Graduate recruitment 2005/06: confidence climbs

Demand for new graduates has been picking up over the past couple of years, and may well continue to do so in the year ahead, finds our latest annual study of graduate recruitment.

Graduate recruitment has been enjoying a modest upturn in the past couple of years, and our latest study shows that recruiters expect this gentle climb to continue during 2005/06, despite current economic uncertainties.

This, the 14th in our annual series of graduate-recruitment studies, draws on feedback from 139 recruiters of new graduates from a broad range of organisations in the UK. It covers a wide range of issues of relevance to graduate recruitment, including attraction methods, application processes, selection techniques and starting salaries.

We find that the labour market for new graduates has not materially changed - there has been no boom in demand by employers. Instead, the growth in graduate vacancies has kept pace with university output, with the result that recruiters' difficulties in finding suitable new graduates have not increased in the past couple of years. On the downside, they remain as widespread as ever, however, affecting four in 10 organisations.

Changes in starting salaries reflect the gentle nature of the upswing in demand for new graduates. The median starting salary for 2005/06 has been uplifted by only 3%. This brings the increase in line with overall pay rises in the economy, but breaks the pattern of previous years of higher rates of increase.

Looking ahead, the coming year will involve graduate recruiters in preparing for the implementation of the age discrimination legislation from October 2006. For these and other topics, read on.

Graduate supply

The demand for new graduates has kept pace with supply in the past two years, and is set to rise further. The growing proportion of graduates with good degrees is making it more difficult to choose between applicants.

The supply of new graduates continues to increase year on year, and is gradually approaching the 300,000 mark. The latest figures show that 282,100 students gained a first degree from British universities in 2004 (source: www.hesa.ac.uk), which represents a rise of 3.2% in one year.

At the same time as this constant numerical increase, the share of graduates with good degrees continues to rise. Students gaining firsts and upper seconds now represent more than half (55%) of all new graduates.

The number of graduates with firsts rose by 1,400 to 29,700 and those gaining upper seconds rose by 3,700 to 116,000. In other words, 145,700 students left higher education in the summer of 2004 with the best degrees, while 136,400 graduated with lower seconds and other lower-level degree classes. This trend means that it is becoming increasingly difficult for recruiters to use degree class as a key pre-selection or shortlisting criterion.

However, while recruiters must engage with a mass market of new graduates each year, the numbers involved are not as large as the output figures would suggest.

The annual destinations survey conducted by the Higher Education Statistics Agency (HESA) indicates that only 105,000 to 137,000 new graduates out of the 282,100 total were looking for work within six months of graduating in 2004. Most find work within this period. Some six in 10 succeed within this short period in gaining a graduate-type job (at managerial or professional level); many others gain lower-level work often until they can find a role at graduate level. Only 7% fail to find any job within six months. This the same jobless rate as in HESA's previous year's survey, indicating that employers' recruitment is expanding at the same pace as graduate output.

Demand for new graduates

Employers expect to increase their demand for new graduates in 2005/06 compared with recent years.

The graduate labour market has been buoyant for the past two years, with employers' demand increasing after the downturn of the first years of the new century.

The employers of new graduates that we contacted for this year's study (see Our research for details) again showed that their demand for graduate recruits was strong in 2004/05. Just over half (51.9%) wanted to recruit a similar number of new graduates in 2004/05 as in the previous year, while three in 10 (30.8%) were seeking a larger number of recruits. Just one in six (17.3%) reduced their need for new graduate recruits.

Looking ahead to the 2005/06 recruitment round, recruiters tell us that they expect their demand will increase still further. Just 6.6% expect that they will require fewer new graduates than in 2004/05, while three in 10 (29.4%) expect demand to rise. The remainder (54.4%) anticipate that their recruitment levels will stay much as they were in the previous round. Few (2.9%) of those we contacted were unable to make any forecast.

When we compare these findings with those that the same employers gave us previously - in other words, using a matched sample of recruiters - we find that their forecasts are becoming progressively more optimistic. Given that we conducted our latest research only last month, these predictions must presumably have been made against the background of lower forecasts for economic growth and the downturn in consumer confidence.

Plans and outcomes

Most employers set targets for their graduate recruitment for the year ahead. Just over half have to readjust their plans later.

