With so many graduates and young people out of work and recruitment slow to pick up, internships and work experience are a popular route for those looking for a foot in the door to their chosen career.
There are also significant benefits for smaller employers. Internships offer them a pool of talented new faces at a time when budgetary constraints mean they may be struggling to take on permanent staff.
However, while the benefits are clear, SMEs must be aware that from a legal standpoint interns can be considered either workers or employees. This means that they are often covered by the same employment legislation as the rest of the workforce, including the right to be paid National Minimum Wage (NMW). As failure to comply with NMW laws can lead to costly employment tribunal claims and hefty fines, it is crucial that businesses know where they stand before offering work experience or internships.
Is an intern a worker or an employee?
“Internship” is a general term that can result in varying employment relationships and, as a result, varying employment statuses. Depending on the way that an intern is treated, they can either be considered an employee, a worker, or to be undertaking work experience.
A worker is described as an individual who works under a contract of employment, or undertakes to perform work personally for another, where the relationship is not one of client or customer. Workers are covered by some basic employment rights but not as many as full employees.
Individuals employed under a formal work placement are therefore likely to be considered workers. This is often the case with internships, which are more formal than work experience with those involved usually undergoing a proper selection process.
A worker’s employment rights are (including but not limited to) the right to be accompanied in disciplinary and grievance procedures as well as rights under the Working Time Regulations in respect of holiday and, crucially, payment of the NMW.
An intern could be considered an employee if there is an employment contract based on mutuality of obligation, i.e. the employer is obliged to provide work and the individual has to carry it out. As a result, employees enjoy a wider range of rights including the right to equal pay, the right not to be unfairly dismissed and the right to receive a statutory redundancy payment.
As a result, if employers have significant control over where and how an intern works, the individual may be deemed to be an employee rather than a worker, and would therefore enjoy these additional employment rights.
Work experience is an opportunity to watch and learn from others within a workplace setting without the individual carrying out work themselves. For example, if an individual attends a place of work for a few hours a day, to get a “feel for office life”, this may not be considered a job and is more likely work experience.
However, the more those on work experience, or interns, are asked to do for the employer, the more likely it is that they will be considered to have a job and be “working”. Most interns will be looking to impress the employer in the hope of getting a permanent job, so they are likely to undertake real work at some point.
In order to ensure that an intern doesn’t become a worker or employee, companies should follow a few basic principles. Do not ask the individual to carry out specific tasks within set hours or on a regular pattern, encourage work shadowing, and limit the work experience to a short period of time, e.g. one or two weeks – the longer it lasts the more likely it is to attract entitlement to NMW.
Other situations to be aware of
Occasionally interns could be referred to as volunteers. However, in the majority of cases, this is unlikely to be the case. In order to be protected from paying a volunteer NMW, the worker must undertake work for a charity or voluntary organisation.
Students undertaking work experience as part of a “sandwich” course in association with a higher education establishment will be exempt from the NMW, provided the placement does not exceed one year.
Don’t give up on internships
While the law around internships may sound daunting, employers shouldn’t shy away from taking on these individuals. Hiring interns can be mutually beneficial as employers not only support those trying to break into their chosen career but interns can prove to be a valuable resource also. It is, however, crucial that employers understand the law surrounding internships and take all necessary precautions to avoid tribunal claims and fines.
Andy Willis is the senior manager of the litigation and employment department at Croner-i.