Malaysia’s labour market is undergoing a profound shift as skills-first hiring gains traction, prioritising candidates’ competencies over conventional markers such as degrees and years of experience.

This transformation is part of a broader global trend driven by digitalisation, artificial intelligence, and evolving workforce expectations.

The Robert Walters Malaysia 2025 Hiring Trends Report highlights how businesses are implementing skills frameworks to identify key competencies and ensure alignment with job roles.

Many companies are redesigning job structures and investing in upskilling initiatives to cultivate a more agile and productive workforce.

According to LinkedIn’s Future of Talent Report, Malaysian employers are placing greater emphasis on technical skills (38%) and transferable skills (28%), while formal education (10%) and years of experience (12%) are becoming secondary considerations.

Moreover, 67% of businesses are open to hiring professionals from different industries, provided they possess the necessary expertise.

This evolution reflects a growing disillusionment with traditional recruitment models. McKinsey’s Workforce Transformation Report notes that skills-based hiring adoption has surged from 40% in 2020 to 60% in 2024, underscoring the limitations of degree-centric recruitment. By focusing on practical skills and hands-on experience, employers can widen their talent pools and mitigate hiring biases.

Also Read: Skills vs degrees? Ex-IBM boss weighs in

The forces behind skills-first hiring

Several factors are accelerating this trend. The Deloitte Global Talent Trends Report found that 72% of businesses cite talent shortages as a pressing concern, prompting a shift towards alternative hiring strategies. Meanwhile, automation and AI-powered skills assessments have made competency evaluation more efficient.

Beyond operational benefits, skills-first hiring is proving instrumental in diversity and inclusion efforts. By removing unnecessary degree requirements, companies can attract talent from non-traditional backgrounds, supporting a more inclusive workforce.

The Society for Human Resource Management (SHRM) observes that businesses worldwide are embracing skills-based hiring in response to competitive job markets.

In Malaysia, digital transformation, automation, and sustainability initiatives are increasing demand for specialised technical expertise, reinforcing the need for a more adaptable workforce.

Alongside this shift, contract hiring is gaining popularity. Organisations are leveraging temporary roles to manage seasonal demand, project-based work, and workforce gaps to ensure agility and cost-effectiveness.

The business case for skills-based hiring

Investing in skills-based hiring isn’t just about accessing a broader talent pool. It also enhances efficiency and cost savings.

Burning Glass Institute’s Hiring Efficiency Study, for example, found that companies using skills-based hiring platforms reduced time-to-hire by 25%, with some seeing reductions as high as 40%.

Meanwhile, Deloitte’s Cost-Per-Hire Benchmark Report shows that businesses save an average of 30% on recruitment expenses by leveraging pre-screened talent pools and AI-powered assessments.

For startups and SMEs with limited hiring budgets, these savings can make a tangible difference.

The future of hiring in Malaysia

Malaysia’s transition towards skills-based hiring reflects a fundamental rethinking of recruitment strategies. As businesses shift their focus from credentials to competencies, they stand to gain a more diverse, capable, and future-ready workforce.

Amid rapid work and business transformation, hiring based on what people can do – rather than where they studied or how long they’ve worked – will be key to sustaining growth and innovation.