Just over four in 10 recruiters encounter problems in filling their vacancies. Re-advertising in a different publication or medium, or turning to an entirely different recruitment method, are the most effective ways of overcoming recruitment difficulties.

Graduate recruitment often demands a medium to long-term approach to the planning of talent management, but this is becoming increasingly difficult given the rapidly changing context of today's business world.

Nevertheless, most employers that aim to recruit new graduates begin each year with a target number of recruits - more than seven in 10 (71.8%) of those we contacted do so. However, just over half of them have to subsequently adjust their plans. Given the background of growing demand for new graduates, this means that recently more of them have revised their target number upwards (33%) than reduced it (20%).

As well as these internal factors, recruiters' plans for graduate recruitment also face challenges from the external labour market. In fact, many employers find it difficult to recruit all the new graduates they need. In both 2003/04 and 2004/05, just over four in 10 graduate recruiters experienced difficulties in finding new graduates that met their selection criteria. Most recruiters (82%) that encountered such difficulties took action to overcome them.

The scope for remedial action seems limited, however. Only one tactic was tried by the majority of those affected: six in 10 (61%) placed advertisements for their vacancy/vacancies in a different publication or medium than the one that had originally proved unsuccessful.

Just over four in 10 (44%) turned to a different means of recruitment entirely, such as fairs or campus visits. Just over one in three (36%) re-advertised in the same publication. And one in five (19%) increased the starting salary they were offering, or attempted to speed up their recruitment process so that potential recruits were not lost to competitors. Fortunately, the most used ways of tackling difficulties in recruiting new graduates often turn out to be the most effective as well (see table 1).

Age discrimination legislation

The impact of age discrimination legislation on graduate recruitment and training is likely to be limited; however, the full implications for employers are unlikely to be known until case law develops over time.

In less than a year's time, graduate recruitment and graduate development programmes will operate in a completely new legal climate due to the implementation of the Employment Equality (Age) Regulations 2006.

The forthcoming legislation has cast a shadow over the current recruitment round, and has given many commentators an opportunity for considerable speculation about the law's likely impact. Some of the "headline-grabbers" have presented an apocalyptic view of the future.

This year's research asked graduate recruiters for their own views. In all, only around a quarter (27.4%) consider that the legal changes from October 2006 will have an impact on their recruitment, selection, training or internal promotion of new graduates.

And among this minority, the changes they expect to make involve fairly modest amendments to their current practices, such as the text and images they use in their recruitment literature, and any actual or implied age-related criteria used as part of the entry requirements for their graduate training programmes. Table 2 gives the full results.

In fact, at the present time, neither graduate recruiters nor others know the final shape of the law. The Regulations will not appear in their final form until early 2006 and, even then, much of their impact will be uncertain until case law has developed. There is, too, the prospect of the UK being compelled to amend the Regulations if they are found to be in breach of the underlying EU Directive.

Equal opportunities expert Michael Rubenstein makes these points vividly in his commentary on the draft Regulations in a recent issue of our sister journal, Equal Opportunities Review. One of the ambiguities comes from the fact that the draft Regulations permit direct discrimination to be capable of objective justification by an employer, unlike the existing discrimination laws, but then fail to provide a list of the ways in which this might be achieved. It will therefore be left to case law, as it evolves over time, to show employers what is and is not permissible direct (or indirect) discrimination on the grounds of age.

Rubenstein also argues that "the draft age discrimination Regulations are considerably weaker than were once anticipated", that "the government has done the minimum necessary to implement the age strand of the Framework Employment Directive" and, in fact, "it may not have even done that". He goes on to say that "there are several key areas where the government is likely to be sued for non-compliance with the requirements of EU law."

As they stand, the draft Regulations will prohibit discrimination in key areas of graduate recruitment and employment where an age group is put at a disadvantage compared with another age group and "the treatment or, as the case may be, provision, criterion or practice [cannot be shown to be] a proportionate means of achieving a legitimate aim".

The draft Regulations suggest that an employer might be able to justify discrimination in recruitment or access to training where a maximum age is required so as to afford a "reasonable period in post before retirement". However, Rubenstein considers that this will prove difficult in practice. An employer will have to show that the post in question actually requires the training involved and, second, that the pay-back period would be less than actually operates among other age groups. In other words, labour turnover and job tenure statistics that justify the age limit would have to be produced.

