57 per cent of employers say skills gaps are impacting productivity, finds AHRI research


Almost one in five employees are deemed “not proficient” in their roles, according to a recent report. Here’s how employers are responding to productivity barriers caused by skills gaps. 

Australia’s ongoing skills gaps are hampering productivity for over half of employers (57 per cent), according to a recent report from AHRI.

The report, based on insights from 607 senior business decision-makers across a range of sectors, also found that almost one in five workers (19 per cent) are considered “not proficient” in their role by their employer, a statistic which is consistent with AHRI’s most recent Quarterly Work Outlook report

This problem is more significant in the public sector, where 24 per cent of employees aren’t fully proficient, compared to 18 per cent in the private sector.

With the integration of AI and other complex technologies moving at a rapid pace, it’s unsurprising that employers are lacking essential capabilities within their workforces. 

Skills and qualifications that previously sustained a career spanning 40 years or more now demand continuous updates and to remain relevant, posing significant challenges for learning and development teams to keep up with the speed of change. According to the World Economic Forum, the half-life of a skill is currently about five years. 

With that said, AHRI’s findings demonstrate that employers are not resting on their laurels. More than three quarters (77 per cent) are taking active steps to strengthen their talent pipelines

Below, HRM unpacks AHRI’s key findings on the driving forces behind Australia’s capability gaps, and how employers are responding.

Common causes of skills gaps

Employers identified a range of driving forces behind current skills gaps, mostly related to the rapid evolution of skill and business needs.

Figure 1 shows that evolving business or strategic needs are cited by 44 per cent of employers, while 42 per cent point to the constantly evolving skills landscape as a significant factor.

A lack of skilled candidates and underinvestment in training and development were both cited by one in four employers. One survey respondent, a Director of Workforce Strategy and Planning from a public sector organisation, highlights the critical gap in basic employability skills among new graduates.

“[We expect graduates to have] a set of employability skills around teamwork, creativity and analytical skills… but the universities say that’s not their role to develop these skills.”

Employees’ reluctance to develop new skills and poor management practices were also commonly cited as barriers to skills development, indicating a need for employers to create more dynamic and engaging learning environments for employees at all levels.

To tackle these issues effectively, it’s essential to conduct regular analysis of current and projected skills gaps and use these insights to shape your HR strategies. See the action points below for tips (hover over the card to reveal tips).

Actions for HR

How employers are strengthening their talent pipelines

Encouragingly, AHRI’s findings show employers are taking proactive steps to address skills gaps and build a robust talent supply.

Over a third of employers (37 per cent) say they plan to increase their training investment over the next 12 months, with just six per cent reporting plans to decrease their investment. Technical and practical skills are the highest priority for investment (26 per cent), while just 14 per cent will prioritise leadership and management training.

Recognising the long-term need for talent stability, more than three quarters of employers (77 per cent) report taking measures to strengthen their talent pipeline. As shown by Figure 2, the most common initiatives to achieve this include mentoring schemes (38 per cent), work placements for adults (31 per cent), internships (30 per cent) and graduate programs (28 per cent).

Particularly in the not-for-profit sector, employers showed high enthusiasm for apprenticeships due to their low cost, high retention rates and effectiveness in addressing skills gaps. 

An executive from a large service organisation noted, “We are using apprenticeships or other non-graduate-entry programs for school leavers. They complement the graduate programs really well, especially in filling entry-level roles. We are now broadening the scope, using them for occupations where there is a skills shortage, such as data analysts.” 

See the action points below for tips to expand your internal and external talent pools and contribute to nurturing the next generation of skilled workers. (Hover over action points to reveal tips).

Actions for HR

Addressing skills gaps with overseas workers

Another significant finding from AHRI’s research is that more than two in five employers (41 per cent) report employing overseas workers to meet their skills needs. Moreover, over a third (37 per cent) say they plan to increase efforts to hire workers from overseas in the next 12 months. 

This intent is especially high in the public sector, where more than half (58 per cent) of employers plan to increase overseas recruitment.

Unsurprisingly, the primary motivation for overseas hiring was a lack of local skilled candidates. In the age of remote and hybrid work, many employers are also more equipped to hire global talent than ever before.

