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Latest NewsGraduatesPay & benefitsLabour turnoverRecruitment & retention

Graduate turnover at 11-year high, driven by pay

by Ashleigh Webber 31 Mar 2022
by Ashleigh Webber 31 Mar 2022 More young people are leaving jobs because of pay, according to the ISE
Shutterstock
More young people are leaving jobs because of pay, according to the ISE
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Graduate turnover has reached its highest level in more than a decade, with the Institute of Student Employers (ISE) warning that stagnating salaries could accelerate the departure of early careers talent.

Organisations are retaining on average 72% of university graduates three years after they join, according to the ISE’s annual student development survey, down from 79% in 2011.

Asked their reasons for switching jobs, more young people are citing dissatisfaction with pay. Forty-per cent of graduates in 2022 said pay was behind their decision to leave, up from 28% in 2021.

The ISE this problem is likely to worsen as graduate salaries fail to keep pace with inflation. It said the average graduate salary is £28,563, rising to £40,000 after three years, but when compared with inflation graduates earn less now than they did in 2008/09.

Pay settlements are severely lagging behind inflation, with data from XpertHR showing that the median basic pay increase in the three months to the end of February was 3%. The consumer prices index measure of inflation was 6.2% in February.

“Young people aren’t staying in their jobs as long as they used to and this is a looming threat for employers this year,” said ISE chief executive Stephen Isherwood.

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“Combined with high inflation and a reduction in spending power, dissatisfaction may create major retention challenges for student employers as workers move roles to seek a pay increase. This could lead to salary becoming the main driver when young people choose a career or employer.”

More graduates are also leaving their jobs to pursue a career change. Forty-four per cent of respondents to the 2022 survey cited this as a reason for their resignation, compared to 20% in 2021. Two in five said they quit their job because of location.

The legal sector saw the highest level of graduate turnover, with just 28% of its graduate intake retained after three years.  Employers in health and pharmaceuticals had the highest graduate retention rate, at 80%.

The ISE also looked at the retention of staff who joined an organisation straight after school or college, including apprentices, and found that retention had sunk to its lowest point since it started collecting this data in 2019. Just 71% of employees remained after three years, compared with 77% in 2019.

A third of organisations that responded to the survey noted a rise in gradute turnover, particularly ethnic minority groups and young people with mental health issues, with 63% introducing initiatives that they hope will improve retention this year.

Twenty-seven per cent found that graduates who had completed an internship with them were less likely to leave before three years.

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Ashleigh Webber
Ashleigh Webber

Ashleigh is editor at OHW+ and part of the Personnel Today editorial team. Prior to joining Personnel Today in 2018, she covered the road transport sector for Commercial Motor and Motor Transport.

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