3 Big Challenges Facing Firms Looking to Hire Graduate Talent in 2019

Tom Freeman, MD of Sanctuary Graduates, explains that while graduate recruitment is currently in rude health, there are major challenges ahead facing firms who look to hire graduates.

Last month’s annual survey of the 100 best known UK graduate recruiters suggests that graduate recruitment is buoyant, with a rise this year in graduate vacancies and further rise expected in the coming year.

This will come as a relief for this increasingly career-focused cohort of graduates who will have invested as much as £50,000 in their university tuition and accommodation.

However, while the graduate market currently looks sturdy, there are major challenges ahead, namely changing student attitudes, the apprenticeship levy, the widening skills gap and, of course, Brexit.

Graduate Recruitment in rude health

Before we explore the imminent challenges facing those companies whose future talent policies have graduates at their centre, let’s explore the recent employer survey statistics. High Fliers surveyed the “Times Top 100” graduate recruiters in January 2017, with graduate recruiter leviathans such as GSK, PWC and Jaguar Land-Rover polled for their past performance and future plans, in terms of student recruitment. The survey showed that for the 5^th consecutive year, the country’s biggest graduate employers plan to increase their recruitment of university leavers, with a 4.3% rise planned for 2017, the largest rise in this time period. This suggests confidence in the economy (graduate recruitment is a reliable bellwether for economic confidence) and that the looming threat of Brexit has not yet affected corporate thinking in terms of sourcing future talent.
Other interesting insights include:

• • The average starting salary of £30,000 remained unchanged once more

• • 75% of the employers offered paid internships and industrial placements, as firms increasingly like to “try before you buy” to ensure they get the right graduates

• • 25% of employers are targeting 1^st year undergraduates with internships and open days, in order to reach talent early before the competition

• • The top 10 most targeted universities include Warwick, Manchester, Bristol, Cambridge, Leeds, Birmingham, Nottingham, Oxford, Durham & Bath

• The total number of applications made by students to these graduate schemes is up 9% (adding to the burden of sifting & screening the applications)

Challenge 1: Candidates reneging on accepted offers of employment

Only in the recent past, with the scarcity of graduate vacancies, students were often delighted to receive the job offer they wanted. As we have shifted into a candidates’ market, with the increase in graduate and entry-level opportunities, we have seen a sea-change in students’ attitudes towards offers of employment. Some of the best students are collecting offers, sliding them into their back pocket and continuing their job-hunt in pursuit of more, apparently preferable offers. In unprecedented numbers, graduates are reneging on offers having previously accepted them. It was a hot topic at the AGR (Association of Graduate Recruiters) Summer Conference last year and the most recent AGR annual survey of employers found that nearly one offer in 12 (8.2%) was reneged on after being accepted. Indeed, this year’s High Fliers research suggested a third of the UK’s leading employers had reduced graduate intakes with more than 1000 graduate positions left unfilled owing to candidates reneging on offers. It is a clear and present problem caused not only by the increase in graduate vacancies but also by the fact that, as James Darley, Director of Strategic Alliances at Teach First points out, “this generation of graduates have grown up with ‘choice’ and are used to holding lots of options open before making a final decision (dates, parties, social events etc.)”.

Reneged offers demonstrate that you are competing in the same pool as others for sought after talent. Let’s take a recent example of one of Sanctuary Graduates’ clients, a global asset manager, headquartered in London, with myriad graduate, intern and apprenticeship schemes ranging from investments and distribution, to finance and technology. From an attraction perspective, none of the pathways have ever presented a problem, Except one: Technology. A lot of firms recruiting graduates experience problems when trying to hire the best technical talent. Firms from multiple industries, such as Banking, Investments, Technology, Consultancy and more are all slugging it out to attract the best technical talent. The result? The best candidates receiving multiple offers and all but one of the employers behind these offers left disappointed.

The key, then, is to market to a wider pool of talent, not just those who are engaged with traditional media, traditional campus recruitment channels and the “milkround”. You have to go further to reach the graduate talent that employers traditionally can’t: for example, the many students who don’t go to career fairs and presentations, in favour of spending their time at university applying themselves to their courses, indulging their enjoyment for intellectual rigour, academically and in extra-curricular and social activities.

Challenge 2: The Apprenticeship Levy

For the uninitiated, the apprenticeship levy is a government initiative announced in the 2015 Summer Budget, as part of their drive to train three million new apprentices by 2020 – and to address the decreased focus on employee training outside the work place. The government will apply the levy to large employers across all industries from spring this year, requiring all employers with an annual pay bill of more than £3 million to spend 0.5 per cent of the total on the levy.  Once employers in England have registered and paid the levy, they will then be able to access funding through a digital apprenticeship service account. This will allow them to select and pay Government-approved training providers and post apprenticeship vacancies.

The prospect of the levy has set many graduate recruiters into a spin. Do they continue hiring their future talent by way of university leavers and just pay the levy like a tax, or do they shift their focus to hiring apprentices to be able to claw back some of the levy by way of training funding? While only a small number of larger employers have cut back their graduate recruitment in favour of increased school-leaver recruitment in preparation for the levy, a lot of companies, particularly in financial services, are simply paying the levy this year. This might be because the organisations do not have the desire to replace graduates with school leavers, or because they currently lack the infrastructure and expertise to attract and on-board them. It is no secret that apprentice recruitment is tough. It is one thing to make the decision to move towards apprenticeships from graduates, it is quite another to successfully attract the desired quality and volume. While the demand from business is there for apprentices, partly synthesised by the levy, there needs to be a sea-change in attitude from schools and parents, who are still focused on university as the best pathway for their children, in order to generate the supply of apprentices needed.

As the levy becomes a reality this year, there will inevitably be more pressure on HR functions to make good the financial shortfall by looking more to attracting apprentices. While there has been limited effect on graduate recruitment vacancies to date, following conversations with HRs across various sectors, Sanctuary Graduates anticipates some big changes over the coming 24 months.

Challenge 3: Brexit

The looming prospect of Brexit has already led to 8% of employers cutting their UK recruitment numbers. Depending on what our relationship with Europe looks like once Brexit is finalised, there might be huge repercussions for the graduate recruitment market, which would manifest themselves in two ways. Firstly, firms and multinationals who rely on tariff free access to the EU might look to relocate to the continent if the Brexit settlement removed this free access.  Several large firms, particularly in financial services, have signaled their willingness to relocate should the terms of Brexit make it harder or more expensive to trade with the EU, and cities such as Paris and Frankfurt are lobbying hard for the attentions of these companies. The second consequence is the diminishing desire or perhaps even ability for EU students to study in the UK in future. Stephen Isherwood, the Chief Executive of the AGR, pointed out recently that, “our universities have a significant international dimension. 15% of academics and 125,000 students in the UK are EU nationals. Brexit terms will determine the impact on our universities’ finances and people but it could be significant”. Early signs are not reassuring – there was a 7% reduction in applications to UK universities from EU students this year. With numbers of students set to shrink anyway over the coming years (there were far fewer babies born between 2001-2009), the further shrinking of our future talent pools will make the graduate market very challenging for graduate employers over the coming years.

When one adds the challenges of Brexit, changing candidate behaviours and the apprenticeship level to the ongoing graduate skills gap, you can see that there are issues surrounding cost, complexity and competition to be dealt with when hiring your graduate talent. The key for firms to circumvent these problems will be innovative graduate attraction strategies in order to fend off the competition and hire the very best graduates into your organisation, who will add immediate and long term value to the team they’re in, and the company as a whole.