Graduates may not be in such strong demand during the recession, but the right perks will help attract the best candidates, says Tom Washington
Being a student at a time when unemployment is rife may sound like an enviable position to be in – at least for those who have a few years left before graduating. But with employment budgets being slashed, employers might be forgiven for cutting back on attracting this year’s alumni, even though competition may still be hot for select key skills.
In more prosperous years, a buoyant job market saw employers battling to lure top graduates with competitive reward packages and eye-catching starting salaries. But according to the Association of Graduate Recruiters’ (AGR) 2009 Winter Survey, published in February, graduate vacancies are set to drop for the first time since 2003 and salaries have been frozen. The research shows this year’s median starting salary remains at the 2008 figure of £25,000, while some sectors, including banking, are cutting graduate starting salaries by up to 8%.
Dan Hall, co-founder of the Graduate Recruitment Bureau, says the changed job market has seen employers regain some of the power in the recruitment process. “The pendulum has swung the other way and employers are digging their heels in. Benefits that would normally be dangled in front of graduates are being trimmed.”
David Conroy, a principal at Mercer, says: “A lot of employers are not having a graduate intake this year, or it is being greatly reduced. Graduates used to be able to hawk themselves out, but now there are far fewer opportunities around.”
Graduates may therefore be less fussy when weighing up the reward packages on offer, with long-term stability and job security rising higher up their agenda. Clare Harris, head of legal recruitment at law firm Lovells, says graduates may now seek out better personal development opportunities rather than entry-level pay. “I would hope people are thinking more about the long-term prospects and stability of the organisation they are joining, rather than just the money.”
Progression prospects can be offered in the form of a personal development budget. This spells out the employer’s intention to encourage a graduate’s development, professionally and personally, with budgets typically spent on study support, such as exam fees, study leave and course literature.
A number of employers, aware of the importance of continuing their graduate intake even in tough times, are offering a deferral payment. This is a means of attracting candidates while avoiding unnecessary employment costs when the business cannot justify recruitment. For example, Lovells is paying graduates a £2,500 cash lump sum for deferring their start date for six months, and those who defer for a year will receive £5,000.
“We are smoothing out some of our numbers for the intake joining next year because workloads have changed,” says Harris. “Quite a lot of people have come forward and said they think it is a good opportunity to go and travel or do further studies.”
Another form of lump-sum payment used as part of a signing-on package – often known as a ‘golden hello’ – has traditionally been part of a graduate benefits package, particularly in large organisations. For debt-laden graduates, this perk can be a significant draw because it can be used to help with relocation costs or to pay off part of a student loan. Lump-sum payments to graduate recruits are typically about £2,000, and the AGR survey shows 32.9% of respondents included the perk in their reward package last year.
Damian Stancombe, head of corporate DC at Punter Southall, says firms can use joining bonuses as a retention tool by making the payment once staff have completed one or two years’ service. “These bonuses encourage loyalty. The last thing an employer wants is to spend time and money training someone up, only for them to leave after a year.”
But Conroy believes the economic downturn has made employers more prudent over expensive perks. “Because graduate positions have reduced so much, it is more about candidates fighting over a job than you trying to attract them,” he says. “If employers are in hot competition for a particular graduate, they might stick the golden hello on the table, but they are being selective and offering it only if they need a little extra for certain individuals or categories of staff they do not want to compromise on.”
With pay increases at a standstill, employers can no longer use salaries alone as the main differentiator, so may switch to promoting the value of the entire reward package. “Graduates will go for the money, no two ways about it,” says Hall. “If they have had an excellent education, they deserve a good package. But, after a while, they reflect on it and see other things as being more important than the salary.”
Total reward†
Conroy also believes the current generation of graduates understands the concept of total reward better than their predecessors. Today’s graduates are inclined to look for less tangible, non-cash perks that result in a well-rounded benefits package and encourage a work-life balance, he says. Subsidised gym membership, flexible working arrangements and cycle-to-work incentives all appeal to the health and eco-conscious modern alumni.
David Blondel, student development manager at PricewaterhouseCoopers, believes such softer benefits attract graduates who are not just money-orientated. “It says something about the culture of an organisation and how employers view employees,” he says.
Flexible benefits schemes suit the ethos of the latest graduates, who are less inclined than previous generations to jump aboard the corporate train and work for a single employer for their whole career. The idea of choice and flexibility is far more attractive and if employers cannot compete on financial perks, offering staff the option of retail vouchers or healthcare cash plans through flex, for example, can make their reward package appear far more attractive.
Occupational pension schemes are a benefit often overlooked by graduates, who prefer to deal with more immediate financial matters, such as paying off their student loan or climbing onto the property ladder. So some employers now offer alternative financial perks in place of pension contributions. For example, corporate individual savings accounts (Isas) may be a more attractive tax-free savings method to graduates who could be put off by the sheer length of time their money is locked up in a pension scheme.
Some firms also offer a student loan repayment scheme, whereby they might match the amount of money that is automatically deducted from an employee’s salary, while others may simply add a little extra to each month’s salary to cover the loan repayments.
But Stancombe thinks few employers will be striving to offer such perks in the current climate. “Creating an alternative vehicle to save is worthwhile, but I do not see an appetite at the moment to offer alternative benefits just for graduates,” he says
Case study: Graduate perks add up for PWC
PricewaterhouseCoopers (PWC) recruits about 1,000 graduates a year, and continues to do so despite the recession.
The accountancy firm, which has claimed the top spot in The Times’ Top 100 Graduate Employers list every year since 2004, offers its graduate employees a range of perks. These include access to its flexible benefits scheme, through which options such as buying or selling up to five days’ holiday a year and travel insurance are most popular among graduate recruits, says Carolyn Wilkinson, senior employee benefits manager.
Financial perks on offer include interest-free loans of up to £7,000 for full-time graduates. This year, for the first time, the firm has also extended eligibility for its bonus scheme to include junior graduates studying for their professional qualification. Students have previously received bonuses for passing professional exams, but by including them in the bonus schemes, awards will be linked to their overall performance.
“We felt they should share in the success of the business alongside other employees, and strengthen the link between performance and reward,” says Wilkinson.