Internships: know the law

 2 September 2011

The range of UK internships has greatly increased in recent years and interns are now a regular feature in many industries. With claims that interns can be exploited, it's important to know the law.

Organisations benefit from talented individuals willing to give their services for an internship.
Organisations benefit from talented individuals willing to give their services for an internship.

Internship and work experience arrangements have recently been a focus of political debate and a controversial issue, due to claims that interns are being exploited. James Lynas is a Consultant at Winckworth Sherwood and a specialist in Employment Law. He gives some advice on the legal position of taking on interns.

The benefits of an internship

Internships benefit the interns by providing them with valuable work experience. Organisations benefit from a pool of talented individuals willing to give their services in return for very little or no remuneration.

Published reports from the Low Pay Commission (LPC) and the Chartered Institute of Personnel Development (CIPD), have drawn attention to the rights of interns to be paid.

If you take on interns, or are contemplating doing so, it is now more important than ever to consider your legal and tax position.

Should you pay your intern?

If an intern is carrying out work that others are employed and paid to do, it is very likely that the intern should be paid.

An internship is a period of workplace experience which offers young people practical experience and the chance to make important contacts to help gain a permanent job.

There is no legal definition of internship and no requirement to pay for an intern’s services. However, it has been established that if the intern satisfies the legal definition of ‘worker’ they are entitled to be paid at least the minimum wage.

The threshold for establishing worker status is fairly low. ‘Workers’ are individuals engaged under a contract (written, oral, express or implied) to personally carry out any work or services.

Therefore, it is likely that interns will be workers if they undertake, for any reasonable length of time, during regular hours, substantive work that an employer often relies on. If an intern is carrying out work that others are employed and paid to do, it is very likely that the intern should be paid.

Salary rates for internships

If your interns are ‘workers’ then you will need to pay them at least the National Minimum Wage (NMW). However, work experience undertaken by students as part of a UK-based higher or further education course, for a year or less, are exempt from the NMW, as are interns working for a charitable organisation.

Workers are also covered by the Working Time Regulations which provides various entitlements, including: paid annual leave (currently 28 days, including public holidays); rest breaks (20 minutes where the daily working time is longer than 6 hours); and a maximum working week of 48 hours.

The latter entitlement is calculated by looking at the average hours of 7 day periods over the preceding period of 17 weeks. This maximum working week can be easily opted out of by the intern signing to confirm their agreement to opt out. However, care should be taken about asking an intern whom you are not paying to do so, as you may be accepting they are a worker.

Discrimination legislation and employment rights

Not paying an intern any wage or providing any other entitlement could well give rise to a claim.

If your intern is a worker, he/she will be protected from discrimination under the Equality Act. If you were to fail in your duty, for example, to make reasonable adjustments in the case of a disabled person, you could find yourself liable in the Employment Tribunal for a claim of disability discrimination.

For small businesses without any in-house HR expertise, it is very easy to fall foul of discrimination legislation and infringe other employment rights without any knowledge of doing so.

It is often therefore advisable to seek advice proactively from experts or by using very helpful and reputable sources, such as Department for Business Innovation and Skills and Advisory, Conciliation and Arbitration Service.

The risks of not paying an intern

Not paying an intern any wage or providing any other entitlement could well give rise to a claim. If an intern believes that they are being underpaid then they could bring an employment tribunal claim, which can be costly and disruptive to defend.

In 2009, an intern who worked for a London production company and, who at the outset had agreed to receive expenses only, was held to be a worker and entitled to NMW.

The LPC, in its recent 2011 Report, criticised HM Revenue & Customs for poor enforcement of minimum wage laws regarding the payment of interns. The LPC recommended that HM Revenue & Customs carry out ‘targeted enforcement’ in areas where internships are ‘abused’.

The Government appears to be keen to endorse internships and encourage applications from the less affluent. Taking a firmer line regarding payment of interns will support their aim and the ability to defend non-payment to interns is likely to be severely reduced in the future. 

Recommendations for an internship

Interns gain valuable work experience. Organisations benefit from a pool of talented individuals.

We would recommend setting out the terms of any internship (an ‘internship agreement’) in writing, both to ensure clarity and certainty but also, in appropriate circumstances, to avoid the intern gaining worker status and employment rights.

However, it must be accepted that there is a real possibility with any intern could be deemed a worker, irrespective of any agreement in writing. Notwithstanding any express contractual terms, a Tribunal will look behind this at the actual arrangements and circumstances in deciding the true employment status of an individual.


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