Graduate employees reaping pay benefit

Graduates who stay with their employers receive salary increases up to three times higher than the rest of the workforce.

Most of those who went into jobs from university between 1989 and 1991 are still with their original companies and have enjoyed increases of around 9 per cent on top of any rises enjoyed by non-graduates, according to Incomes Data Services (IDS).

At a time when most managers are receiving 3.5 per cent, recent graduates will be enjoying rises of 12.5 per cent. The extra money constitutes a "graduate premium" and a reward for promotion and the acceptance of additional responsibilities, says Steve Tatton of IDS.

The extra pay may also be a means of retaining degree-holders who have been trained at the organisation's expense.

The median starting salary for graduates is, however, expected to rise modestly from £13,793 to £14,000 this year, the IDS management pay review found. Starting salaries last year were within the £9,000 to £20,000 range. The highest pay was offered in the manufacturing and service industries, with the lowest in the public sector.

The demand for graduates is continuing to rise after the recession with a 10 per cent increase in job offers expected this year, following a 14.5 per cent increase last year.

However, the research group points out that the growth in the number of graduates is continuing to outpace the rise in vacancies. Universities' output is due to rise to 180,000 this summer, 20,000 higher than in 1994.

Evidence of intense competition comes from the PA Consulting organisation which found there was an average of 87 applications per post in 1994, around 6 per cent higher than a year earlier. At smaller companies, the applications were even higher at 155.

The increasing supply of graduates has therefore put little upward pressure on starting salaries. Allied Dunbar, IBM, Mercury Communications and KPMG were among 16 employers who decided not to increase the pay in 1995.

Some organisations, however, are predicting increases. The retailer Iceland is planning to increase pay by 12.5 per cent from £12,000 to £13,500. Overall, starting salaries are only expected to increase by an average 2.7 per cent in 1995 - lower than the predicted inflation rate.

Companies in the service sector are expected to lead the way in their increased demand for degree-holders, raising their intake by 12.2 per cent. Tesco employed 73 university-leavers in in 1994 and expects to take on 100 this year. J Sainsbury also predicts that it will take on 100 recruits this year, up on the 83 it took on last year.

Finance companies are expected to increase recruitment by 8.9 per cent, compared with a 1994 increase of nearly 20 per cent. Intake in the manufacturing sector will rise by 8.3 per cent compared with 22.5 per cent last year.

IDS found that just under a quarter of the 100 major employers in the survey recruited some or all of their graduates on temporary contracts. The number of students awarded company sponsorship more than doubled between 1993 and 1994.