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Graduate retention in decline

Stephen Isherwood

One in six drop out of graduate programmes. Retaining graduates is becoming increasingly difficult with employers typically losing 16 percent of their intake in the first two years, which is an increase on the 9 percent reported last year. Comment from Stephen Isherwood, Chief Executive of the AGR.

The Association of Graduate Recruiters (AGR) Development Survey 20171 showed that 20 percent of graduates leave by the first year after completing a graduate development programme, increasing to 46 percent after five years of employment. Graduate employers typically run two-year development programmes and when comparing figures from the AGR Development Survey 2016, 17 percent of graduates had left by the first year after a development programme had ended, increasing to 39 percent after five years. Graduate programmes in the legal, utility, construction, engineering and industrial sectors all experienced a year-on-year drop in retention. Financial services reported the only increase in retention this year (1 percent)2. This trend of lower retention appears to be new and consistent across different sectors, which suggests a systemic change in graduate behaviour. AGR data shows graduate retention remained relatively stable from 2011 until 2014 when it has kept declining3.

Graduates who leave in the first three years of employment have a variety of motives. While nearly a quarter (24 percent) leave for a career change, other reasons reflect their ambitious nature with 19 percent moving on for better pay and 14 percent are dissatisfied with their career progression.  Other reasons for graduates leaving are more practical with 7 percent moving location and 6 percent are compelled to leave due to redundancy or lack of permanent positions.

For graduates that stay, the median salary increases by a quarter, three years after joining an organisation. The median starting salary for a graduate training scheme is £27,500. They also progress quickly, with an average of 39 percent in manager positions after five years.

Employers invest significantly in their graduate talent. Typically hiring graduates onto permanent contracts and two-year development programmes, and spending a median
of £3,015 to develop each graduate. The industry invests more than £69 million on graduate development annually.

To help protect their investment, many companies develop their programmes in response to graduate feedback and invest in interns as a means of helping ensure cultural fit. Last year an AGR survey reported that graduates who were formerly interns stayed with a company six months longer than those who weren’t. Stephen Isherwood, Chief Executive of the AGR said: “Over the last ten years retention rates have remained relatively stable, so contrary to popular belief not all millennials are job-hoppers. Graduate expectations are changing and they are leaving for a myriad of reasons. Employers will need to monitor and respond to this trend to ensure they benefit from their investment.”

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