HMRC to investigate unpaid internships

Any case that subsequently goes before an employment tribunal will be closely scrutinised, and the tribunal will look past the wording of the contract to consider the reality of an employment relationship. Apart from very limited exceptions, any individual who is a worker or an employee is entitled to the NMW, regardless of whether they have the title ‘intern’ or are working under an ‘internship agreement’.

Factors that might indicate worker or employment status include requiring an intern to personally perform work, a high degree of control exercised by an ‘employer’, a long duration of the arrangement and/or mutuality of obligations between the ‘employer’ and the intern (to provide work and to accept work respectively).

Many businesses refer to their interns as ‘volunteers’, believing that this will circumvent the NMW rules. Volunteers must not be paid for their time but may receive money to cover expenses, which are usually limited to food, drink, travel or any equipment they need to buy.

If a volunteer gets any other payment, reward or benefit in kind, they may be classed as an employee or worker, rather than as a volunteer, and HMRC has confirmed that a ‘reward or benefit in kind’ includes any promise of a contract or paid work in the future.

The purpose of work experience and internships is to provide the opportunity to gain experience for a professional career over a limited period and the focus should be “shadowing” work, not actually doing it.

An extreme example of ‘getting it wrong’ is Goal.com, a football news website that admitted having 30 unpaid interns filing match reports and writing content for its UK edition. With only 22 “proper” employees, it is easy to see why the interns’ roles may be thought to go beyond shadowing, and HMRC is currently investigating the matter.

For businesses that flout the NMW rules, HMRC can order the repayment of wage arrears and impose an additional penalty of 50% of the total underpayment of all relevant workers up to a maximum of £5,000. It has already ordered a major fashion chain to pay 90 unpaid interns almost £60,000, and employers are therefore advised to carry out a careful review their arrangements with interns.