Research finds graduates and apprentices are jumping ship for more money rather than progression opportunities amid ongoing cost of living crisis
More graduates and apprentices are leaving their jobs because of dissatisfaction with pay in 2024 than in previous years, a survey by the Institute of Student Employers (ISE) has suggested, highlighting the impact of the cost of living crisis on entry-level staff.
According to the survey of 139 employers, conducted in collaboration with the International Centre for Guidance Studies at the University of Derby, this year half (51 per cent) reported graduates and apprentices were leaving roles for better pay, compared to 40 per cent in 2023 and 2022, and just over a quarter in 2021 and 2020.
This shows a shift in priorities, the researchers say, as before the cost of living crisis graduates were more likely to leave their employer for better progression opportunities than higher salaries.
The ISE’s Student Recruitment Survey also showed a shift to more applications for higher-paying sectors such as finance, and fewer graduates applying for jobs in the public sector, which are traditionally lower paid.
Overall, graduate retention after three years was found to be in gradual decline: in 2016, employers retained 83 per cent of their graduates after three years; in 2023-24 it had dropped to 70 per cent.
Reflecting on the findings, Stephen Isherwood, joint CEO of the ISE, commented: “The cost of living crisis still impacts students once they have found work. Increases in rent, travel and general living costs mean that salary levels are not keeping pace with inflation. So, in a competitive market for talent more people are leaving for better-paid opportunities. Employers are going to need to work harder to retain talent.
He told People Management, however, that “money isn’t everything, and historically we know that the opportunity to develop and progress within an organisation is vitally important to them. If employers can’t compete on salary, then talking to younger workers about where they see their career going and how they fit into an organisation can help with retention.”
Charles Cotton, senior reward adviser at the CIPD, agreed that there were actions businesses could take to improve retention and attempt to ease the cost of living effects on entry-level workers. He said: “In terms of what employers can do if they can’t afford to increase pay, they should look at what accounts for the largest elements of young people’s household expenditure and see what they can do to reduce them, such as commuting, accommodation, energy, groceries.”
For example, in terms of lowering food costs for staff, Cotton suggested free or subsidised meals and drinks, retail discounts and vouchers and workplace snacks.
In terms of reducing accommodation and energy costs, he said this could include offering rental deposit schemes; giving accommodation and rent subsidies; providing information and guidance on employees’ legal rights regarding housing; signposting ways of reducing energy use as well as offering benefits that cut energy consumption; and giving paid leave to move home.
Barney Ely, managing director of the South East region at Hays, said businesses should also be aware of other factors influencing the engagement levels of younger employees, as “whether employers understand what each individual wants and provide it where possible will directly influence a person’s decision to stay or leave”.
He said, for example, that entry-level employees often see it as the employer’s responsibility to support them to develop their professional skills through training and development opportunities, as well as mentoring.
“Offering an appealing benefits package, tangible wellbeing initiatives, tailored flexible working options and an engaging and supportive team culture are also effective ways to retain talent,” Ely said, adding that young workers were also more likely to stay at an organisation that demonstrated a “clear and authentic commitment to diversity, equity and inclusion, as well as sustainability”.
Nichola Hay, director of apprenticeships policy and strategy at BPP, agreed that personal development, the ability to develop their skillset and progression were “key motivators” for workers just starting out in their careers, and said apprenticeships were a great way to spearhead this. “It can create new lateral opportunities for employees, and a pathway to promotion, strengthening the business’s credentials as a supportive employer during difficult economic times,” she said.
But these things can only go so far, and employers must work very hard to mitigate the very real impact of the cost of living crisis, said Andrew Moss, corporate partner at DSG Chartered Accountants. “Employees are now less able to substitute pay for perks or progression opportunities,” he told People Management.
“Especially with younger employees, the effects of inflation and difficulties in accessing the housing ladder mean lower salaries simply cannot be an option. And the flip side of the coin is that employers are also feeling the pressure, and not all are able to offer an increase in salaries.”
Beyond pay, he said that, to attract and retain young talent, employers should aim to create an inclusive working and “less pressured” environment that will make employees want to stay. “While meeting client demands is important, our managers and partners work closely with the teams to help deliver results on time. This means that the burden of delivery and pressures of deadlines are shared across the team and not pushed down from the top, which can often cause retention issues for younger talent,” said Moss.
“It’s also important to encourage a culture of autonomy. This supports in allowing all staff to feel like they have individual responsibility, and creates a positive culture of trust that is motivating for staff. At the same time, giving responsibility in a supervised manner so staff always feel supported and able to develop at their own pace. We don’t punish people for making mistakes, as long as they learn from them and can help themselves and others develop through the learning. We regularly benchmark salaries to the market, which should enable us to deter those looking to leave purely for a salary gain but in a competitor business. It’s a moving feast but hopefully this helps those who want to develop with us but also want to feel fairly remunerated. “
Moreover, Moss said they “place priority on building long-term relationships through the time spent with clients, and these relationships are more important than quick billable gains. Our strong relationships are key to helping us attract and retain top-level talent, as these connections become invaluable and our staff genuinely care about the people and the work they do.”
Ultimately, however, Cotton said: “Strategically, HR teams should explore how they can improve wages for such workers by looking at how they can improve productivity, which will pay for these salary increases in a sustainable way.”
Chris Davies, founder and CEO of Graduate Coach, agreed. He said: “With the cost of living crisis, the number one priority for graduates is salary. If companies can’t provide a salary increase there are other options such as giving them more responsibility or perhaps interest-free loans for travel but, at the end of the day, salary is the most important thing in the current climate.
“Graduates are often surprised how much more they can earn by moving and they will often go back to their employer to see if they will match it. Cash or lack of it is an easy way of assessing whether a company wants to keep you.”
Article written by Lauren Brown
Culled from people management’s website: Read fully story there.