Certainly, the background information published by the Department of Trade and Industry to accompany the draft Regulations gives the impression that any traceable age discrimination in graduate recruitment and training will infringe the law:

"Employers will need to take greater care when advertising vacancies in order to avoid explicit or implicit differences of treatment, unless objectively justified.²

"The proposed Regulations will mean thinking carefully [about] whether phrases such as 'young dynamic' or 'mature persons' are justified in adverts. The proposed Regulations will have a provision for justifying age restrictions and the guidance will help inform employers. This means that management decisions on recruitment will be under greater scrutiny and consequently businesses may need to invest in more formal job specifications - namely that they will have to identify skills and competences and wider advertising to minimise litigation risks. (ibid.)

"Requiring a birth date or age on job application forms: this is not age-discriminatory in itself. However, an employer could use this information to make age-discriminatory decisions. For the avoidance of doubt, an employer may prefer to move questions regarding age to a diversity monitoring form (which those who take the recruitment decisions would not get to see)³.

"Graduate recruitment schemes: an employer wishing to recruit graduates may not be able to justify setting a requirement of a certain maximum age. Students could be of any age, and it will be difficult to show why older students should be excluded from applying. However, in our view it will be easier for employers to justify indirect discrimination in the form of recruitment drives at universities ('milk rounds'), provided employers do not exclude applications from other sources." (ibid.)

What seems to be absent from the official background information accompanying the draft Regulations is any challenge to the fundamental nature of graduate recruitment: the practice of targeting students fresh from university who hold a first degree. On present evidence, therefore, October 2006 will see graduate recruitment largely unchanged from its familiar pattern. A checklist of areas that might require review and modification is given in box 1.

Attraction

Graduate recruitment continues to follow an annual cycle, peaking in October-November and January-March.

National newspaper advertising, the recruiter's corporate website and jobs boards are the most effective attraction methods. Overall, as many as 20 attraction methods are in use, with half of graduate recruiters using eight or more. Take-up of online recruitment seems to have reached saturation point.

Both national newspaper advertising and the use of sponsorship schemes represent attraction methods with potential, being under-used relative to their reported effectiveness.

When best to recruit?

Many organisations' graduate recruitment continues to maintain a regular annual rhythm, despite the changes that are taking place in higher education and the internal pressures that make it increasingly difficult for employers to predict their requirements some way ahead.

The timing of when, and where, to recruit new graduates - usually at the stage before they have gained their degree - is often crucial to finding the best candidates. Tardy recruiters will lose the best undergraduates to other employers, while premature hiring efforts may be frustrated if many students are not yet ready to commit themselves to their choice of employment after university.

The research we conducted last year into this topic shows that employers' recruitment activity continues to be focused on the autumn and winter months. Recruitment begins to gear up in September, is at its most active in October and November, then quietens down in December. It intensifies again in January, February and March, and then slows down to a steadier pace in April to June. The quietest hiring period falls during August.

How best to recruit?

There are around 20 different attraction or recruitment methods in use in the UK by graduate recruiters, of which eight are in widespread use (in terms of being practised by upwards of 50% of employers). Some of these methods are much more expensive than others; and not all of them are equally effective. So which ones should recruiters consider as options for their organisations?

Of course, the reason that so many attraction methods continue to be employed lies in the need to find those best suited to targeting the graduates who will most closely match the organisation's needs. But there are also some more general pointers about the methods that recruiters have, in their own experience, found to work well for them.

Table 3 analyses the feedback from recruiters about the effectiveness of the methods that they themselves use to attract graduates. They rate some of them more highly than others.

The top three attraction methods represent a surprising shortlist: national newspaper advertising, the recruiter's corporate website (or a separate graduate careers site run by the organisation); and job boards (external websites that carry details of more than one employer's graduate vacancies). Also well rated are sponsorship schemes, campus visits, advertising in vacancy directories and providing work placements.

This year's league table of the best-rated attraction methods differs significantly from the feedback we obtained last year. Analysing the experience of a matched sample of recruiters from this year's and 2003's studies, we find indications that some methods may be gaining more credibility, while others may be losing some of theirs. In particular, online recruitment methods (both corporate sites and job boards) seem to be gaining credibility. In contrast, campus visits and sponsorship may possibly be losing some of theirs. Further time must pass before we can say for sure whether these changes represent temporary or permanent changes of fortune.

