Employers across the UK report a surge in graduates and apprentices leaving roles due to dissatisfaction with pay, according to a survey by the Institute of Student Employers (ISE).

ISE's annual Student Development survey showed the impact of the cost-of-living crisis, with more entry-level staff favouring pay over progression.

This year, more than half of employers (51%) reported graduates and apprentices were leaving for better pay, compared to 40% in 2023 and 2022 and just over a quarter in 2021 and 2020.

Dissatisfaction with pay has become the second most common reason for people quitting, behind moving to a similar role in a different company. Before the cost-of-living crisis, graduates were likelier to leave their employer for better progression opportunities than higher salaries.  

The survey also showed a shift to more applications for higher-paying sectors such as finance and fewer graduates applying for jobs in the public sector, which are traditionally lower paid. 

The survey showed that pay progression once in employment has not kept pace with the market and only new joiners, both entry-level graduates and those moving for better pay, seem to be reaping the benefits.

ISE also found that while starting salaries for graduates and apprentices increased this year, the levels for those who've been in the job for three years have remained static.

Overall, graduate retention after three years is in gradual decline. In 2016, employers retained 83% of their graduates after three years; in 2023/24, it had dropped to 70%. Employers reported finding black heritage hires and women particularly hard to retain.

Conversely, there was a spike in apprentice retention, which rose to 77% this year compared to 71% in 2023. This may be due to school and college leavers feeling less secure in the job market. While the employment rate for graduates has increased, non-graduate employment rates have not yet started to recover from the end of the pandemic.

The ISE said offering work experience can help. Approximately a third of employers (32%) reported retaining former interns at a higher rate. The survey also showed that those who had completed an internship or placement arrived with better skills and attitudes.

Stephen Isherwood, joint CEO of ISE, said, "The cost-of-living crisis still impacts students once they have found work. Increases in rent, travel and general living costs mean that salary levels are not keeping pace with inflation. So, in a competitive market for talent more people are leaving for better paid opportunities. Employers are going to need to work harder to retain talent."