While overseas employment can be an effective and flexible way to address skills needs, it’s crucial for employers to stay on top of their compliance obligations when hiring global talent, given that visa and jurisdictional requirements can introduce a number of potential legal pitfalls for HR. 

Read HRM’s article about compliance measures to keep in mind when hiring skilled migrants.

Use the tips below to minimise risk and ensure a smooth hiring process for overseas employees.

Actions for HR

Addressing future skills challenges

AHRI’s report highlights that employers are recognising the need to not only address current skills shortages, but also anticipate future skills requirements. This approach currently involves a combination of upskilling existing employees, developing robust talent pipelines and leveraging migration to supplement the domestic workforce.

Looking forward, there is a critical need for continuous investment in skills development to ensure skills shortages do not continue to stunt productivity in the years and decades ahead.

As one survey respondent from an infrastructure company puts it, “To build an electrician who can work on a high voltage line takes 10 years, so if there’s a gap today, you should have filled it 10 years ago.”

By adopting a comprehensive approach to skills development that remains attuned to emerging skills needs and fostering a forward-thinking mindset in their people, HR practitioners will play an instrumental role in stabilising the future talent landscape.

For more detailed insights, download the full AHRI report here.

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damain
damain
18 days ago

WOW, They had to ask 607 senior business decision-makers!!!! Just ask any worker where the issues are. Organisational culture starts at the top and cultivated through effective leadership. We all know what, It’s the traction to doing that’s the issue.

Max Underhill
Max Underhill
18 days ago

This article could have been written in late 1980’s early 1990’s. At this time Australia lost most of the manufacturing sector. The Federal government introduced Enterprise Based Vocational Training which focused on workplace training. The organisational experts focused on competence which was skill, application and attributes. In those days it was the competency to produce an outcome at the standard set by the quantitative performance measures. Why it was so successful at the time was that it involved clear definition of position and empowering the employees. We could learn a lot from those days and wisdom of people like Roger… Read more »

More on HRM

57 per cent of employers say skills gaps are impacting productivity, finds AHRI research


Almost one in five employees are deemed “not proficient” in their roles, according to a recent report. Here’s how employers are responding to productivity barriers caused by skills gaps. 

Australia’s ongoing skills gaps are hampering productivity for over half of employers (57 per cent), according to a recent report from AHRI.

The report, based on insights from 607 senior business decision-makers across a range of sectors, also found that almost one in five workers (19 per cent) are considered “not proficient” in their role by their employer, a statistic which is consistent with AHRI’s most recent Quarterly Work Outlook report

This problem is more significant in the public sector, where 24 per cent of employees aren’t fully proficient, compared to 18 per cent in the private sector.

With the integration of AI and other complex technologies moving at a rapid pace, it’s unsurprising that employers are lacking essential capabilities within their workforces. 

Skills and qualifications that previously sustained a career spanning 40 years or more now demand continuous updates and to remain relevant, posing significant challenges for learning and development teams to keep up with the speed of change. According to the World Economic Forum, the half-life of a skill is currently about five years. 

With that said, AHRI’s findings demonstrate that employers are not resting on their laurels. More than three quarters (77 per cent) are taking active steps to strengthen their talent pipelines

Below, HRM unpacks AHRI’s key findings on the driving forces behind Australia’s capability gaps, and how employers are responding.

Common causes of skills gaps

Employers identified a range of driving forces behind current skills gaps, mostly related to the rapid evolution of skill and business needs.

Figure 1 shows that evolving business or strategic needs are cited by 44 per cent of employers, while 42 per cent point to the constantly evolving skills landscape as a significant factor.

A lack of skilled candidates and underinvestment in training and development were both cited by one in four employers. One survey respondent, a Director of Workforce Strategy and Planning from a public sector organisation, highlights the critical gap in basic employability skills among new graduates.

“[We expect graduates to have] a set of employability skills around teamwork, creativity and analytical skills… but the universities say that’s not their role to develop these skills.”

Employees’ reluctance to develop new skills and poor management practices were also commonly cited as barriers to skills development, indicating a need for employers to create more dynamic and engaging learning environments for employees at all levels.