Current recruitment practice

Returning to the range of attraction methods in current use, our research shows that online recruitment seems to have reached saturation point, having been taken up by almost all employers that are receptive to it. In all, more than eight in 10 (82.2%) graduate recruiters, large and small, have set up their own website or use pages on their organisation's general corporate site. In addition, more than half (52.6%) of recruiters place advertising on a job board - an external internet site that carries details of several organisations' vacancies.

Publications, whether in conventional paper format or produced electronically via the web, continue to be popular, particularly those that are targeted at undergraduates. General national newspaper advertising is less popular, being used by only one in five (21.5%) graduate recruiters, while previous studies of ours have shown that local newspapers are even less commonly used to place graduate job adverts. The full details are given in table 4.

As for trends, our matched samples of employers show that online recruitment has reached a high point from which it has not climbed further in the past three years, although there are indications that directories and regular vacancy bulletins that are targeted towards undergraduates are enjoying renewed popularity.

Punching above their weight

It is not always the case that the most effective recruitment methods are those that are also in greatest use. Mismatches occur in the following recruitment methods, where the methods appear to "punch above their weight" in being reported as highly effective despite their relatively low usage:

• national newspaper advertising; and
• the use of sponsorship - pre-selecting undergraduates who are sponsored for all or part of their course (see below for further details) and who may work in the organisation during vacations and sandwich years; sponsorship is relatively rare yet it is highly rated by employers that use it.

In contrast, speculative applications are widely accepted by graduate recruiters; these require as much time and effort to sift as other applications but, according to those accepting them, are not a very effective means of finding quality candidates.

Pre-selection and selection

• Online application methods are now more widely used than paper-based formats.
• Assessment centres and face-to-face interviewing are by far the most effective selection methods. Upwards of five different selection methods are used by at least 50% of employers. Several methods are rising in usage, while none are waning.
• Tests of specific skills and/or abilities are less widely used than their reported effectiveness would suggest should be the case; in contrast, presentations, personality questionnaires and telephone interviews provide only a relatively minor contribution to overall selection decisions.

Application methods

Application methods represent a bridge between attraction, pre-selection and the main selection processes. The rise of the internet as the method of choice for graduate recruitment has seen online application methods surge ahead over their traditional paper-based cousins.

Among the organisations we contacted, two-thirds (65.9%) now use electronic application forms, while only four in 10 (40%) retain paper-based formats. Three in 10 (31.4%) employers insist on the sole use of electronic application forms, although they will offer alternatives to candidates with disabilities. CVs also remain in widespread use, as table 5 shows.

Different types of employer favour different application formats. Public sector employers are much more likely to insist on the use of application forms, in either paper or electronic versions, while firms in the manufacturing and production sector are more likely than the public sector or private sector services companies to retain an attachment to CVs.

How best to select?

Many employers use the assessment centre technique to recruit new graduates. This method deploys a battery of selection methods over an extended period. A normal job interview might last one to two hours, but assessment centres can easily take one to two full days.

Assessment centres have been found by their users to be conclusively the best method of reaching sound selection decisions. Two-thirds (66.7%) of their users told us that they are their single best method (see table 6).

In respect of the process of selection - assessing applicants against the vacancy's selection criteria beyond the pre-selection stage - just two methods are predominant: assessment centres and face-to-face interviewing. Four in 10 employers have found that interviewing represents their most effective selection technique. No other method was cited by more than 6% of its users.

Opinions seem fairly settled about the best selection methods. When we compare the same selectors' feedback in this year's survey with our 2003 study, we find that no significant changes have taken place.

Current selection practices

The range of selection methods in current use by graduate recruiters is detailed in table 7, while table 5 covers their pre-selection or sifting techniques.

Our findings show that more than half of all employers recruiting new graduates use at least five different selection methods. Interviews are more or less universally used; nine in 10 (89.6%) graduate selectors favour the traditional face-to-face encounter, while others include them in their assessment centres or, on occasion, use telephone interviewing.

Two-thirds (66.7%) use assessment centres, with around six in 10 employing literacy/numeracy tests, competencies and presentations.

In recent years, according to our matched samples of graduate recruiters, some selection methods have become more widely used: work-sample tests; competencies; literacy/numeracy tests; and, to a lesser extent, discussions and tests of specific skills/abilities. There are no indications, however, that other selection methods are waning in use in parallel to this growth.

