Each year up to 70,000 young people are offered the chance to undertake an internship and gain work experience. But the legal status of internships has troubled employers for some time. How do you stay on the right side of the law?

The rise of the internship

Employers in certain industries where it was notoriously difficult to obtain an entry level job – such as advertising, PR, fashion – had, for many years, offered unpaid work experience as a way to get noticed. As the economy contracted in 2008 and with a glut of graduates, other businesses saw this as a way to get skilled employees for no cost, usually over the summer holiday period when their other employees were on leave, and so the rise of the internship began.

What’s the problem? Many internships don’t offer meaningful work experience and can only be accessed by those with family connections who can facilitate introductions. Equally, with one in five interns not being paid, is that legal? The answer depends on the nature, length and arrangements for the internship.

Working or volunteering?

This is the crucial distinction; volunteers need not be paid the national minimum wage (NMW) or in fact anything, but workers must receive the NMW appropriate to their age for all the hours that they work, s.54(3) National Minimum Wage Act 1998 . The definition in the Act includes anyone who works “ under a contract of employment or any other contract, whether express or implied, and if express whether written or verbal, under which he or she agrees to do or perform personally any work or services for the employer ”.

Pro advice 1. If you’re trying to argue that the individual is a volunteer don’t give them expenses that do any more than cover their out of pocket expenses such as bus or train fares.

Pro advice 2. Try to make a very clear distinction from an employee, e.g. can they choose when to work and what they observe? If they turn up late you could ask them not to come back but not discipline them.

NMW breach

Failing to pay a worker is a breach of the NMW legislation that will require six years of arrears to be paid and a 200% penalty based on the arrears. As soon as someone is doing more than “work shadowing” i.e. watching another employee working, but rather are given tasks to carry out unsupervised, they are classed as a worker as they will be carrying out tasks personally. To this end make sure they don’t interact directly with customers or have any responsibilities for which they’re solely responsible.

Apprentice rate savings?

Whilst there are lower rates of the NMW for the under 25s, don’t think you can get away with paying the apprentice rate. Apprentices must be working towards a recognised apprenticeship qualification and receiving either formal offsite training at an educational facility or in-house training that has been formally approved as working towards a qualification.

Approved schemes

There are some routes into work that can be offered on an unpaid basis: school work experience programmes offered to those under 16; government run schemes; placements via higher education establishments that last no more than a year and are a requirement of the course; and EU initiatives such as the Erasmus scheme.

Pro advice. In truth, the ability to offer unpaid internships is becoming much more difficult with legislation proposed that will limit such unpaid schemes to no more than four weeks.

Voluntary workers

These are individuals who are working in charities, voluntary organisations or fundraising bodies associated with charities. They can receive travel and subsistence payments that do no more than reimburse them for their expenses. Some of the big charities have started to pay their interns, feeling it is wrong to exploit this exemption in the law which deters social mobility as it favours those from wealthier backgrounds who can afford to take on unpaid work.

What can’t you do?

Simply saying in an ad or paperwork that the NMW doesn’t apply or asking the individual to sign something to say they’re just a volunteer so not entitled to be paid the NMW should both be avoided. A promise of work after the end of the internship will certainly make them a worker from the start. And even if the individual says they will work for nothing you can’t accept that as you will be breaking the law unless you are covered by one of the exemptions.

Other rights?

If the intern is actually a worker then that means there are other rights for you to consider such as working hours under the Working Time Regulations 1998 . That includes breaks, rest periods and daily/weekly hours, plus an entitlement to paid annual leave for each month worked. If the intern doesn’t take their holiday entitlement during the placement, they will be due to be paid salary in lieu of holiday at the end of their contract. SSP is not available to workers, only employees, so again care needs to be taken to decide if the nature of their role has strayed into full employment rather than the more limited (in terms of employment rights) worker category. To become an employee there will have to be significant elements of supervision, direction and control, and also mutuality of obligation, i.e. the individual is obliged to turn up at set times and then be paid for that service.

International interns

Undergraduates who have studied here but are from the EU have the right to stay and work here after graduating so could take up positions as interns until, as it stands at present, at least December 2020 (if they are in the UK at the date that the UK leaves the EU). Applying to the EU settlement scheme will mean that they will be able to remain here after their internship if you want to offer them permanent work (see Follow up ). Irish nationals do not need to apply for settled status. A non-EEA national who holds a Tier 4 general student visa is generally given an additional four months of visa validity after the scheduled end of their course of study. During this extension they can work, but they’re not allowed to fill a full-time permanent vacancy. Temporary, fixed-term employment, such as an internship, is permitted but only outside term time.

Paperwork and supervision

You should provide the intern with details of their rate of pay, an explanation of their duties and other information relating to the role, such as working hours. It’s sensible to carry out induction training too, particularly in relation to health and safety and data protection – they need to be given a privacy notice including details of how their data is processed and for what purpose. It makes sense to give someone the responsibility for supporting and supervising the intern throughout their placement. There is no legal obligation to provide a reference, but it is good practice to if requested.

A word of warning

Following the publication of the Taylor Review (see Follow up ) of working practices last year, Theresa May announced a crackdown on unpaid internships, sending more than 550 warning letters to companies and setting up an HMRC enforcement team to tackle employers who were advertising for unpaid interns.

Whistleblowing

Remember that it’s very easy for anyone who thinks they have been denied the NMW to make an anonymous whistleblowing complaint. HMRC has to investigate such complaints within seven days. When it comes to your workplace, it has the right to interview anyone without you being present or coaching them in what you might think are the right answers.

Agree to the storage & handling of data by dn-accountants*