The current economic climate results in challenging conditions for businesses and also for the young people trying to get a foot, or perhaps just a toe, on the employment ladder. Young people should start their working lives with optimism; how sad it is to think of young people who cannot, even with adequate qualifications, find that important first job. It’s easy to see how the offer of unpaid work experience seems attractive.
I’ve been reading lots of articles of late, quite a few front page ones too, about interns. ‘Shock horror’ stories of how some politician may have been given a leg up from an unpaid internship.[1] It’s not what you know, it’s who you know and so on. I’m not sure I get the objection to connections, they exist throughout society, and it’s not just bankers and politicians who have jobs to offer.
What I have found most ‘shocking’ though is the absence in many of the articles to any reference to the National Minimum Wage Act. As you are no doubt aware, workers are entitled to receive at least the National Minimum wage (NMW) for work undertaken.[2] There are, it is true, some exceptions, but where articles refer to ‘unemployed young people working for a business’ none of the exceptions will apply. It is easy to be misled by the current media coverage, so I hope that the following will remove any misconceptions you may have.
The National Minimum Wage Act exists to prevent exploitation. Simple.
National Minimum Wage Act 1998
The National Minimum Wage Act 1998 requires that anyone who is classified as a ‘worker’ is entitled to be paid at least the minimum wage.
Under the Act, a worker is someone who has a contract of employment, written or oral, express or implied, or any other contract that requires that they personally carry out work or services for another party assuming that they are not genuinely self-employed, or that they are employed by someone else.
The Act has some specific exemptions:
- People doing government accredited apprenticeships and some work based training schemes.
- Students undertaking first UK based degree course or teacher training course who are working for no more than 12 months as part of their UK based degree.
- Voluntary workers employed by a charity, voluntary organisation or statutory body.
- A few other minor groups e.g. homeless people working in return for shelter.
Another exception is in respect of people work shadowing; that means trailing someone else who is working but not actually undertaking any work themselves.
Businesses
Where the employer is a business the exemption for voluntary workers will not apply. If the other exemptions listed above are not relevant, then you must determine whether or not the ‘intern’ is a worker; if they are workers then ensure that you pay at least the NMW.
Charities, voluntary organisations and statutory bodies
Charities, voluntary organisations and statutory bodies often use volunteers and voluntary workers to support their work. A volunteer is under no obligation to undertake any work, may attend at times of their own choosing and typically does not have any prescriptive terms applied to the how they help the charity. They may only be reimbursed for expenses genuinely incurred in the course of the volunteering.
Voluntary workers in contrast have the hallmarks of workers. They work under a contract of employment or a contract personally to perform work or provide services. Voluntary workers must work for a charity, voluntary organisation, associated fund raising body or statutory body. Again, they can receive expenses incurred in the course of the volunteer work and perhaps subsistence and accommodation, if relevant to the volunteering. Any payment over and above this risks their voluntary worker status being lost and instead they may become a worker because they are receiving payment.
Dynamic response team
HM Revenue & Customs is responsible for enforcing the NMW.[3] HMRC compliance officers may carry out inspections at any time and there is no requirement to provide reasons for an inspection. Many such inspections are triggered by complaints from workers.
From January 2010 HMRC launched a new team with the rather racy title of ‘Dynamic Response Team’ to work on the most high profile cases and provide a rapid response to cases across the UK.
If a compliance officer determines that you have failed to pay NMW where it was required you may be served with a notice of underpayment which requires that you pay the arrears to the worker and to pay a penalty to the secretary of state. The penalty is half the total underpayment with a minimum penalty of £100 and a maximum of £5,000. If you fully comply with the terms of the notice the penalty may be reduced by 50%. Failure to comply can result in a criminal prosecution.
I am glad to see that there is a growing lobby for the improvement of conditions for interns. Young people deserve a fair chance and, by law, to be paid for work undertaken. But please Dynamic Response Team, where are you, if I can find the unpaid internships with a little judicious Googling why can’t you? Oh yes, and didn’t you all notice a political party recently holding a fundraiser auctioning internships;[4] do you suppose they are all getting paid?
The opinions expressed in this article are personal opinions of the author.
[1] www.guardian.co.uk/politics/2011/apr/05/nick-clegg-parental-job-boost
[2] See also: www.lowpay.gov.uk/lowpay/report/pdf/Revised_Report_PDF_with_April_date.PDF
[3] See: www.hmrc.gov.uk/paye/payroll/day-to-day/nmw.htm
[4] www.newstatesman.com/blogs/the-staggers/2011/02/hedge-funds-party-banks