February 2012

There have been plenty of recent horror stories of some youngsters being viewed as a cheap source of labour, moving from one internship to the next for no pay or at best, expenses only.

Employers who take on interns under these conditions may not realise they could be breaking the law and could incur a hefty fine if they do not pay their interns at least the applicable national minimum wage.

The problem is often down to interpretation. There is no official definition of what comprises an internship, indeed the term is often used interchangeably with 'work experience.'

The fact that it is a relatively new practice imported from the United States is adding to the confusion. In the US, internships are recognised in academic circles as a form of experiential education that allows students to apply their learning to a real work situation and build upon their skills. It's seen as an opportunity to train students in their working practices and to identify prospective hires. The one common thread is that work is related to the student’s course of study.

In the UK, internship programmes operate on a less formal footing and have initially been popular in certain sectors such as the arts, entertainment and the media, Increasingly, however, they are being offered in other sectors, particularly in financial services where completing a relevant internship can help towards progression onto a graduate training scheme.

So, in order to assess whether or not an intern should receive payment, companies need to understand what the government defines as a ‘worker’. A worker is legally defined as an individual who works under a contract to provide work or services personally, where this is not a genuine business-to-business relationship. The following tests will typically be applied by the courts to determine whether an individual qualifies as a worker:

• Whether there is a requirement upon the individual to perform the work personally.
• The degree of control exercised by the organisation over the individual.
• The extent to which there is “mutuality of obligation”. For example, when there is an obligation both upon the organisation to provide work and upon the individual to undertake that work.

Further - but not exclusive - factors which may have a bearing upon if the intern should be viewed as a worker or not include whether there is a structured programme of learning, the length of the placement and whether the work being undertaken will benefit the organisation.

Where it is established the intern is a worker, they should, in all probability, be paid at least the applicable national minimum wage rate.

Such an assessment will increasingly be important in light of the growing numbers of initiatives being introduced by the government, aimed at supporting the rising number of young people out of work.

Initiatives such as the Youth Contract Programme that comes into force in April 2012, will provide £1 billion of support to companies taking on young people below the age of 25. Private sector employers taking on an 18-24 year old who has been unemployed for more than nine months will be granted a subsidy of £2,275 to cover national insurance costs.

In addition, a further 250,000 work experience placements, lasting up to eight weeks will be offered to youngsters who have been on job seekers allowance for more than three months. Moreover an extra 20,000 apprenticeship payments will be made available to small businesses taking on a 16-24 year old apprentice for the first time.

While these plans and subsidies are primarily aimed at companies taking on young people to fill a permanent position - as opposed to offering the chance to gain career experience - there will inevitably be some cross over with a company’s existing plans.

It is therefore crucial to assess any gaps that currently exist in your company’s definition and treatment of interns. Most companies that operate a responsible internship programme will clearly define the role of interns and ensure they are offered a competitive form of payment.

Tony Culpin is Human Resources Manager, Client Services for Mazars in London.