Punching above their weight

As with attraction, it is not always the case that the most effective selection methods are those that are also in greatest use. The greatest mismatches occur in the following methods:

• tests of specific skills and/or abilities are less widely used than their reported effectiveness would suggest should be the case; but
• presentations, personality questionnaires and telephone interviews provide only a relatively minor contribution to overall selection decisions, despite their relatively wide-scale use.

Assessment centres

Assessment centres are widely used in graduate recruitment and are generally seen as offering the best means of selecting good recruits.

The typical user has developed their centre using in-house staff, has based its dimensions on competencies, and conducts evaluations of the centre's performance and effectiveness.

Most non-users have thought through their reasons, and base their non-use on their low level of graduate recruitment each year rather than on cost or time factors.

Assessment centre techniques

Assessment centres represent the selection method - or, more accurately, the battery of methods - par excellence for new graduates. They are widely used, particularly by larger employers - although our matched samples indicate that usage for graduate recruitment is not increasing - and are highly rated by users, as we have already described.

The power of carefully designed, validated and applied assessment centres lies in their multiple approach to analysing candidates' potential suitability. Each key aspect of the vacancy being filled is assessed by two or more methods, and each candidate's performance in an assessment method is observed by at least two assessors. Giving relevance and consistency to the whole process is a set of dimensions that describe the essential facets of the vacancy.

Our previous year's graduate recruitment study looked in depth at assessment centre use. We found that the typical assessment centre is designed in-house without external consultant support (the case among two-thirds of users), and is based on competencies (among nine in 10). That is, competencies are used to provide the "dimensions", which describe the skills, behaviours and other factors that the assessment centre aims to assess.

Reassuringly, most organisations undertake evaluations to ensure that their assessment centres are effective and fair in selecting the best graduates (eight in 10 do so). Most employers make use of several review techniques, including the performance of the graduates selected as a result of the assessment centre, and feedback from assessors and some of the participating graduate candidates. Equal opportunities monitoring data is analysed to check that the centres are not adversely affecting applicants on the basis of their gender, ethnicity and other attributes. And statistics on the retention rates of graduates selected via assessment centres are reviewed. On a more technical level, many employers make comparisons between different assessors' ratings and recommendations to ensure that their centres are being conducted in a consistent way.

Why assessment centres are not used

This year, we explored another issue related to the use of assessment centres in graduate recruitment: the explanation why a significant minority of graduate recruiters does not use them. Given that assessment centres are widely held to be the best means of selecting new graduates, why has their usage not increased in recent years?

We asked our contacts who are not assessment centre users - one in three of all those that we contacted - for their reasons. Most have given consideration to the introduction of assessment centres (see table 8) and, having done so, have decided that they simply do not have enough vacancies for new graduates each year to justify it. Or, equally importantly, their low level of recruitment means that it would be difficult in practical terms to design a centre and then find sufficient participants to take part in one.

For three-quarters of the non-users, neither cost nor time are major factors in preventing the introduction of assessment centres. The same proportion has not discounted assessment centres in the belief that their current selection process might be equally effective in finding the best recruits. And very few of the 47 employers we contacted told us that a lack of internal expertise stood in the way of introducing centres should they wish to do so.

Electronic methods

Almost nine in 10 employers use online methods to recruit graduates. Most of them use both their corporate site and one or more job boards. Satisfaction with the effectiveness of the internet is rising. Three in 10 organisations require potential applicants to complete an online screening questionnaire.

One in three graduate recruiters are not clear that disability law applies to online recruitment, and fewer than four in 10 can say for certain that the sites they use have been checked for accessibility by people with disabilities.

Earlier, we described how most employers seeking new graduates use online recruitment methods. More than eight in 10 advertise their vacancies on their own organisation's website or its special careers site, and just over half use job boards.

Going more deeply into the use of online media, we find that the typical online user employs both their corporate site and one or more job boards. Overall, almost half (46.7%) of online users have adopted this approach, while fewer (35%) rely solely on their corporate site, and hardly any (5.8%) use one or more job boards to the exclusion of their corporate web presence.

Removing the overlaps in usage, we find that almost nine in 10 (87.6%) of the graduate recruiters we contacted this year are now involved in online recruitment.

