Jessica PillowThe global competition for talent has never been fiercer. Across industries, organisations are dealing with a growing AI skills gap that threatens growth and innovation. In the UK, the challenge is particularly acute: according to the Open University, 54% of organisations report a skills shortage, and nearly a third of business leaders believe this gap will worsen over the next five years. For companies already navigating economic uncertainty, this is a huge wake-up call.
The rise of AI is only amplifying the pressure.
Startups, fuelled by investor confidence and a race to innovate, are driving what can only be described as an “AI talent squeeze”, the growing pressure on employers as demand for specialised AI skills outpaces supply. Deel’s latest State of Global Compensation Report, which draws on hiring and pay data from thousands of companies worldwide, supports this revealing that early-stage firms are offering 8% to 10% higher pay year-on-year for senior AI roles, outpacing the 5% to 7% growth seen at larger organisations. Signalling a significant change in the way companies find and keep their top talent.
The UKs place in the AI race
On paper, the UK remains competitive. Leading in the top three countries for median pay for technical and AI roles is strong, and the country boasts a vibrant tech ecosystem. Yet beneath the surface, cracks are forming. Skills shortages persist and are only worsening. If the UK doesn’t act now, it could fall behind in a world where talented people can work from anywhere.
While UK employers have traditionally relied on strong brand equity and career progression to attract talent, these levers are no longer enough. The truth is, the market has shifted, top talent today is looking for flexibility, competitive pay, and opportunities to work on cutting-edge projects; regardless of where the employer is based. This shift in the market is significantly impacting the UK workforce by intensifying competition for skilled professionals, making it more difficult for businesses to attract and retain the expertise needed to drive innovation and growth.
What bigger players can learn from startups
Startups are shaking things up in the AI job market. They’re attracting experienced AI professionals by offering bigger salaries. However, it’s not simply about the money. Startups are nimble, able to make decisions quickly, adapt roles to new technology trends, and build workplaces where creativity and fresh ideas can flourish. For talented people, this mix of financial rewards and the chance to make a genuine impact is hugely appealing.
This shift is having major consequences. Larger, more established companies often have strict pay scales and old-fashioned systems that make it harder for them to compete for top talent. Because of this, the gap between the skills needed and those actually available is getting bigger. This shortage is slowing down the adoption of AI in vital sectors such as finance, HR, and product development; areas where having the right expertise is increasingly crucial for progress.
The end of “one size fits all”
As jobs in AI become more focused and specialised, the old ways of hiring just don’t work anymore. In the past, companies looked for people with a wide range of technical skills. Now, they are searching for experts in very specific areas. For example, a business in finance might want someone who knows about machine learning for risk modelling, while a human resources team may look for someone skilled in AI-powered analytics for managing people with HCM agents. Because these roles are becoming so specific, employers need to completely rethink both how they attract new people and how they keep their best employees.
Offering flexibility has become essential. Companies can no longer get by without using global hiring platforms or allowing people to work remotely. For securing top talent, these are now must-haves, not just nice options. Employers need to be open to hiring talent from anywhere in the world, comparing their pay and benefits to others globally, and offering rewards and perks that can be tailored to each person. The old approach of giving everyone the same salary bands or the same set of benefits just doesn’t cut it. In today’s job market, the best candidates often have several offers from companies in different countries, so businesses need to do more to stand out and meet their needs.
The UK needs a rethink
The UK’s ambition to lead in AI innovation hinges on one critical factor: talent. Yet the current trajectory, marked by acute skills shortages and escalating global competition, demands a fundamental rethink. It is no longer enough to rely on traditional strategies. Employers must invest in upskilling at scale, redefine compensation models to stay competitive, and tap into global talent pools to close the gap.
This isn’t just about changing how companies hire and retain talent; it’s about changing their mindset. Companies that can adapt will find the talent they need to keep moving forward. Those that don’t could get left behind as the world moves faster and demands more specialised skills.
Jessica Pillow is head of total rewards at Deel
