Difficulties when hiring interns
18 October 2019
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Internships are a voluntary working arrangement, between an individual and a company, which benefits both parties. The employer is able to obtain the services of an individual for a fixed-term, whose apparent lack of experience is usually offset by paying them a salary significantly below the market rate. In return, an intern is able to gain some valuable insight and experience into how the business operates. They are viewed as specifically important for younger individuals as they can help bridge the skills gap between education and working life.
That being said, “intern” is not a defined employment status. An intern’s employment status is likely to be either an employee, worker or volunteer. Employees are the most protected class of individual and have the most extensive rights under UK legislation. Workers maintain some of the protections that are afforded to employees such as the right to the national minimum wage (NMW) and paid holidays, whilst volunteers are the least protected of the three. It is important to determine what an intern’s status is at the outset as this will impact on the employer’s obligations.
Employment status is determined by the actual working relationship between the individual and the company. If an intern is expected to perform work tasks and comply with the company’s instructions, rather than simply shadow someone else, it is likely that they will be held to be at least a worker. An individual is generally understood to be a volunteer if they are not obliged to work but agree to perform work for which they are not paid. A charity will often rely heavily on work and assistance from volunteers. A volunteer usually receives no payment, except the reimbursement of expenses, but can come and go as they please. This will normally be incompatible with an internship arrangement, as an intern will usually have set working hours and work for a fixed-term. Consequently, it is difficult for a company to assert that an intern is a volunteer and therefore they must be at least a worker.
If an intern qualifies as a worker they will, amongst other things, receive the following:
1. the national minimum wage
2. 5.6 weeks of paid holiday per year
3. pension auto-enrolment
Advertising an internship as 'unpaid' will not mean it is exempt for the purposes of NMW. An intern cannot waive their right to NMW and any agreement purporting to do so is void.
Only certain prescribed groups are not eligible to receive the NMW including:
• those participating in certain Government arranged schemes;
• those participating in certain schemes funded under the European Social Fund;
• students doing work experience for up to one year as part of a higher education course; and
• those doing work as part of certain European Community programmes
HMRC can take enforcement action against an employer who has failed to pay NMW to interns. Consequently, employers should consider recruiting interns using similar methods and practices to those used to recruit all other employees. For instance, even though an intern (who does not qualify as an employee) is not entitled to an employment contract, it is still advisable to confirm the terms of the working relationship in writing. This is to clarify the expectations of the intern as well as their right to pay, holiday, pension and other benefits.
If you would like advice on hiring interns, please contact our employment team.
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