Interns – to pay or not to pay?
This article first appeared on People Management online on 29th September 2011.
Internships are a hot topic. Are they providing genuine work experience or just exploiting cheap or even free labour? This month saw the graduate advice site Graduate Fog launch a "Pay your Interns" campaign, intended to "name and shame" companies that fail to pay interns the National Minimum Wage (NMW). The campaign reflects the ongoing concern, from both employers and interns, about the lack of clarity surrounding interns' rights. In an effort to clarify the position, the Government has now published guidance, outlining when interns should receive the NMW.
What is an intern?
There is no specific legal definition of "intern”. Interns could actually be "employees" or "workers" and have greater employment rights than first anticipated. "Employees" are individuals who have entered into or work under a contract of employment. This involves personal service and mutuality of obligation. Employees have various statutory rights (e.g. the right to claim unfair dismissal). The broader category of "worker" includes employees and also individuals who have entered into or work under any other contract whereby they undertake to do or perform work or services personally. Workers are entitled to some statutory protections (e.g. holiday under the Working Time Regulations 1998 and payment of the NMW).
The guidance confirms that entitlement to the NMW does not depend on job titles, the type of work undertaken, the description of work (e.g. "unpaid" or "expenses only") or the relevant profession/sector. What matters is whether the arrangement with an organisation qualifies interns as workers for NMW purposes.
Workers are entitled to the NMW, unless an exemption applies. Exemptions may apply to internships. For example, as the guidance highlights, workers undertaking work experience placements not exceeding one year as part of higher education courses do not qualify for the NMW.
The guidance also identifies arrangements which do not qualify for the NMW, such as work shadowing and volunteer work. Importantly, however, the guidance states that calling an unpaid worker "unpaid" or "volunteer", even if the individual agrees to this, does not prevent them from qualifying for the NMW if a worker relationship exists.
The guidance also distinguishes "volunteers" from "voluntary workers". "Voluntary workers" (i.e. employed by a charity, voluntary organisation, associated fund-raising body or statutory body) are exempt from the NMW if they do not receive monetary payments, other than reimbursement of expenses incurred in the performance of their duties; or benefits in kind, other than reasonable subsistence or accommodation.
Is the guidance useful?
The guidance provides a helpful NMW worker checklist and various examples, which underline that entitlement to the NMW depends not on job titles or labels but on the reality of the arrangements.
Although the guidance is a useful starting point, it cannot cover every type of arrangement. For example, there may be internships that either fall outside the examples provided or have elements of more than one arrangement. Where this is the case, employers should recognise that the guidance cannot provide a conclusive answer on eligibility for the NMW.
Employers should consider the following before taking on interns:
- Before the recruitment process begins, identify whether interns would be workers for NMW purposes and ensure all parties understand the nature of the role and the scope of the arrangements. Remember that job titles and labels are not conclusive.
- Refer to the recently published Best Practice Code for High-Quality Internships for guidance on preparing for internships. This provides best practice advice on providing fair and equal access to internships; offering work that will develop interns’ skills and implementing supervision/mentoring.
- Where appropriate, ensure the arrangements are in writing. Simply stating in an agreement that an individual is not a worker under NMW legislation is not definitive and will not limit liability to pay the NMW.
- Keep internship arrangements under regular review. Ensure any changes in practice are documented and address any potential exposure where the NMW is not being paid.
Louise Fernandes-Owen is a Senior Associate (PSL) in the Employment and Pensions Group, Field Fisher Waterhouse LLP.