Graduate salaries have increased at a record rate this year as employers compete for talent, according to the Institute of Student Employers.
The ISE found that average pay growth for graduates is 7% this year, with some employers raising salaries by 20% – the sharpest rise in 20 years.
Salaries have risen at an average rate of 2% per year since 2002. However, the ISE points out that the last time pay spiked in this way was just before the financial crash in 2007/08.
Graduates commanded the highest salary increases in the digital sector, but wages remained stagnant in the public sector.
Apprentice salaries are also rising steeply, with average pay growth at 11%. Some employers plan to increase apprenticeship pay by as much as 50%, according to the ISE.
Early career pay compares favourably to average pay rises in the workforce as a whole. The Office for National Statistics found that the average pay rise for July 2022 was 4.3% – well below inflation, which stands at over 9%.
Employers polled by ISE said their main reasons for hiking pay rates were to compete with other organisations and to meet the rising cost of living.
According to the ISE Student Recruitment Survey 2021, the median starting salary for graduates in 2021 was £30,500 while the median starting salary for school and college leavers was £19,489.
Other tactics to attract talent included offering sign-on bonuses, interest free or low-interest loans and salary advance schemes. Some offered support with transport or accommodation, while others offered discounts, healthcare and hardship funds.
Stephen Isherwood, chief executive at ISE said: “Higher salaries are a clear indication of a healthy recruitment market. We have surpassed pre-pandemic levels of hiring and it’s competitive out there.
“High salaries are one way to win the war for talent, but we’re also seeing additional benefits being offered such as support with wellbeing and flexible working patterns.”
He added that high percentage rises in apprentice salaries were largely down to the fact they come from a lower base rate.
“This year many employers are responding to the challenges young people are facing from the rising cost of living,” he said.
“The true test of the strength of the graduate and school leaver labour market will be in the autumn when we will see if the economic headwinds have caused problems for employers.”
Nicola Lamplough, head of early careers at Experian, said her company had increased entry salaries for the 2022 cohort by 10%.
“As a world leading data company, the majority of the roles we recruit in the UK for our early careers programmes are in the tech/digital sector,” she explained.
“They include roles like software engineers, IT application support and data analysts, which are becoming increasingly competitive as more companies look to hire in this sector.”
Graduate recruitment took a major hit during the pandemic as employers paused or cancelled hiring schemes. In 2020, the ISE found that the graduate hiring market dropped by a third in some countries.