The gloom and doom of the global economy has resulted in a plethora of qualified graduates offering their services to employers for free in a desperate plea to gain experience or a foot in the door as a route to paid employment. However, new guidelines published by the Department for Business Innovation and Skills (BIS) on the pay levels for work experience, internships or placements mean that there may no longer be such a thing as a free intern.
The updated guidance provides information on an employer's obligation to pay interns and work experience students the national minimum wage. It also further clarifies when an individual is entitled to be paid the national minimum wage that is, what it takes to be considered a “worker” in law. It includes a helpful checklist for employers as well as useful examples of case studies to that effect. This improved guidance should now mean that those entitled to pay do receive it.
In the past a person's job title may have been used as an indicator as to whether or not they should receive payment for their efforts. The guidance confirms that entitlement to the national minimum wage does not depend on this but on whether the arrangement that he or she has with an organisation makes him or her a "worker" for national minimum wage purposes.
In the circumstances where an individual is a worker and there are no applicable exemptions he or she must be paid at least the national minimum wage. So what does the law say about “workers”?
Section 1 of the National Minimum Wage Act 1998 provides that workers are entitled to be paid the national minimum wage provided that they have reached school-leaving age and work, or ordinarily work, in the UK. With this in mind, the question an employer needs to answer is whether or not an intern meets these criteria, that is, are they a “worker”. A worker can be defined as an individual who works under any contract whereby he or she “undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual” (s.54(3) of the National Minimum Wage Act 1998).
The above definition means that where an intern is obliged to work for an organisation personally, the “worker” definition is likely to be satisfied meaning he or she will be entitled to the national minimum wage. However, where the intern is only observing or shadowing employees and not in actual fact undertaking any work themselves, he or she is unlikely to be a worker and will, therefore, not be entitled to the national minimum wage.
Where a student is working as part of their degree or higher education they do not qualify for the national minimum wage. Of course an employer may wish to pay them for their contribution but Regulation 12 of the National Minimum Wage Regulations 1999 (SI 1999/584) provides that there is no obligation in law to do so. The rule differs, however, if the period of work experience should exceed one year.