4 trends that are defining the future of HR

Demystifying the Future of HR: 4 Trends To Look Out For featured image
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Today’s workforce is undergoing unprecedented transformations, and it’s expected to continue evolving. 

Failing to understand and respond to the intricacies of these changes can put your company at risk of losing top talent, making poor workforce planning decisions, and missing opportunities for innovation. This can impact your revenue, growth, and reputation. 

But trying to understand the future of human resources can be confusing and overwhelming. 

In this article, we discuss the four most important emerging trends in HR. We provide digestible explanations and practical tips along the way so you can navigate changing employee expectations, global shifts, and HR technological advancements with confidence and ease.

  1. The rise of skills-based hiring

  2. What NextGen employees need: The 4Fs

  3. Working with the gig economy 

  4. The ups and downs of AI

1. The rise of skills-based hiring

We recently surveyed 1,500 employers and employees about their company’s recruitment practices. The results, detailed in our The State of Skills-Based Hiring 2023 report, showed that 70% of organizations used skills-based hiring in 2023 – up from 56% in 2022. 

If you’re new to it, let’s quickly look at what skills-based hiring means and why it’s on the rise. 

What’s “skills-based hiring” all about?

Skills-based hiring refers to the practice of assessing job candidates on the specific skills required for a job rather than their educational qualifications, prior work experience, personal hobbies, and other traditional assessment criteria. 

This could mean asking candidates to demonstrate their skills through online assessments, hackathons, case studies, or role-play exercises.

Why is skills-based hiring gaining popularity? 

Skills-based hiring is becoming more popular for the following reasons:

Tight labor markets in high-income countries

In their 2023 report, the World Economic Forum (WEF) surveyed 803 companies employing over 11 million workers, exploring how jobs and skills will evolve over the next five years. 

Results showed that job markets in high-income countries like the US are facing tight labor markets. This means there are more open positions than unemployed workers to fill them due to high demand for labor, low unemployment rates, and skills shortages or mismatches. Our own data also shows that about 60% of employers faced difficulty finding talent in 2023. 

Using skills-based hiring can help you reach a wider talent pool by eliminating the need for specific qualifications or years of experience. Plus, it helps reduce skills mismatches. 

Further, our research shows that 82% of employers using skills-based hiring reduced their time-to-hire. Faster recruitment helps you secure top talent before other companies. 

Low and lower-middle-income countries face rising unemployment

The WEF report also indicated that lower-income countries are seeing an increase in unemployment levels, particularly for women and workers with only basic education. This is expected to continue over the next few years. 

We spoke to HR expert Yashna Wahal about why this might be the case. 

In her experience hiring in both high and low-income markets, Yashna found that employers in developing economies focus much more on educational qualifications when making hiring decisions – including MBA degrees, years of experience, and prior employment with reputed companies. 

Unfortunately, these are the same economies where minority groups like women have had fewer opportunities in education and employment. According to Yashna, “Many individuals from these groups have the right competencies, skills, and attitudes to succeed but get overlooked due to ‘weak’ resumes.” 

By using skills-based hiring processes to assess candidates' real-world skills and abilities, employers are providing fair opportunities to the individuals and increasing diversity in their workforce. 

Companies are questioning traditional screening tools

87% of employers face issues using resumes as a screening tool. They state concerns with:

  • Assessing the accuracy of resumes

  • Ranking candidates and evaluating their skills

  • Spending time reviewing resumes

  • Letting unconscious biases affect the screening process

Of the employers who’ve already adopted skills-based hiring, 88% reduced instances of mis-hiring, 74% reduced the cost-to-hire, 82% reduced the total time-to-hire, and 89% increased employee retention among new recruits. 

How to use skills-based hiring correctly in future recruiting efforts 

Here’s how you can incorporate skills-based hiring into your future HR practices. 

Start with simple and effective forms of skills-based hiring – like talent assessments. Evaluate candidates on the key skills and traits required for a role. This is a quick way to identify top performers while eliminating bias from the process. 

Then, consider using role-play, practical workshops, or virtual simulations to examine applicants’ abilities in real time. 

Finally, we highly advocate for completely scrapping outdated hiring practices and committing fully to skills-based hiring. 