Satisfaction seems to be rising at the same time. Corporate internet sites are now the second highest-rated attraction method, followed closely by job boards.

Beyond their use in attraction, online media are also widely used by graduate recruiters as a prime means of receiving applications (two-thirds, 65.9%, do so, making it the single largest application channel today).

Screening online

Online recruitment has become increasingly sophisticated with technological advances and the growing awareness of its potential to increase the cost-effectiveness of hiring processes. In terms of graduate recruitment, there is a growing trend towards the introduction of application-management software, which provides one common, computer-based system for the process of attracting, selecting and appointing new recruits.

In addition, an increasing number of graduate recruiters are turning to electronic screening processes in an effort to reduce the time and expense of handling large numbers of applications. Three in 10 (32%) organisations now require potential applicants to complete an online screening questionnaire, failure at which usually means that they cannot proceed to the application process proper. This proportion increases to four in 10 (40%) among private sector services firms.

Disability law and the web

One of the most striking differences between online recruitment and conventional recruitment practices concerns awareness of, and compliance with, the law. In particular, the Disability Discrimination Act 1995 (DDA) applies to the access by individuals with disabilities to websites.

Yet despite a formal investigation of internet sites by the Disability Rights Commission (DRC) using its legal powers⁴, little attention is still being paid to web accessibility.

This is borne out by feedback from graduate recruiters. More than one in five (22%) of those we contacted did not know that online recruitment is covered by the DDA and a further one in 10 (11.4%) were unsure. In other words, one in three graduate recruiters are not clear that disability law applies to online recruitment.

Moreover, of the graduate recruiters using online recruitment, one in five (20.5%) told us that the sites they use have not been checked for their accessibility by people with disabilities, and a further four in 10 (42.7%) were unsure. Several others told us that this issue does not apply to them, but, when we checked, we found that most of them do indeed use one or more forms of online recruitment or selection.

In all, fewer than four in 10 (36.7%) were able to say for certain that the sites they use have been checked for accessibility. Recruiters in the public sector were most likely to answer in the affirmative, followed by private sector services and manufacturing/production companies. The likelihood of a positive answer was also linked to workforce size, rising in tandem with staff numbers.

Placements and sponsorship

Three-quarters of employers that recruit new graduates provide work experience placements, and one in four provides a sponsorship scheme for undergraduates.

The median sponsorship bursary is £1,500. Most sponsorship schemes require students to follow vocational courses in particular subjects. The recruitment of new graduates is different in many ways to the normal process of filling organisations' vacancies. In paraticular, there are few other situations apart from graduate recruitment where employers can create opportunities to "preview" potential candidates months, sometimes years, in advance of hiring them.

These opportunities can take the form of facialitating work-experience placements by undergraduates. Or, more formally, an employer can select one or more students whom it will sponsor. Such students usually apply for this opportunity and undergo a selection process. Employers more often than not offer a bursary for all or part of the student's course and, in return, the individual is often expected to spend time with the employer during vacations.

Placements

Many graduate recruiters take full advantage of the opportunity presented by their contact with students during work placements. Six in 10 (59.6%) of the graduate recruiters we contacted that host work experience students turn to this group when seeking to fill their vacancies.

As well as providing an opportunity for potential employers and employees to get to know each other, work placements help undergraduates develop the work-related skills and behaviours that employers value. For vocational courses, placements play a central role in students' learning.

The practice of offering work experience is widespread - three-quarters (76.5%) of organisations that recruit new graduates provide such opportunities. Firms in the manufacturing and production sector are more likely to host work placements than their counterparts in private sector services (83.7% against 71.2%). And larger graduate recruiters are much more likely to do so than smaller employers.

Given these high rates, our matched samples show no indications that greater proportions of employers are now offering work placements.

Sponsorship

Employers maintaining sponsorship schemes rate them highly in terms of helping them recruit new graduates of high quality. Increasingly, though, the costs involved, coupled with the increasing difficulty of reliably forecasting their requirements for new graduates, have meant that sponsoring organisations are reviewing their schemes and tightening them up. By the same token, these difficulties mean that the proportion of graduate recruiters offering sponsorships is not tending to increase over time, and remains most prevalent among manufacturing firms where the difficulties in finding suitable vocationally trained graduates (particularly engineers) remain widespread.

