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Val Dougan

Dundas & Wilson

Professional Support Lawyer

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Unpaid interns: does HMRC’s latest campaign herald a shift in employment culture?

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Failing to pay an intern amounts to more than a breach of National Minimum Wage (NMW). On a wider level it can create barriers to social mobility. In 2009 the final report by the Panel on Fair Access to the Professions concluded that the internship process across the professions was not sufficiently transparent.

The report stated that positions were often gained according to parental connections rather than on merit, and graduates from poorer backgrounds were not able to afford spending several months as an unpaid intern.

As a result in recent years the government has intervened in this area by toughening up their stance on employers who fail to pay interns and by reducing ignorance of the law through guidance.

The latest developments announced in November include further measures designed to tackle employers who do not pay their interns NMW rates. HM Revenue and Customs (HMRC), who are responsible for enforcing NMW rates, have written to 200 employers who advertised for unpaid internships, advising them that they plan to carry out targeted checks to ensure NMW compliance.

Employers who fail to pay the NMW may face more than a payment of arrears. The HMRC also have the power to impose a penalty of up to £5,000 or name and shame employers who do not pay. The rules on naming and shaming were relaxed in October 2013 to cover all failures to pay NMW – irrespective of the amount or the employer’s intention.

On the education side, the government has also updated its Common Best Practice Code on Internships by drafting a short one page guide aimed specifically at interns. The Guide clearly explains the difference between an intern’s right to payment, and the position of an unpaid volunteer.

Genuine volunteers have no right to be paid the NMW, and sometimes the legal position relating to their status can be confused with interns. A genuine volunteer in a legal sense has no binding relations. Volunteers can walk away at any time from a workplace with no questions asked. They are under no obligation to perform work or come to work every day. To state the obvious, the relationship is entirely voluntary.

Legally, if an intern fulfils the definition of a “worker” then they should be paid the NMW. A worker has an obligation to provide personal service, and can be recognised by the existence of mutual obligations between the parties. As such it covers a broad range of working relationships, from casual workers and in many cases consultants who are hired for specific engagements.

And while it is obviously helpful for the government to provide clear guidance for interns on this issue, the problem is not generally about interns being ignorant about their rights. It is  much more complex than that.

Interns who are desperate to obtain employment are often the least likely to challenge a refusal to pay them, for fear of negatively affecting their future prospects in a challenging labour market. Although there have been a few employment tribunal cases brought by interns challenging non-payment, such as the highly publicised Sony case, these are few and far between. What we have seen in recent years is an increase in campaign groups such as Interns Aware and Interns Anonymous using the collective, rather than an individual, voice to push for change.

A few years ago, it could genuinely be said that there was a lack of awareness amongst employers that interns were entitled to be paid NMW. It is doubtful that this level of ignorance still exists, given the amount of campaigning the government has done in this area. In September some of the UK’s largest recruitment companies Monster, Milkround and Totaljobs took the initiative and agreed not to advertise unpaid internships on their sites.

Yet despite this there are still a significant number of unpaid internships being offered to willing interns. Economic factors obviously have a part to play in perpetuating this position. Perhaps within some sectors such as the media, PR and the fashion industry there is simply a reluctance to change because “that is the way that things have always been done”.

The traditionalists resist arguments for change by saying that paying interns will simply result in a reduction of internships. The same arguments were raised when the government proposed the NMW. There are of course solutions to this response. In 2011 the Scottish government introduced an Adopt an Intern scheme which provides funding and support to employers to enable them to pay their interns. Over 300 internships have been placed in less than three years.

It’s been four years since the report on the Panel on Fair Access to the Professions. There is undoubtedly a greater awareness of the rights of interns. Yet campaigners now say that this means that failure to pay NMW is no longer about ignorance but rather exploitation.

Will the HMRC’s new approach make a difference? It is certainly their intention to make naming and shaming more commonplace. It is too early to say whether the threat of reputational damage will compel more employers to change their payment practices. The new approach of writing to those who advertise unpaid internships in my view is more likely to have an impact. Risks are not worth taking if you are likely to be found out.

One Response

  1. Commercial organisations can’t have volunteers

    Unfortunately it is not made clear in this article or the Best Practice Code that only charitable and statutory bodies can have people volunteer working for them.

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Val Dougan

Professional Support Lawyer

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