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2019 Graduate pay trends – Europe

Have the rising costs of a university education affected pay?

Compensation Strategy & Design|Talent|Total Rewards
Beyond Data

July 17, 2019

Employers depend upon fresh talent from school and university leavers, but what are the expectations of pay for the employer and employee?

The topic of starting salaries is multifaceted and often under appreciated. Employers depend upon fresh graduates to be the vitality of today and possibly the leaders of tomorrow. Determining what to pay new hires fresh out of school can be a challenge, particularly in terms of retaining that new talent. Depending on how many new employees are needed, the investment can be substantial. What’s more, starting pay plays an important role in establishing expectations and can send a variety of messages to staff (and not just those being hired).

While it’s safe to say that employees expect career progression and salary growth to go hand-in-hand anywhere on Earth, the extent to which this is true can vary massively. Often in Europe’s more developed markets (especially Western Europe), staffing costs can be particularly high but their evolution is tempered. This can partly be explained by the prevalence and significance of reward elements beyond basic salary, especially among management. In places where cash is “inefficient” for the employer and/or the employee due to taxes and contributions, the growth in cash compensation will be comparatively repressed during the course of one’s career because employers will invest in other (generally more favorable) reward types.

Starting salaries - 2019

Source: Willis Towers Watson 2019 Global Starting Salary Report; 2018-2019 Global 50 Remuneration Planning Report

Conversely, in markets where tax effects are more subdued and alternative forms of reward fewer, more focus is likely to be placed on base pay growth. Developing markets may have other influences to contend with, such as inflation. In these markets, staff may expect annual and promotional pay increases which outstrip corporate budgets and guidelines.

Starting salaries - 2019

Source: Willis Towers Watson 2019 Global Starting Salary Report

An adjoining consideration – as well as a perennial question – pertains to the value of a university education. With rising schooling costs and potentially difficult entry requirements, understanding the “value” of a university education is as valid as it’s ever been. From an employer’s perspective, it goes beyond knowing what to pay people. It also helps to understand how “elite” graduates see themselves, thus giving a glimpse into what their overall expectations may be. Particularly in markets where multinational companies may require very specific (and possibly uncommon) skill sets, this can be invaluable talent management information.

The main consideration when planning pay for these new hires and balancing the expectations of new employees, current employees and the budgets is that the latest data is a guide to what the market actually looks like. Where is there a pay premium for education levels, and how does the tax environment behave relative to the costs and how these are paid.

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