The government’s Graduate Talent Pool (GTP) scheme is underway. Introduced earlier this year, the scheme is part of a package of measures designed to help graduates to improve their employability skills and support business at the same time. Employers willing to participate are key to the success of this programme, but what are the employment law issues that arise should they choose to do so?
Q Do employers have to pay interns?
A If interns are undertaking work of value then they may have worker status under the National Minimum Wage Act 1998 and qualify for the National Minimum Wage (NMW). The key elements to establishing the worker status of an individual is to decide whether there is an obligation on the individual personally to perform the work; whether there is an obligation on the employer to provide the work; or whether the individual is rewarded for the work by money, benefits or training.
If interns are simply ‘work shadowing’ then this is unlikely to indicate any entitlement to the NMW as the individual is not performing any work. However, if interns are being asked to work set hours and/or are under an obligation to perform work or provide services, then it is likely that they would be held to be a worker. The fact that there is no formal written contract in place and that their title or role is described as work experience/internship/voluntary work makes no difference.
Q What other employment rights would an intern have?
A If an intern is held to be a worker, then they will have a pro-rata statutory holiday entitlement and during the course of the internship they will accrue annual leave.
An intern would be entitled to statutory sick pay (SSP) if they were an ’employed earner’ (ie they receive earnings from which PAYE tax and Class 1 NICs are deducted) and if they satisfied the usual qualifying conditions. Where an intern is required to provide personal service, there is mutuality of obligation and the individual is subject to control or supervision by the employer, then the intern could be deemed to be a temporary/fixed-term employee and so entitled to SSP.
Q Do employers have to account for tax?
A Although there are no specific tax rules which apply to interns, employers will still have to be careful to ensure that, if an intern is characterised as a worker under the National Minimum Wage Act 1998, tax is properly accounted for under the usual rules. However, depending on the number of hours worked per week and the length of the internship, it may well be the case that no tax or NICs are payable. Where an intern is a student working for an employer solely during their holidays, then provided that they can complete a form P38(S), the employer should be able to pay them without having to deduct PAYE tax (although NICs will probably still need to be deducted).
Q What documentation should be given to the intern?
A If interns are simply work shadowing, then it would be sensible to give them a letter advising them of the start and end dates of the internship, any information that is available as to who they are to shadow and any further details of what is expected from them. This should be kept brief to avoid any risk of the letter being held to be an obligation on the interns personally to provide work.
If interns qualify for the NMW, a letter containing details of the start and end date of the scheme and brief details of what the trainees are expected to do during the internship would probably be sufficient. However, employers should bear in mind that if interns are, in fact, employees then they would be entitled to a statement of particulars of employment which fulfils the terms of section 1 of the Employment Rights Act 1996.
Q How should issues of poor performance be addressed
A Employers should be aware that, although interns with less than 51 weeks’ service will not have unfair dismissal rights, they will be protected from discrimination. Following disciplinary/dismissal procedures put in place for employees is likely to strengthen arguments that interns are employees.
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Employers should ensure that both they and the intern have the right to terminate the arrangement on a short notice period. This would allow the swift removal of poorly performing interns provided that there are no discrimination issues.
Clare Cruise, associate, Bristows