2. What NextGen employees need: The 4 Fs

Over the next few years, most of the workforce will comprise millennials and Gen Z workers, who, according to HR expert Medi Jones, “are a will unto their own in the workplace and don’t respond to standard employee engagement initiatives or traditional management styles.”

We’ve looked at several research papers and studies and found 4 Fs to help drive, engage, and retain these generations of employees: flexibility, fulfillment, financial stability, and fairness. 

Flexibility

In their 2023 survey, Deloitte – one of the world's leading multinational professional services networks – gathered feedback from over 22,000 millennials and Gen Zers across the world. Results consistently showed that these workers preferred hybrid work and wanted autonomy in their work. 

This could mean working remotely full time or coming into an office or coworking space once a week, month, or even year. Only 2% of employees want full-time remote working, meaning: they want physical interaction and collaboration with their colleagues, but on their terms. 

You don’t have to provide complete choice. At TestGorilla, we encourage employers to seek balance when it comes to hybrid work – meeting employees’ needs while maintaining business objectives. 

Here’s how you might approach hybrid work: 

  • Limit the maximum daily hours of work. The International Labor Organization (ILO) found that longer hours were associated with lower productivity.

  • Follow regulations around statutory rest breaks. The ILO also showed that these contribute to employees’ long-term health and well-being.

  • Establish principles – not policies. For instance, ask employees to come in three days a week without mandating which days. Harvard Business Review suggests that this can provide autonomy.

  • Consider exploring the four-day workweek, like some companies are doing according to Gartner, a consulting firm. This could encourage on-site work while supporting work-life balance. 

Fulfillment

Engaging employees through pay and perks is no longer enough. Gen Zers and millennials want to have a tangible impact and feel fulfilled in everything they do – from their careers to company success and the world overall. 

Here’s how to give your future workforce fulfillment. 

Provide work with purpose 

A Gallup poll showed that 67% of millennials said they’d be more engaged in their jobs if they felt it was important to the company’s mission. Similarly, a 2021 study found that 71% of Gen Z employees were even willing to take pay cuts for more meaningful work.  

Here are some of our top tips for creating a sense of purpose for employees. 

  • Remind employees of the company’s purpose and how their work contributes to it during check-ins and town halls.

  • Involve them in key company decisions, fostering a sense of ownership.

  • Set up volunteer days, charity runs, and other initiatives that help employees find ways to connect with their personal values and find a sense of purpose at work. When an employee feels purpose at work, they’re more likely to stay with a company. 

Encourage professional development

O.C. Tanner, a global specialist in employee recognition, said providing employees with growth and a “sense of mastery” helps increase employee fulfillment. Millennials and Gen Zers place high value on their professional development, and 74% are willing to move jobs for better career advancement opportunities. 

Providing them these opportunities in-house will satisfy employee needs and benefit your company. Developing employees’ skills will improve productivity and innovation and let you “quiet hire” – bridge skills gaps without making expensive external hires.

Further, the World Economic Forum is expecting 60% of employees to need retraining by 2027 due to factors like the adoption of technology and AI and the growing importance of cognitive abilities like critical thinking. Investing in your future workers now will ensure you’re not on the back foot later. 

HR expert Yashna Wahal,  who’s had many years of experience in employee learning and development, shared her top tips on supporting employees’ growth. 

  • Help employees upskill and reskill through comprehensive training programs, including classroom-style, online, and on-the-job training.

  • Provide personalized coaching to your top talent.

  • Support internal career mobility, encouraging employees to work in and learn different roles.

  • Offer mentorship to provide access to career development support and advice.  

Financial stability 

In Deloitte’s survey, both millennials and Gen Zers ranked “cost of living” as their top concern today. Additionally, over 50% of both groups said they live paycheck to paycheck, up 5% since 2022. 

Evidence suggests that financial insecurity affects employee performance. According to MetLife, a well-established company in the financial sector, companies lose $250 billion annually due to the impact of stress on employees’ work, with one in three employees admitting to being less productive due to financial stress. 

We found two solutions for providing employees with more financial security. 

Employer-assisted savings 

Commonwealth, a Boston-based financial security organization, suggested employers should offer to deposit a proportion of employees’ paychecks into separate savings accounts. Seventy-five percent of workers said they’d consider an employer-based emergency savings program, and nearly 100% would participate if employers matched their contributions. 

