Partner Article

Understanding rights is key to success of internships

Alison Weatherhead, of Maclay Murray & Spens LLP gives her expert advice on successfully managing internships.

In a challenging economic climate, where headcounts are paired to the bone and an abundance of job candidates, a growing number of businesses are offering internship opportunities. Such internships are seen by many as a cost-effective way to identify stars of the future, looking for an opportunity to jump-start a career. In many cases these are unpaid, with only expenses reimbursed. The challenge for employers is to fully understand the legal implications and the existing framework under which such roles must be managed.

As long as the intern is a student on certain UK higher education or further education courses and the placement is for less than one year, there is no requirement to pay the National Minimum Wage (NMW). Otherwise, there is no specific exemption for internships when it comes to remuneration. Employers should, therefore, expect to pay, unless the intern’s activities are restricted to work shadowing. Once the line is crossed and the interns carry out work themselves, the NMW becomes due.

The rules governing voluntary workers are similar and individuals who undertake placements on a volunteer basis are not workers for NMW purposes. However, this must be truly voluntary, for example, with no obligation to turn up or personally perform work. There are different rules for charitable organisations. Specifically, voluntary workers in this sector are excluded from the NMW, as long as they meet the statutory test.

In some cases the line is clear, as was the case for the publishing intern responsible for a team of writers, scheduling articles and hiring other interns: she was clearly a worker and entitled to the NMW! However, it is easy for an internship to start as shadowing and morph into work. It is, therefore, important for everyone to be clear what the role of the intern is.

The consequences of getting this wrong should not be taken lightly. HM Revenue & Customs is cracking down on abuse, with a range of different industries in spotlight. Employers risk having to pay arrears to each intern, as well as a penalty payment. Such organisations may also be ‘named and shamed’ by the Government. Most significantly though, refusal or wilful neglect to pay the NMW is a criminal offence, with fines up to £5,000 per offence, in addition to the cost of arrears and penalty payments. Directors should also take note that they too can be held criminally liable where they connive or neglect to pay the NMW.

Deputy Prime Minister Nick Clegg’s drive to end the so called “who you know, not what you know” culture is built largely on a call for an end to unpaid internships. With some 100 big businesses already committed to this ‘business compact’, the popularity of internships are showing few signs of receding.

This was posted in Bdaily's Members' News section by Tom Keighley .