The U.S. job market continues to defy expectations, adding more than half a million jobs in January and reaching a 54-year low unemployment rate of 3.4%. It’s no surprise that 61% of the U.S. business leaders surveyed by LinkedIn recently say it’s challenging to attract top talent right now.

In today’s uber-competitive talent market, forward-thinking employers are switching up their talent acquisition strategies in order to win more qualified candidates for their team. Highly skilled talent will always be in high demand and skills-based hiring can help you identify, engage, and close these coveted job seekers.

What is skills-based hiring?

Skills-based hiring is a recruitment approach that focuses on evaluating candidates based on their skills, rather than on their education or past work experience.

Employers have long relied on proxies like education or years of experience in a given role to signal that a candidate was capable of performing a job. Instead, these unnecessary requirements weed out perfectly qualified candidates for seemingly arbitrary reasons.

Skills-based hiring is gaining popularity because it helps employers find qualified candidates with the necessary skills and potential to succeed in the role. This approach works best with entry-level and mid-career positions that don’t require specialized training or credentials.

4 advantages of skills-based hiring

Skills-based hiring offers several advantages over traditional hiring methods that focus on a candidate’s pedigree.

1. Increase your quality of hire

Pedigree requirements like degrees and years of experience aren’t reliable proxies for candidate quality, but skills and competencies are. LinkedIn research shows that employers who find talent using skills are 60% more likely to make a successful hire than those who don’t rely on skills as part of their hiring process.

When employee competencies are aligned with their role, your team is set up for success and more likely to be engaged and motivated in their work. This can lead to higher performance, productivity, and profitability.

2. Expand your talent pool

The talent shortage has reached a 16-year high, with 75% of companies reporting difficulty filling open positions.

Skills-based hiring can help employers identify candidates who may not have formal education or traditional career paths, but have the right mix of skills for the job. For example, a cashier has 79% of the skills needed to be a customer service specialist and 68% of the skills needed to be an office assistant.

Removing unnecessary job requirements — like years of experience in a specific role or a skill that can be easily learned on the job — may expand your talent pool immensely. This can have a significant societal impact as it removes barriers so more people can access well-paying jobs.