Ending the era of the unpaid intern

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The problems with unpaid internships and the opportunities in overhauling the system

Across many sectors and industries, unpaid internships are becoming almost the only viable route for securing a full-time position.

However, with the cost of living spiralling across the country, and greater competition for graduate jobs than ever before, drastic steps need to be taken to ensure, not only that interns are receiving fair treatment, but also that businesses are able to access the best up-and-coming talent from the entire social spectrum, and not simply from those fortunate enough to be able to afford to take up unpaid work.

While a number of businesses do offer payment to interns, the prevalence of unpaid internships has skyrocketed in recent years. The practice, which used to be confined to certain industries, has become far more widespread and as the jobs market becomes more competitive, it is natural that greater numbers of prospective candidates are willing to engage in the process.

In many ways, UK law is partly to blame for the high numbers. There is no requirement to pay students on certain university or higher education courses, where the course itself requires the individual to undertake work experience in the marketplace. Then, for all other interns who do not fall into this category, the problem is that National Minimum Wage (NMW) legislation only applies to individuals who are classed as ‘workers’. To meet the statutory requirements (as set out in the Employment Rights Act 1996), a worker requires, among other elements, a contract and some form of payment or reward for the work they undertake.

Some organisations have used this definition to their advantage by tweaking the structure of the internship programme in an attempt to exclude interns from worker status, and by doing so avoid paying NMW. In many instances, the structure does not reflect the reality of the situation. While the intern may not have a contract or receive payment, they will nevertheless still be expected to turn up on specified days and undertake work to last the course. While a job offer may not be guaranteed at the end of the programme, it is often the first stage of a long process in securing a permanent role.

Interestingly, government guidance suggests that a ‘promise’ of paid work at the end of an internship would be sufficient 'reward' to trigger a requirement that the intern be paid NMW throughout the internship. But, in practice, it is rare for the prospect of paid work at the end of an internship to be anything other than a potential opportunity dangled in front of interns like a carrot.

The good news for both candidates and employers is that there is a renewed focus on overhauling the internship system. Sector trade bodies have been collaborating with the government for some time to push for clarification around best practice. Following the Taylor Review, the government has asked HMRC to clamp down on NMW enforcement against employers, with a particular emphasis on unpaid internships. If this approach is not successful, it could pave the way to wider legislative change. However, in practice, while such moves are positive, they do nothing to tackle the root of the problem; more decisive action is needed.

A statutory definition of what constitutes an ‘intern’ will go a long way to help. There needs to be an acknowledgement that, in reality, an internship is a form of on the job training, which benefits both the intern and the business. While this does mean that it will need to have a degree of longevity, it must also have a capped length. In some sectors, internships lasting a year or more are not unheard of. The key is to contrast a genuine internship – which should be paid – from a shorter period of work experience (say two or three weeks), where the individual is simply seeking an initial insight and understanding into what a particular industry or sector is like.

One ongoing worry for businesses has been sourcing the funding needed to pay for interns. There are two possible solutions. With a statutory definition of an intern in place, one could be to permit a lower minimum wage to be paid – as is currently the case for apprentices – to interns, reflecting the fact that their lack of experience renders them less valuable than a permanent worker. Another solution could be a rethink of how and where the apprenticeship levy can be spent, and whether some of the financial support it generates could be extended in scope to cover internships, as well as apprenticeships.

Creating a clearer set of rules around internships, and addressing funding issues, will encourage more businesses to open their doors to accept them, in turn creating more opportunities. Ensuring that internships are properly paid across the board, and eliminating the prevalence of unpaid programmes, would also open up the playing field to allow more young people from across the social spectrum to access and benefit from the experience.

Jon Heuvel is employment partner at law firm Shakespeare Martineau

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