Employment Law Update - Internships & the National Minimum Wage

In the modern labour market and economic climate, internships have become popular. Individuals can gain valuable experience which can give them the edge with future employers. But what are the pitfalls for businesses tapping into this talent pool? Often interns may be employees or workers, in which case they will benefit from certain rights and protections.

HMRC recently targeted 200 employers who advertised internships to ensure that they were paying interns the National Minimum Wage (NMW). In 2013, HMRC also issued penalties to 466 employers for not paying the NMW to interns who were due to be paid it.

Such financial penalties are in sums of up to £5,000, and the employers who are failing to pay NMW where it is rightfully due, may also be publicly named and shamed. However, when targeting employers, HMRC will inform the employer that they are currently managing the situation wrongly, but should matters be put right, they will not be charged a penalty.

Anyone classed as a "worker" by law is entitled to the NMW. Worker status is assessed with reference to a number of factors:

  • Does the individual personally perform services?
  • What degree of control is exercised over the individual by the company?
  • Is the individual in business in their own right, providing services for other businesses?

If an intern is classed as a worker, they are normally due the NMW. Employers cannot avoid paying the NMW if it is due by:

  • saying or stating that it does not apply
  • making a written agreement that the intern is not a worker

Interns will not be due the NMW if they are required to do an internship for less than 1 year as part of a UK based further or higher education course. Further, school work experience placement students (ie those under 16) will not be entitled to the NMW for any work carried out while on work experience. In addition, if an internship only involves shadowing an employee, the NMW will not be due.

The arrangements for offering experience to interns can significantly affect the likelihood of their benefitting from worker or employee rights and careful consideration of how the internship will work and the documents setting this out can help reduce risks for companies.