In our latest study, one in four employers (25.9%) provide sponsorships, although this rises to more than four in 10 (42.9%) among manufacturing and production companies. Of those that provide sponsorships, almost all (89%) of them turn to their sponsored students when filling their vacancies.

In all, 30 employers gave us details of the bursaries they provide to their sponsored students. They pay a median amount (the midpoint figure in the range of all payments) of £1,500 a year, the same sum as we found in last year's study.

Many sponsorship schemes are open only to students following vocational first-degree courses, notably engineering and allied subjects (which account for four in 10 of the eligible courses among the employers we contacted). The courses are often closely defined and, apart from engineering-related ones, often involve scientific (16% of eligible courses) or construction-related (10%) subjects. However, one in four sponsorship schemes do not place restrictions on the subjects being studied.

Deciding not to sponsor

Three-quarters of graduate recruiters do not operate sponsorship schemes. This year, we asked our contacts for the specific reasons why this is the case. Above all, their feedback shows that they would not be able to justify the time, effort and expense of doing so, given that they receive sufficient applications without a scheme (a reason given by 58% of our contacts).

Many of our contacts also face difficulties in planning ahead for their graduate intakes; organisational changes make their task too unpredictable for the one- to three-year horizon that sponsorship schemes require (a reason given by 41% of our contacts).

Finally, one in four (25%) told us that sponsorship schemes are simply too costly to justify their use in their organisations.

It is worth mentioning, however, that the balance between these reasons varies from sector to sector, and from small to large employers. Manufacturing and production firms are less likely to say that they receive enough applications without sponsorship schemes, but are more likely to say that their need for recruits is too unpredictable to permit them being offered. In terms of workforce size, the issue of being unable to predict future needs for new graduates reduces in importance as organisation size increases. But to counter this, larger organisations are more likely to say that they have no need of a scheme because they receive sufficient applications without one.

Starting salaries

The median forecast starting salary for new graduate recruits is £20,000 for 2005/06, representing a rise of 3%. The rate of increase is lower than in recent years.

For the past couple of years, starting salaries for new graduates have been rising faster than basic pay levels across the economy as a whole. However, our latest study shows that salary rises are being reined back.

The median (range midpoint) starting salary for new graduates in 2005/06 will be £20,000. This represents a rise of just 3% over 2004/05, calculated by taking a matched sample of identical vacancy types in the same organisations. This increase is in line with the all-economy figure recorded by the IRS Pay and Benefits databank.

The median rate of £20,000, as well as the other figures in this report, is net of any identifiable location payment included within it (such as a consolidated London allowance). As table 9 shows, there are differences in median rates between the main economic sectors (£2,500 between manufacturing and production firms and the public sector), while there is a smaller variation according to workforce size (where there is a £750 differential). When analysed by six main types of vacancy, there is a difference of £4,650 between the highest median starting rate (financial roles) and the lowest (sales and marketing).

Our research

This article draws on the latest findings from our 14-year series of annual studies of graduate-recruitment practices in the UK. This study was conducted by Neil Rankin and Ed Cronin in September 2005, and is based on feedback from 139 employers that usually recruit new graduates. This group of 139 includes employers that have taken part in previous years' studies, enabling us to use matched samples to analyse trends in a more reliable manner.

The 139 organisations in our latest study have a total workforce of just under 2 million people. More than one in five are classed as small and medium-sized enterprises, having fewer than 500 employees. More than four in 10 have between 500 and 4,999 employees, and the remaining one in three have 5,000+ employees. By sector, just over half are private sector services companies; just over one-third operate in the manufacturing and production sector; and one in 10 are public sector bodies. The larger employers (500+ employees) in our survey employ one in seven of all such workers in the UK.

Table 1: The best ways of overcoming recruitment difficulties

Method	% of employers
Advertising in a different medium/publication	37%
Trying another type of recruitment method	24%
Re-advertising in the same publication	10%
Speeding up the recruitment process	10%
Improving starting salary	3%
Based on employers' choice of one method only. n = 59. Source: IRS.

Table 2: The potential impact of the new age law

Expected impact	% of employers
Revise the information in recruitment literature	80%
Change the images in recruitment literature	58%
Widen access to new-graduate training programmes	53%
Revise promotion practices	32%
Widen access to other high-flier training programmes	29%
Change selection practices	28%
Discontinue the milk round	4%
Based on the minority of employers that anticipate that the age discrimination Regulations will have an impact on their graduate recruitment, training and promotion. n = 25. Source: IRS.

