about changing requirements, enabling targeted reskilling and smoother redeployment as AI reshapes tasks and roles.
The Institute urged organisations to audit recruitment practices to reduce reliance on academic credentials, build comprehensive skills inventories and integrate skills data across all HR processes. It also recommended that employers share future skills needs with staff and develop scalable reskilling programmes to respond quickly as technology changes the workplace.
The report concluded that the organisations most likely to thrive in the AI economy would be those that embed skills-first principles across the employee lifecycle, from recruitment to career development.
