What is skills gap analysis?
Skills gap analysis is the process of identifying the difference between the skills your employees currently have and the skills your business needs to achieve its goals. It helps employers spot workforce skills gaps, prioritise training needs, and make informed hiring decisions.
A skills gap assessment can support workforce planning, talent development, and long-term business growth by ensuring the right capabilities are in place at the right time.
Why skills gap analysis matters for businesses
This is becoming increasingly important as skills shortages continue across the UK. Recent government data found that 5.1 million people work in occupations classified as being in critical demand. Now, what does that imply?
As competition for skilled talent increases, employers cannot always rely on recruitment alone. Developing existing employees through targeted training and career development is often the faster and more cost-effective solution.
Which is why skills gap analysis is so important.
How a skills gap analysis works
A skills gap analysis is usually completed in four simple steps:
1. Define the skills needed
Start by identifying the skills required to support your business goals, future projects, and growth plans.
2. Assess current capabilities
Review the skills your employees already have through a skills audit, performance reviews, manager feedback, or competency assessments.
3. Identify the gaps
Compare current capabilities against business requirements to highlight areas where skills are missing or need strengthening.
4. Create an action plan
Decide how to close the gaps. This could involve training, mentoring, upskilling existing employees, reskilling teams, or hiring specialist talent where needed.
Common areas where businesses find skills gaps
Skills gaps can appear in almost any part of a business, especially as technology, customer expectations, and market demands evolve.
Some of the most common areas include:
- Digital and technology skills
- Data analysis and reporting
- Leadership and people management
- Sales and customer service
- Industry-specific technical skills
- Compliance and regulatory knowledge
Benefits of conducting a skills gap analysis
Most businesses have a sense of where they want to grow. The tricky part is knowing whether their team has the skills to get them there.
A skills gap analysis helps answer that question.
Some of the key benefits include:
- Spotting skill shortages before they start slowing projects down.
- Making training more focused and worthwhile.
- Helping employees build skills that support their careers and the business.
- Reducing the need for costly last-minute hiring.
- Preparing teams for new technology, processes, and ways of working.
- Giving leaders more confidence when planning for growth.
In short, it helps you invest in the right people, in the right areas, at the right time.
Skills gap analysis example
A 50-person accountancy firm plans to expand its advisory services and move more client processes onto cloud-based platforms.
As part of a skills gap analysis, the business reviews the capabilities of its client-facing team and discovers:
| Skill Required |
Employees Proficient |
Employees Needing Development |
| Cloud accounting software |
12 |
18 |
| Data analytics |
5 |
25 |
| Advisory and consulting skills |
8 |
15 |
Rather than recruiting several new employees, the firm creates a six-month training programme for existing staff and hires one senior specialist to support the transition.
The analysis helps the business focus its training budget where it's needed most and ensures the team has the skills required to support future growth.
Skills gap analysis vs training needs analysis
Think of a skills gap analysis as identifying the problem, while a training needs analysis helps determine the solution.
| Feature |
Skills Gap Analysis |
Training Needs Analysis |
| Key question |
What skills are we missing? |
How do we develop those skills? |
| Focus |
Looks at workforce capabilities today and in the future |
Focuses on the training required right now |
| Business purpose |
Helps with workforce planning and hiring decisions |
Helps plan learning and development activities |
| Outcome |
Can highlight whether to train, hire, or restructure |
Focuses specifically on training solutions |
| When it's used |
Usually the starting point |
Usually follows once gaps have been identified |
Simply put, a skills gap analysis tells you where the gaps are, while a training needs analysis helps you decide what training is needed to close them.
How often should businesses review skills gaps?
For most businesses, reviewing skills gaps once or twice a year is enough to keep workforce plans on track. However, it's worth carrying out a review sooner if you're introducing new technology, expanding into new markets, restructuring teams, or taking on major projects.
