By Gillian Hasley, eBusiness Manager, Monster UKIE

Taking on interns can be a win/win situation. They offer a cost-effective way to recruit qualified and motivated students and graduates to meet the company's needs. It's a great low-cost way to identify potential candidates for employment and for putting short-term talent at your disposal.

For interns, especially in a slow economy, short-term placements give vital work experience to help them find a permanent position.

Before hiring an intern now though, you must be sure they really are an intern and could not be classed as a worker. Many of those hired as interns, working for free or for expenses, should actually be classed as workers and paid at least the National Minimum Wage.

Perhaps you, in common with many employers, mistakenly believe it's OK to take on unpaid interns simply so long as both sides understand it's a voluntary position? Here's our guide to staying on the right side of the law.

Defining internship

An internship is a way for graduates and students to gain experience. This places an obligation on you, the employer, to educate and train them. An unpaid internship can last no longer than four months, with the intern moving round the company, experiencing a wide range of differing positions with no onus on them to produce work for your company. An internship, to be unpaid and legal, needs primarily to be a learning and training experience for the intern. You should not expect the intern to produce work that is going to be of benefit to you.

The fine line between internship and employment

Work experience, internship, voluntary work or volunteering. Call it what you will - if an intern is producing work for your company, the law quite simply states they must be paid. An intern who works with you for more than four months and who is expected to work set hours or to your schedule, is liable to be classified as a worker and entitled to be paid at least the National Minimum Wage as stated under the National Minimum Wage Act 1998.

Of course, you are still free to hire interns to fill temporary positions, with no legal obligation to provide a permanent contract at the end of the internship. It is the question of payment that is the issue.

So, to offer a genuine internship, you must assign the intern a role:

- which is not the equivalent of an employee

- where they are not expected or required to produce any meaningful work output on your behalf

- where they are not paid or offered any kind of enticement

The exception to this rule includes charities, voluntary organisations and statutory bodies - being able to employ unpaid voluntary workers. Private companies may not.

Work experience

The National Minimum Wage Act also exempts payment to students in work experience of up to one year as part of a UK further or higher education course. Otherwise, students are entitled to be paid at least the national minimum wage in the normal way - including when they are working as a requirement of their course for longer than one year.

Repercussions of getting it wrong

Getting it wrong can be an expensive business with severe financial penalties. If an intern believes they are a worker and should be paid, they can take you to an employment tribunal. If they win, you can be forced to pay up to six years' back wages.

Despite this new, more stringent, understanding of internships, even paid interns still have many positive benefits to offer your company. If you are still in any doubt, it's definitely worth seeking legal advice.