By Howard Kennedy

A report has been recently published by think tank IPPR (Institute for Public Policy Research) and campaign group Internocracy which highlights that some employers are failing to pay the National Minimum Wage (“NMW”) to their interns and so are at risk of claims by interns and enforcement action by HM Revenue and Customs.

Internships are often popular with those trying to get a break in a particular industry. While many internships are unpaid they do offer the opportunity for on the job training and experience which is invaluable in CV enhancement and networking in industries that are notoriously hard to get into. Historically internships have been common in fashion, television and journalism. With the economic downtown and fewer paid training places available, many individuals see internships as the only way to break into their chosen career. However, there is growing concern that some employers are exploiting the market conditions to obtain staff on the cheap.

There is no single answer to the issue of interns and pay. Some interns are entitled to be paid the NMW and others not. Employers need to assess precisely the nature of the relationship and what individuals are being asked to do to establish whether they are legally entitled not to pay the individuals, or not to pay them the NMW. They need to ask whether an individual is an employee, a volunteer, doing work experience/shadowing or is a worker.

Interns involved with charities, voluntary organisations, fundraising bodies and statutory bodies are not normally entitled to the NMW where they act as volunteers (who are not entitled to any pay at all) or provide their services as “voluntary workers”. Voluntary workers are not volunteers. They are individuals who have entered into a contract (in writing or not) to perform services for free. Advice should be taken to ensure that the engagement of voluntary workers does not fall foul of this exception to the NMW.

Other interns, who are providing their services as part of recognised training programmes may also not have an entitlement to the NMW. Employers will need to check whether or not their training programme is one which is exempt under the NMW legislation. Not all training schemes are covered.

Those engaged genuinely as volunteers, who have no obligation to perform work and can come and go as they please will not be entitled to the NMW nor are those who are simply observing other people go about their jobs.

Workers are entitled to the NMW. A “worker” can be an employee or can be anyone who has agreed to provide their services personally under a contract (which can be in writing or not). It is not always clear if someone is a worker as this depends on the facts and is ultimately something to be determined by the courts.

As a general rule of thumb, if you engage an intern and they receive any pay, benefit in kind or have an obligation to attend work or perform certain services — there is a risk that these individuals will be viewed as workers and entitled to be paid for their work. It is worthwhile taking legal advice.

The Low Pay Commission (the body that advises the Government about the NMW) has been commissioned to review and report in 2011 on the labour market position of young people, including those in apprenticeships and internships. This report could lead to the Government introducing changes to clarify the position on interns and their right to the NMW in the future.

For more information contact Louise Gibson of Howard Kennedy.