So you want to get out there into the job market. It’s ruthless out there and there are lots of good people who have recently been made redundant. You might find someone willing to take you on with their project for little, if any, salary. Indeed, you would probably be doing them a favour, and this is the stepping stone you need for greater things. So you reach out through your social network, find a company and they offer you work experience, an internship or just ask you to help (let's just call you an Intern for the purposes of this article). Have you just been employed?
Why does employment status matter?
If employment status (i.e. you are really an employee) is triggered then there will be legal implications for your employer including:
Tax: they have to account to the Government for tax in relation to all employees. HM Revenue and Customs has the right to inspect their books if they think the business is getting this wrong. As this can be disruptive, it is important for businesses not just to comply, but to be seen to be complying in order to avoid these investigations.
Unfair Dismissal: Once the business no longer needs you, you can't just be dismissed; the business must have a fair reason to dismiss and they must act reasonably in the circumstances in deciding to dismiss. Otherwise you can sue them for unfair dismissal. What this means in practical terms is that the business must follow a legally defined set of procedures and evidence that those procedures have been followed in writing. Even if there is a potentially fair reason to end employment, if correct procedures aren't followed, dismissal will be unfair. Unfair dismissal rights would normally only apply to employees with more than one year's continuous service, but there are exceptions and often "one year" means less than that in practice. The one year qualifying period is due to rise to two years from April 2012.
Are Interns employees?
Much of the time although businesses may not intend you to be one, Interns are in fact employees (or in any event have most of the rights associated with a contract of employment).
Traditionally work experience has involved students shadowing management or their colleagues for short periods of time but not working as such. Internships (a phrase imported from the United States) have been more formal and have involved "proper work", often being undertaken by university students looking to break-in to a particular area after finishing their studies or even as part of a course of study.
There is no legal definition of an Intern in the UK. Traditionally Interns have been unpaid. However, although carefully drafted documentation might help avoid an Intern falling within the strict legal definition of an employee, much employment-related legislation is drafted in such a way that it will apply to "workers" working on any basis other than as a genuinely self employed individual.
The National Minimum Wage and The Working Time Regulations
If Interns do "proper work" then the law requires that they are paid the National Minimum Wage, being £6.08 per hour (for workers aged 22 or over, after 1 October 2011) and that you are offered a minimum paid holiday entitlement under the Working Time Regulations usually equating to 28 days per year (including public holidays). The only exceptions to such obligations are in relation to Interns working under certain Government-run schemes such as the "Entry to Employment" programme and the European Union's Leonardo da Vinci programme and (more often) as a required part of a higher education course that does not exceed one year.
The law looks past whether businesses call an individual an Intern and to the heart of what the individual is actually doing for the business: if you are really working for them then you are as good as employed.
It is a good idea for you and the business to have a simple internship agreement to record accurately your respective duties to each other. The provisions of internship contracts often include the following terms:
For the protection of the business, such an agreement should also include the following:
Penalties if you treat an employee as an Intern
There are stiff penalties and criminal sanctions for businesses getting this wrong. If HM Revenue and Customs believes that individuals may be working for businesses without being paid then they can investigate this. If they conclude that "Interns" have actually been working, and are not lawfully excluded from the minimum wage (i.e. they should have been paid), then HMRC has the power to order the business to pay you the minimum wage with retrospective effect from the day you joined. In addition, HMRC will require the business to pay employer's National Insurance Contributions and tax usually with penalties and interest for late payment. Non-payment of the minimum wage is also potentially a criminal offence which is punishable by a hefty fine.
In addition, the "Intern" may apply to an Employment Tribunal to demand paid holiday. If the "Intern" then leaves or is dismissed on account of your failure to offer paid holiday, then the employer will have unfairly dismissed them, (even if the Intern has worked for less than a year) and the business may be liable to pay significant compensation.
If the organisation is a charity, then special exclusions from the National Minimum Wage apply to volunteers.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.