Additionally, 62% agreed that employer-offered savings tools would make them work harder, 55% said they’d miss less work, and 76% said it would make them want to stay with the company. 

Better benefits programs 

Employees also require support for their more immediate needs, including unplanned time off, healthcare, and childcare. Employers must enhance benefits packages, even if they can’t increase employee salaries or bonuses. 

US Bureau of Labor Statistics data from 2022 indicates that, compared to higher-paid workers, lower-paid workers are less likely to have access to paid leave. A different report by the Department of Labor found that one in three workers who didn’t have paid leave spent down their savings when they had to take time off. Lack of paid leave can lead to significant financial strain and stress for employees facing emergencies or personal health issues.

Meanwhile, benefits packages can be a big draw for candidates: one survey found that employer-sponsored health insurance plans influenced employees’ decision to join a company in 46% of cases and stay with the company in 56% of cases. 

JPMorgan Chase and Patagonia estimated a 91% and 115% return on their investments in childcare benefits. Plus, they saw less turnover and higher levels of employee engagement. The evidence is clear: employers benefit just as much as their employees from better benefits programs.

Fairness

Finally, millennials and Gen Z care deeply about working for companies that focus on fairness, equality, and ethical working. 

In our conversation with Medi Jones, HR expert, Medi stressed, “These digital natives value transparency and integrity above all else. They expect their employers to uphold high ethical standards, align with social responsibility, and actively contribute to positive change. They simply won’t engage with employers that don’t meet their expectations.”

Ioana Andrei, HR expert and social entrepreneur, echoed this view when we talked to her. “Digital media makes it easier for candidates and customers alike to become aware of companies’ poor employer reputations,” she said. “There’s also less societal patience with companies appearing not to move fast enough on workplace equality – particularly since the Me Too and Time’s Up campaigns.” 

So, reiterate your commitment to fair workplace practices through town halls, newsletters, and more. Moreover, put it into action by ensuring fair pay and promotions and a commitment to diversity and ethical business. 

3. Working with the gig economy 

We can’t discuss the future of HR without considering the fast-growing gig economy.

Often used interchangeably with “freelancers” or “contract workers”, gig workers take “gigs” – temporary or project-based jobs. They provide services to different clients or companies.

Recent statistics show that as of 2023, nearly 75 million freelancers work in the US – up by at least 2 million per year since 2017. Analysts expect this number to rise further in the coming years, with around 50% of freelancers citing “wanting to save money,” “needing to cover gaps or changes in income,” and “being able to control own schedule” as the top reasons for taking gig work. 

At TestGorilla, we believe that – contrary to popular opinion – employers benefit greatly from hiring gig workers. It opens doors for more talent and reduces expenses relating to employee benefits like 401k plans. 

To take advantage of this growing gig workforce, Deloitte suggests companies evolve their hiring, management, and cultural practices to align with the dynamic nature of temporary labor. Here’s what we think this could look like in practice.  

Streamlined onboarding

Develop tools and tactics to hire and onboard gig workers quickly and effectively without compromising on the quality of hires. You could, for example, eliminate training modules on certain employee policies irrelevant to temporary labor. 

Focus on skills rather than jobs

Step away from traditional perspectives on key positions you “must” fill. For instance, it may not be necessary to hire a marketing manager who occupies a full-time seat and supports your overall marketing strategy. 

Instead, you might hire gig workers to work on specific campaigns, website SEO, and other projects. 

Improve security

Your IT team will need methods to accommodate the constant movement of workers into and out of the business, such as creating efficient and standardized processes to revoke access, retrieve company assets, and so on. 

Adjust your company culture

The rise of gig work occurs concurrently with the rising need for job fulfillment. “Don’t treat gig workers as outsiders like so many companies do today,” says HR expert Yashna Wahal. 

Where appropriate, involve your temporary employees in company decisions, remind them of the mission, and ensure they integrate well with your full-time workforce. Make your organization a place where gig workers want to work. 

Consider financial security 

Think about how you can offer financial stability to temporary workers. For instance, put your best gig workers on a retainer – a fixed, long-term contract – so they feel secure about having a steady demand for their work from your company. 

4. The ups and downs of AI

Artificial Intelligence (AI) has entered every industry, and HR is no exception. Gartner’s research estimated that 76% of HR leaders believe they should adopt AI solutions in the next 12-24 months to stay competitive. 

