Ongoing skills shortages in Australia and New Zealand are negatively impacting organisational performance, the economy and global competitiveness. In response, 86% of hiring managers are shifting towards skills-based hiring, says a new report.
Recruitment and workforce solutions company Hays has released its Hays 2025 Skills Outlook Report which highlights worsening skills shortages, driven by an ageing population, declining birth rate, changing employment arrangements increasing the need for skilled workers, changing skill needs and inadequate apprenticeship rates.
Hays says the report is based on a survey of more than 5,000 hiring managers and professionals from Australia and New Zealand across 10 different industries and professions and uncovers their respective skills gaps and the strategies being deployed to address them.
The report finds that 85% of hiring managers in Australia and New Zealand experience skills gaps that negatively affect team or organisational performance. The most significant gaps include:
- Hard/technical skills (57%).
- Critical thinking and problem-solving skills (50%).
- Leadership/management skills (46%).
- Communication skills (41%).
The industries most affected are public safety and administration (60%), manufacturing (52%), and financial and insurance services (51%).
Hays says in a statement that larger organisations face even greater challenges, with 53% of those employing more than 1,000 people reporting moderate or extreme skills gaps.
Shane Little. (Image supplied.)
Building a future-ready workforce
The company says that skilled migration has been at the forefront of the skills shortage debate, however, the report finds only 37% of hiring managers use skilled migration to address talent shortages, with 23% reporting below-expected outcomes. The primary challenges include lengthy hiring processes and high costs.
To address these gaps, 86% of hiring managers are instead adopting skills-based hiring practices. However, identifying and assessing skills remains a significant challenge. Hays says the biggest barriers include:
- Identifying and assessing candidate skills (52%).
- Redefining roles and processes (49%).
- Training hiring managers (49%).
“Despite these hurdles, 64% of organisations reported that skills-based hiring met their expectations, demonstrating its potential to minimise skills gaps.
“Upskilling and reskilling are also critical, with on-the-job and formal training proving most effective. These strategies met the expectations of 67% of organisations,” the firm says.
Hays Managing Director APAC, Shane Little says accessing the right skills to build a future-ready workforce “requires a deliberate ‘Build, Buy, Borrow’ strategy. Businesses must rethink traditional approaches, embrace skills-based hiring, and invest in upskilling to stay competitive. While each pathway has challenges, the rewards are clear for those who adapt and innovate.”
Perception gaps between employers and employees
The report also highlights a disconnect between the skills employers prioritise and those professionals believe are essential.
“Hiring managers identified human skills as most important for the future, with the top three being communication and teamwork (84%), critical thinking and problem-solving (81%) and adaptability and flexibility (71%).
Generative AI was at the bottom of the list with only 30% of respondents reporting that they think these skills will be necessary.
In contrast, professionals ranked new IT/tech skills (58%), leadership/management skills (43%), and technical skills (40%) as their top priorities.
Little says the “misalignment between employer and employee skills priorities highlights the need to close the perception gap to align career development goals with business needs”.
“The future of work will continue to rely heavily on human skills such as communication, problem-solving and adaptability…”
“While technical and IT skills are critical, the future of work will continue to rely heavily on human skills such as communication, problem-solving, and adaptability. Employers who recognise this balance will be better positioned to thrive in the years ahead,” he says.
“With 86% of hiring managers turning to skills-based hiring, it’s clear that employers are rethinking traditional hiring practices. Those who focus on building lifelong learners and capabilities over credentials will be better positioned to close skills gaps and drive organisational success.”
Advice for professionals
“To thrive in a rapidly evolving job market, embracing continuous learning and adaptability is non-negotiable for professionals,” says Little.
“While employers may offer some training opportunities, professionals need to proactively take charge of upskilling and reskilling to stay ahead.
“Leveraging a mix of formal training, in-house programmes, and micro-credentials—while also upholding essential human skills like critical thinking, communication, and collaboration—will give individuals a competitive edge.
“Professionals must also focus on showcasing their skills rather than just their qualifications. Demonstrating a diverse skill set will make you more attractive to employers who are now looking beyond traditional resumes,” he adds.
See the full report at Hays 2025 Skills Report.
