Taking on staff represents a considerable expense and risk for businesses. For fledgling businesses, the cost alone can be prohibitive and that’s where interns come in. Interns do not have the same rights as employees or workers and importantly, are not entitled to the national minimum wage.
However, there is considerable scope for confusion when it comes to determining whether a working relationship qualifies as an internship. For example, who you thought you hired as an intern could, despite their title, be performing the role of a worker or employee. If so, you could inadvertently be breaching their corresponding rights and that could lead to a claim against you or land you in hot water with HMRC.
If you want to avoid a claim or an HMRC investigation, it is vital that you and your staff – whether employee, worker, contractor or intern – fully understand the basis of the engagement at the outset and that the paper work, duties and payment structures properly reflect this.
When is an intern not an intern and what does this mean?
In short, an intern is there to learn and increase their skill set typically with a view to pursuing a career in the industry of business that offered them the internship.
They may carry out work for the business but it is important that they do what they do does not amount to what might be expected of a worker. Otherwise they may, at law, be considered as such, and have additional rights, such as the right to holiday and to be paid the national minimum wage.
An intern may be classified as a worker if for example they are under an obligation to come into work at specific times or perform specific duties of genuine value to the employer, as opposed to shadowing or performing tasks under supervision. The right to be paid the national minimum wage as a worker applies even if the intern has agreed to work for free.
What this means is, you cannot simply hire a bunch of staff, call them interns, have them run your business and pay them nothing. It will not matter what their title is or what agreement they have entered – if they are performing tasks of a worker they will be considered as a worker.
There is an exception to the right to receive the national minimum wage as a worker. A worker will not be entitled to the national minimum wage if they are doing a placement as part of a course with a higher education body. So, you can technically engage a worker and not be liable to pay the national minimum wage; however, care must be taken that the student qualifies for the exception (for example, overseas institutions do not qualify as higher education bodies).
What happens if you get it wrong?
If an intern is deemed to be a worker and you have not paid them what they are entitled to, not only will they have a claim against you for what they should have been paid but HMRC can investigate you and carry out an audit of all your staff, contractors and suppliers, which can be extremely disruptive. If HMRC find that you have breached a worker’s right to receive the National Minimum Wage, they can penalise and fine you.
How do I guard against this?
It is important to identify from the outset exactly what the staffing requirements of your business are. If you need someone to help run your business, hiring an intern will be inappropriate and may get you in trouble.
If you are hiring interns, it will be important draw up and enter into an internship agreement that clearly defines the relationship and the intern’s learning objectives. While this alone may not be determinative of an internship, it will serve as useful clarification for you and the intern and as evidence should any issues arise. It is also advisable to have a learning plan to monitor when objectives are met.
This can be a tricky area and given the potential consequences, if you are unsure of whether an intern, or even a supplier or contractor, may be classified as a worker or employee giving rise to additional obligations you should take prompt legal advice.
Karen Holden is founder of A City Law Firm.
Further reading on interns
