Companies are now retaining just 72% of their graduates after three years, down from 79% in 2011, when Institute of Student Employers (ISE) records began.
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While the top reason for leaving their job was to change sector or role, pay has sharply risen in importance.
Four in 10 (40%) graduates said pay dissatisfaction was one of their reasons for leaving, compared to just 28% in 2021.
Chief executive of the ISE, Stephen Isherwood, said the falling retention rates are a potential threat to employers.
Speaking to HR magazine, he said: “Employers should remember that their early talent hires don’t finish exploring their career options when they start a training programme.”
To boost retention, he suggested allowing employees to explore different roles, and for employers to be flexible in the design of their graduate programmes.
He added: “Managed well, graduates and apprentices aren’t as fickle as people think.”
Tom Seymour, senior director of HR at graduate training and re-skilling company Mthree, said that the ISE's data was worrying.
Speaking to HR magazine, he suggested that a poor culture fit may be partly to blame.
He said: “Clearly companies are failing to meet the needs of graduate candidates and support them within their organisation effectively.”
Mthree research from December 2021 revealed 70% of workers aged 21-28 have regretted joining a company after discovering what its company culture was really like.
Over a quarter (26%) went on to quit within the first six months.
Seymour added: “If new starters are well-informed of company culture and are being supported effectively once they join a business, this can have a dramatic effect on retention and reduces the risks associated with employees leaving.
“Acting now, prioritising employee turnover by refining and effectively communicating company culture could be the difference to the businesses that thrive this year, with a happy and engaged workforce.”
