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PEO Services Trend Toward Skill Based Hiring

The PEO Services Trend Toward Skill Based Hiring | VertiSource HR

Here at VertiSource HR, we have been noticing a trend over the last 12-18 months: PEO services working with employers to institute what is known as skills-based hiring. Although formal education and training are still requirements for many types of jobs, employers and their PEO partners are placing a greater emphasis on real world competencies and abilities.

So, why the switch? And more importantly, how did we ever get to the place we are at today? The modern trend of skills-based hiring actually goes back to something that began decades ago. As a side note, employers and PEO services that have trouble filling open positions via traditional hiring practices would do well to look back on how recruitment and hiring has changed since the turn of the century.

Adding Degree Requirements

Harvard Business Review’s Joseph Fuller, Christina Langer, and Matt Sigelman published an in-depth analysis about the trend toward skills-based hiring in early 2022. You can read it here. Although the piece is dated, a lot of the information it contains is still relevant today.

According to the authors, hiring practices began embracing a fundamental change in the early 2000s with the addition of degree requirements for positions that previously did not have them. One could argue that the degree trend actually began a decade earlier, but that is another post for another time.

The point is that, over the next 5-8 years, recruitment and hiring were subjected to what Fuller, Langer, and Sigelman referred to as ‘degree inflation’. By the time the 2008-2009 recession was fully entrenched, businesses were dismissing potential job candidates based solely on a lack of educational credentials. But as the recession subsided and hiring picked up, many companies also realized it was time for a change.

Enter Skills-Based Hiring

The hiring practices of the Great Recession were gradually replaced by new practices that placed less emphasis on college degrees and formal training. That trend eventually gave birth to the skills-based hiring trend we now see throughout the country. This leads to an obvious question: what is skills-based hiring and why are PEO services embracing it?

Skills-based hiring is a hiring strategy that prioritizes a job candidate’s competencies, demonstrated abilities, and future potential. Less emphasis is placed on traditional metrics like educational credentials and tenure. Skills-based hiring does not ignore higher education and vocational training, but it does consider both on an equal plane with real world skills and abilities.

PEO services are trending towards skills-based hiring because they have learned to recognize the potential found in job candidates who do not necessarily have a ton of educational or formal training. They see the potential in candidates who have demonstrated the ability to learn new skills through hands-on training. They recognize those candidates as often being the best choice for certain positions.

Why PEO Services are Worth a Look

Let us close this post by discussing why skills-based hiring is worth a look. At the top of the list is the reality that skills-based hiring expands the pool of job candidates for a given position. When candidates are not immediately dismissed for lack of tenure or education, you have more candidates to work with.

Skills-based hiring also:

  • encourages objective evaluations.
  • promotes adaptability and agility.
  • encourages better performance among hires.
  • encourages employee innovation.
  • reduces turnover rates.

It is worth noting that skills-based hiring does have its downsides. But from our perspective, the good outweighs the bad. PEO services are embracing skills-based hiring and encouraging their employer partners to do the same. The bottom line is that it works for a lot of companies that have tried it.