While there are several use cases for AI in HR in the future, there are also challenges to consider. You must understand both sides and proceed with cautious optimism. 

Upsides

Here are the pros of AI in HR:

Efficient and better-quality hiring

A 2023 study published in the International Journal of Professional Business Review found that using AI in resume and social media screening, candidate matching, predictive analysis, gamification, and VR assessments saved companies’ time and money and resulted in better-quality hires.  

Another study showed that candidates have a positive perception of AI’s use in hiring. The biggest benefit? Faster response times. 

Improved performance management and training outcomes

The Society of Human Resource Management (SHRM) says generative AI can analyze large amounts of employee data, including performance metrics, qualitative feedback, and even praise from team chats to “put together good performance summaries for managers to review.”

This saves managers tons of time they can instead use to have real conversations about performance. 

SRHM also shows that using generative AI can reduce the tendency to overemphasize recent events or achievements in performance reviews. That’s not all – you can go one step further with AI that analyzes performance data and recommends tailored training programs. 

Speed and precision in employee query management 

Another SHRM study shared that most HR inquiries can now be initiated through chatbots and virtual assistants, freeing up time for HR professionals to focus on workforce strategy. 

Chatbots can help employees with frequently asked questions that have predetermined answers – for instance, “provide me with a list of company holidays.” Virtual assistants are more advanced and can, for example, support employees through onboarding, benefits enrollment, and so on. 

Downsides

Here are the downsides of AI in HR:

Diversity and discrimination risks

A ScienceDirect study illuminated dangers of AI in recruitment, including issues with diversity, low accuracy and reliability, and immature technology. 

AI makes predictions and generates insights using past data that’s often riddled with historical biases and discriminatory practices. Unfortunately, this means AI can learn to perpetuate these biases and put the company’s diversity targets at risk. In fact, according to Fortune, Amazon had to abandon an AI hiring process because it perpetuated biases in resume screening by favoring male candidates. 

Reuters explained that although AI appears neutral and unbiased, it can lead to discriminatory recommendations that violate the Civil Rights Act of 1964. This act makes it illegal to base employment and pay decisions on gender, race, and other characteristics. AI can learn historical salary biases and perpetuate issues – like pay inequity.

Consider conducting regular AI bias audits to ensure that you’re not liable for discriminatory hiring practices. Use the latest guidelines by the U.S. Equal Employment Opportunity Commission. 

Data privacy and security concerns

Using AI in HR means providing it with a large volume and variety of employee data, including confidential or sensitive information – like personal information, performance reviews, medical records, and more. If you’re not careful, data could be prone to leaks, putting you in breach of data privacy regulations like GDPR

Reuters suggests safeguarding information by using only “closed” AI systems. These don’t share your prompts or employee data with third-party platforms. 

Displacement 

The rise in AI has fostered a growing anxiety that it’ll replace employees. There are even claims that  1 in 4 companies have already replaced employees with ChatGPT.

At TestGorilla, we believe that while the nature of roles may change. AI is here to enhance – not replace – employees, and HR needs to pioneer the use of AI to improve the employee experience. 

Roles are expected to shift over time, and HR leaders must support employees whose direct roles have been disrupted by AI by reskilling them. 

Distrust

There’s evidence to suggest that employees don’t fully trust AI, not yet at least. For instance, one paper explained that employees still ask HR professionals to clarify their HR queries, as they don’t fully trust the accuracy of chatbots’ responses. 

At TestGorilla, we recommend leveraging the power of AI in hiring and onboarding but exercising caution when it comes to sensitive queries, pay, and promotion decisions. These still warrant nuanced, human interactions. 

Skills-based hiring is emerging as a top choice for employers in the future of HR 

The modern workplace is constantly evolving, and HR teams must prepare for changing market conditions, shifting employee sentiments, and rising technological advancements to stay ahead of the curve. 

Replacing traditional recruitment tools with skills-based hiring can help you attract top talent and increase diversity in your future workforce. Additionally, flexibility and financial stability are non-negotiable for millennials, Gen Z, and gig workers – who’ll make up most of the labor market in the coming years. 

Finally, AI has arrived, and with caution and care, you can benefit from its speed, efficiency, and accuracy. 

In this ever-evolving landscape of work, embracing the future of HR today can make you a pioneer in tomorrow's thriving workplaces. 

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