Table 3: The most effective attraction/recruitment methods

Employers' choice of the single most effective method that provides the best-quality applicants, analysed according to those using the method in question.

Attraction/recruitment method	% of users
National newspaper advertisements	31.0%
An internet site run by/for the organisation (eg its corporate site)	24.1%
An external internet site that carries more than one organisation's graduate vacancies	23.6%
Sponsored students	17.9%
Campus visits	16.4%
Published directories of vacancies for new graduates	15.2%
Former work placement students	14.7%
Word of mouth/personal contacts	11.4%
Specialist journals and/or trade press	10.9%
University careers services	8.0%
Published bulletins of vacancies for new graduates	7.0%
Speculative applications	4.3%
Jobcentre Plus offices	0%
Local radio	0%
n = 131. Source: IRS.

Table 4: Current practice in attraction/recruitment methods

The range of methods used by graduate recruiters; table 3 highlights their effectiveness.

Attraction/recruitment methods	% of employees
An internet site run by/for the organisation (eg its corporate site)	82.2%
University careers services	73.3%
Published directories of vacancies for new graduates	58.5%
Campus visits	53.3%
An external internet site that carries more than one organisation's graduate vacancies	52.6%
Speculative applications	51.9%
Word of mouth/personal contacts	51.9%
Former work placement students	50.4%
Specialist journals and/or trade press	34.1%
Published bulletins of vacancies for new graduates	31.9%
National newspaper advertisements	21.5%
Sponsored students	20.7%
Jobcentre Plus offices	5.9%
Local radio	1.5%
Various other methods	15.6%
n = 137. Source: IRS.

Table 5: Application methods in use

Electronic application forms	65.9%
CVs	52.6%
Paper-based application forms	40.0%
Letter of application	35.6%
Employers could choose more than one method. n = 137. Source: IRS.

Table 6: The most effective selection methods

Employers' choice of the single most effective selection method, analysed according to those using the method in question. Employers were not asked about the methods primarily used for screening and pre-selection shown in table 5.

Selection menthods	% of users
Assessment centres	66.7%
Face-to-face interviews	39.8%
Tests of specific skills/abilities	5.9%
Tests of general ability/aptitude	5.4%
Competencies	5.0%
Tests of literacy and/or numeracy	2.5%
Tests involving a sample/mock-up of work tasks	2.4%
Discussions	2.1%
Presentations	1.4%
Personality questionnaires	0%
Telephone interviews	0%
n = 131. Source: IRS.

Table 7: Current practice in selection methods

The selection methods most commonly used for new graduates. Table 6 highlights their relative effectiveness, while table 5 shows the pre-selection methods in current use.

Selection methods	% of employers
Face-to-face interviews	89.6%
Assessment centres	66.7%
Tests of literacy and/or numeracy	59.3%
Competencies	58.5%
Presentations	53.3%
Discussions	34.8%
Telephone interviews	33.3%
Personality questionnaires	31.9%
Tests involving a sample/mock-up of work tasks	31.1%
Tests of general ability/aptitude	27.4%
Tests of specific skills/abilities	25.2%
Various other methods	4.4%
n = 137. Source: IRS.

Table 8: Why some employers do not use assessment centres

Reasons for non-use	% of employers
Not enough vacancies each year	55.6%
Too costly	26.7%
Too time-consuming	26.7%
Use equally effective alternative methods	26.7%
Never considered as an option	15.6%
Lack internal expertise	13.3%
Various other reasons	4.4%
n = 47. Source: IRS.

Table 9: Forecast starting salaries for 2005/06

	Median	Average
Sector
Private sector services	£19,500	£20,228
Manufacturing and production	£21,000	£20,979
Public sector	£18,500	£19,281
Workforce size
1-499	£20,000	£19,932
500-4,999	£19,750	£19,963
5,000+	£20,500	£21,216
Type of vacancy
Graduate trainee	£20,000	£20,844
Engineer and related	£21,000	£20,970
Financial	£22,650	£23,643
IT	£20,500	£22,003
Management	£19,250	£19,705
Sales and marketing	£18,000	£18,546
All employers	£20,000	£20,393
Salaries exclude location payments. n = 212 vacancy types. Source: IRS.