Graduate salaries have risen at a record rate this year while pay rates for apprentices continue to grow faster as employers compete in a tight labour market, reports the Institute of Student Employers (ISE).
ISE’s poll found that the average pay growth for graduates is 7% this year with some employers increasing salaries by 20%. This is the sharpest rise in 20 years. On average, graduate salaries have risen 2% per year since 2002. The last time pay spiked was just before the financial crash of 2007/8 when they increased by 5% in 2006.
Following the introduction of the apprenticeship levy in 2017, salaries for school and college leavers have been increasing more rapidly than graduate salaries. This year the average pay growth for apprentices is 11%. Some employers have said that they are increasing salaries for apprenticeships by as much as 50%.
The highest salary increases were in the digital sector and the lowest in the public sector, which remained stagnant. The main reasons that employers gave for increasing salaries were to remain competitive in a tight labour market and to meet rising inflation and cost of living.
Figures from the ONS labour market overview in July 2022 showed pay rises averaging 4.3%.
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.
Young people entering the jobs market this year will also find more financial incentives available such as sign-on bonuses, interest free or low interest loans and salary advance schemes as well as support for transport, accommodation and relocation.
The ISE poll also found a range of additional incentives being offered including discounts on own branded products, healthcare, maintenance grants, financial and wellbeing advice, charterships, and hardship funds for those with additional financial needs.
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. Apprentice salaries come from a lower base rate so they continue to increase faster on the whole. This year many employers are responding to the challenges young people are facing from the rising cost of living.”
“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 sa, “Due to the increased competitiveness in the market and our ongoing investment in our early careers pipeline, we have increased the entry salaries of the 2022 cohort by 10% for graduates and degree apprentices this year.
“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. 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.”