To tackle these issues effectively, it’s essential to conduct regular analysis of current and projected skills gaps and use these insights to shape your HR strategies. See the action points below for tips (hover over the card to reveal tips).

Actions for HR

How employers are strengthening their talent pipelines

Encouragingly, AHRI’s findings show employers are taking proactive steps to address skills gaps and build a robust talent supply.

Over a third of employers (37 per cent) say they plan to increase their training investment over the next 12 months, with just six per cent reporting plans to decrease their investment. Technical and practical skills are the highest priority for investment (26 per cent), while just 14 per cent will prioritise leadership and management training.

Recognising the long-term need for talent stability, more than three quarters of employers (77 per cent) report taking measures to strengthen their talent pipeline. As shown by Figure 2, the most common initiatives to achieve this include mentoring schemes (38 per cent), work placements for adults (31 per cent), internships (30 per cent) and graduate programs (28 per cent).

Particularly in the not-for-profit sector, employers showed high enthusiasm for apprenticeships due to their low cost, high retention rates and effectiveness in addressing skills gaps. 

An executive from a large service organisation noted, “We are using apprenticeships or other non-graduate-entry programs for school leavers. They complement the graduate programs really well, especially in filling entry-level roles. We are now broadening the scope, using them for occupations where there is a skills shortage, such as data analysts.” 

See the action points below for tips to expand your internal and external talent pools and contribute to nurturing the next generation of skilled workers. (Hover over action points to reveal tips).

Actions for HR

Addressing skills gaps with overseas workers

Another significant finding from AHRI’s research is that more than two in five employers (41 per cent) report employing overseas workers to meet their skills needs. Moreover, over a third (37 per cent) say they plan to increase efforts to hire workers from overseas in the next 12 months. 

This intent is especially high in the public sector, where more than half (58 per cent) of employers plan to increase overseas recruitment.

Unsurprisingly, the primary motivation for overseas hiring was a lack of local skilled candidates. In the age of remote and hybrid work, many employers are also more equipped to hire global talent than ever before.

While overseas employment can be an effective and flexible way to address skills needs, it’s crucial for employers to stay on top of their compliance obligations when hiring global talent, given that visa and jurisdictional requirements can introduce a number of potential legal pitfalls for HR. 

Read HRM’s article about compliance measures to keep in mind when hiring skilled migrants.

Use the tips below to minimise risk and ensure a smooth hiring process for overseas employees.

Actions for HR

Addressing future skills challenges

AHRI’s report highlights that employers are recognising the need to not only address current skills shortages, but also anticipate future skills requirements. This approach currently involves a combination of upskilling existing employees, developing robust talent pipelines and leveraging migration to supplement the domestic workforce.

Looking forward, there is a critical need for continuous investment in skills development to ensure skills shortages do not continue to stunt productivity in the years and decades ahead.

As one survey respondent from an infrastructure company puts it, “To build an electrician who can work on a high voltage line takes 10 years, so if there’s a gap today, you should have filled it 10 years ago.”

By adopting a comprehensive approach to skills development that remains attuned to emerging skills needs and fostering a forward-thinking mindset in their people, HR practitioners will play an instrumental role in stabilising the future talent landscape.

For more detailed insights, download the full AHRI report here.

Subscribe to receive comments
Notify me of
guest

2 Comments
Inline Feedbacks
View all comments
damain
damain
18 days ago

WOW, They had to ask 607 senior business decision-makers!!!! Just ask any worker where the issues are. Organisational culture starts at the top and cultivated through effective leadership. We all know what, It’s the traction to doing that’s the issue.

Max Underhill
Max Underhill
18 days ago

This article could have been written in late 1980’s early 1990’s. At this time Australia lost most of the manufacturing sector. The Federal government introduced Enterprise Based Vocational Training which focused on workplace training. The organisational experts focused on competence which was skill, application and attributes. In those days it was the competency to produce an outcome at the standard set by the quantitative performance measures. Why it was so successful at the time was that it involved clear definition of position and empowering the employees. We could learn a lot from those days and wisdom of people like Roger… Read more »

More on HRM