Internships: legal requirements for employers

Internships have become increasingly popular in the UK recently, with many people offering their services for little more than the cost of their expenses for the chance of securing full-time work. However, firms could find themselves unwittingly on the receiving end of heavy fines if they don’t follow the rules when it comes to hiring interns.

The economic outlook may be showing some signs of improvement, but getting a foot on the employment ladder – particularly in areas such as professional services – remains as challenging as ever.

Increasingly people of all ages are looking to internships for the answer. The practice of unpaid work experience has been popular for a long time in the arts and media industries, but is now becoming more widespread and commonplace, particularly in IT and engineering and also in sectors such as law. Firms are recognising this and we are increasingly seeing ads being placed in trade magazines offering law graduates and/or newly-qualified solicitors an unpaid paralegal position, with the carrot of a possible training contract or full-time employment at the end.

However, anyone considering taking on an intern from the pool of talented individuals available could, if they are not careful, find themselves breaking minimum wage rules and end up on the receiving end of some rather hefty fines. It’s one of the reasons why late last year the Chartered Institute of Personnel and Development launched a new code of practice to ensure that the current drive to promote internships doesn’t lead to poor quality placements.

To avoid any nasty surprises down the line, it is vital that both parties know their position as internships remain something of a legal grey area.

An internship is a way for people to gain experience and, as such, any organisation placing an intern is under an obligation to educate and train them. Under an intern scheme, a placement which is unpaid can last no longer than four months, and all work-related expenses have to be covered by the organisation.

Where someone fails to properly place and treat an individual as an intern, they could actually find that their intern satisfies the definition of ‘worker’ or even ’employee’ under the Employment Rights Act 1996 and, as such, is entitled to be paid the National Minimum Wage (NMW). Once an individual is classed as a worker, depending on the relationship between them and the organisation, there is a risk that they could claim they are an employee, and therefore entitled to a host of employment rights such as holidays and sick pay.

What’s more, even if interns do not receive remuneration, they may still qualify as a ‘worker’ if they are obliged to perform certain tasks and where there is an expectation of work being delivered personally for the organisation concerned. Anyone who refuses or neglects their obligations to pay the NMW may be committing a criminal offence. This point has been echoed by the group Intern Aware, which is campaigning to ensure that interns are paid at least the minimum wage.

The circumstances in which an internship can be offered without pay are limited, and if an intern is effectively performing as a ‘worker’, the employer is obliged to pay them at least the NMW. Organisations that ensure their unpaid interns are not performing as workers may still be at risk if they offer some kind of enhancement. For example, the opportunity of a training contract offered to unpaid interns could mean they are classed as a worker.

The only real option available is to ensure that the interns carry out a role which is not equivalent to an employee, where they are not required to perform specific tasks and where they are not paid or offered any kind of enticement.

My advice to employers is not to assume that you can simply get people to work for free anymore – even by offering a possible job or training contract in the future. Make sure that you are fulfilling your obligations as an employer properly before you fall foul of the law.

Pam Loch is founder and managing director of employment law firm Loch Associates.

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