“Stack them high and pay them peanuts” is not an attitude to take when you are looking to hire graduate talent.
A key part of any HR department’s work is to deliver value to the business by organically developing every employee. As they deliver more value, their remuneration and benefits equally start to ramp up. However, when an employee enters the workplace for the first time, there is a tendency to undervalue their potential and consequently underpay them based on these initially low expectations.
That is not a recipe to encourage peak performance.
The problem is that many graduates will accept a low starting salary so that they can get their foot in the door at their preferred companies. They might have monumental debts, and they might sleep on the sofa at a friend’s house, but not many will negotiate hard on their starting salary. Too many companies are fine with this scenario as this minimises the risk of hiring them in the first place, but money is often the reason why top grads look to leave. They see what their peers are being paid (potentially for making less of an impact), and they immediately feel a little short-changed. By that point, their salary is what it is, and they are subject to the same annual increases as everyone else. They likely won’t have the opportunity to substantially increase their salary until their first promotion, if they get that far.
This is always a difficult call, but for the true superstar grads, the value of “overpaying” them by a few thousand in the early years will create a unique sense of loyalty that will last for far longer. They might not have earned the right to this “extra” income, but the knowledge that they are being paid a little more than their friends in other companies gives them an inevitable sense of pride – they feel wanted. This shouldn’t be the case for every grad, but where employers think “this is our person,” it makes absolute sense to reward for potential.
There is a strong argument for spoiling your top performing grads rotten. Of course, once they are in the business, these various benefits should be earned, but if they are not rewarded for “smashing it,” they will soon look elsewhere. In the heads of many grads, the link between hard work and good grades is still very fresh, so hard work in employment should also be rewarded. If it is ignored, they will be less happy to put in so much effort next time.
As such, paying bonuses early in their career can be a strong motivator and links hard work to remuneration. The targets for such bonuses need to be achievable and appropriate for someone at their stage, not necessarily aligned to the targets for more senior members of the team.
No business hires a grad to lose them to a competitor within two years, but if they are not remunerated in line with their potential, that is exactly what will happen. A great grad has as much of a chance of becoming a future leader as anyone else. Why would you want to underpay them?
Paying grads a pittance just because they don’t have much experience doesn’t make sense. You pay them for their potential, not for their past.