A number of research settings involve data having a multilevel (hierarchical) structure. Failing to take into account such hierarchical structures may lead to wrong statistical inference. The objective of this study was to explore the correlates of employment status among graduates of Ethiopian Higher Education Institutions nested within their fields of specialization using hierarchical two‐level logistic regression model. The study sample consisted of 2569 graduates nested within 20 fields of specialization. The impact of level-1 covariates and fields of specialization on employment outcome was explored using average marginal effects. The estimated variance of the random (field of specialization) effects was found to be significant – an indication that a multilevel model is appropriate. Likelihood ratio test confirmed that the multilevel random coefficients model was a better fit to the data. Besides demographic and socio-economic characteristics of graduates (and their households), the dimensions related to the skills and competences of graduates, namely perceived level of training of graduates on technical/practical skills and soft skills at their universities as well as cumulative grade point average, had significant influence on employment outcomes. The results also revealed that the effect of practical skills on graduate employment varied across fields of specialization. Average marginal effects analysis indicated that the probability of employment was lower for graduates who were unmarried, aged below 25, with disability, from a low income family and those graduates who perceived that their preparation for practical as well as soft skills required in the job market was less than expected/very poor. Moreover, practical and soft skills differentials in the probability of graduate employment were found to diminish with an increase in cumulative grade point average. To improve graduate employment, provision of adequate training in practical/technical and soft skills is recommended.