New government guidance on the use of unpaid interns

As students look forward to the long summer vacation and hope to obtain valuable work experience the Department for Business, Innovation & Skills has issued guidance on when interns should receive the National Minimum Wage.

| Filed under minimum wage pay

Failure to pay NMW when it is due is a criminal offence which may result in fines as well as claims for back pay. The Government’s Employment Relations Minister indicated earlier this month that claims for NMW by unpaid interns would be fast-tracked for investigation by HMRC.

With increasing competition in the graduate job market and a tough economic climate, it has become more and more common for individuals to offer to work for free in order to get the experience which is often a pre-requisite for a permanent job. Critics claim that some employers exploit unpaid interns who are often used to perform work of significant value to business. The question of whether or not employers are obliged to pay interns at least the National Minimum Wage has appeared frequently in HR columns and web pages in recent years. Now the Department for Business, Innovation and Skills has issued some guidance.

Regardless of whether an individual is called an "intern", "unpaid worker", or "work experience" student and regardless of what the terms of any written agreement state, if the work that an individual is doing brings them within the definition of a "worker" under the National Minimum Wage Act 1998 then they must be paid at least the National Minimum Wage ("NMW") (currently £6.19 per hour). The definition of "worker" for the purposes of the National Minimum Wage Act is similar to other employment legislation, covering any contractual relationship (whether or not the contract is express or implied, written or oral) whereby the individual agrees to provide his/her services personally, other than in the course of a business run by that person.

The National Minimum Wage Act provides specific exemptions including:

  • Students who are required to do work place experience as part of a course of further or higher education – provided the work placement does not last longer than a year;
  • Students undertaking work experience who are of compulsory school age;
  • Participants in government schemes to provide training, work experience or temporary work or schemes to help individuals into employment;
  • Participants in EU Lifelong Learning programmes such as Erasmus;
  • Voluntary workers in charities or voluntary organisations who receive no payment other than limited expenses and benefits.

Considering the specific issue of work experience and internships the Department for Business, Innovation and Skills guidance identifies two other categories that are not eligible for National Minimum Wage:

  1. Work shadowing

    An individual who is simply observing and not performing any work is not eligible for payment of the National Minimum Wage

  2. Volunteers

    A genuine volunteer who receives no payment other than reasonable out-of-pocket expenses is not a worker and therefore not entitled to receive the National Minimum Wage. While a volunteer may hope to gain some non-financial benefit from the arrangement (such as a reference or the offer of employment) to be a genuine "volunteer" there must be no obligation on them to attend work if they do not want to. This does not preclude a business agreeing an expected pattern of attendance with a volunteer, but there must be no sanction (such as withholding agreed expenses or dismissal) if they fail to show up or do not do work that it was agreed they would do.

Many organisations put a lot of effort into structuring intern programmes and may be uncomfortable with such a loose arrangement with those who are lucky enough to be offered an internship. If a business expects regular attendance and completion of assigned work in return for an internship then this points to a "worker" relationship and National Minimum Wage must be paid.

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This news item is not intended as a comprehensive summary of the subject matter and does not constitute legal advice. Parties are advised to obtain professional advice addressing individual facts and circumstances before acting on this information.