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Confusion over interns’ pay puts employers at risk of breaking law

business and industry, employment, fairness, young people

Published date:  31 Jul 2010

new report from ippr and campaign group Internocracy on why interns need a fair wage spells out how employers almost certainly break the law with interns.

Unpaid internships are common in politics, media and the fashion industry and enable young people to get a head start in their career.

The report makes the following key points:

  • Employers mistakenly believe there is a ‘grey area’ around internships in the National Minimum Wage legislation and that they are allowed to take on unpaid interns so long as both sides know it is a voluntary position – but they are wrong. The law is in fact very clear and this is simply not the case.
  • Many private sector organisations offer unpaid, expenses-only internships that almost certainly could not be described as ‘work experience’.
  • Some surveys have found that only half of the organisations that use interns pay them at least the adult minimum wage. But just under a fifth of them (18%) pay no wage whatsoever, and just under a third (28%) pay less than the adult minimum wage.
  • Talented but less well-off young people lose out on the chance to get really valuable experience in sectors seen as exciting – such as the media, fashion, publishing and advertising – because they cannot afford to take internships offering no or very low pay.

Kayte Lawton, report co-author and research fellow at ippr, said:

“Too many employers don’t understand the law when it comes to hiring interns. There is a mistaken belief that employers can take on people on a voluntary basis if both sides agree – but that’s not what the law says. If an intern is doing work for a company, then they need to be paid – it’s as simple as that.

“In practice, this isn’t what happens because employers don’t understand the law and enforcement agencies are turning a blind eye. This is a real shame for all those hugely talented young people who can’t rely on their parents to fund an unpaid internship. We should be doing much better for these young people.”

Dominic Potter, report co-author and director of Internocracy, said:

“We now have entire industries that rely on the willingness of young people to work for free. In the long run this is bad for business because it damages the reputation of these industries and makes it difficult for them to recruit from the broadest pool of talent. It also means that young people from well-off backgrounds or with good family connections have an instant advantage when it comes to finding a permanent job.”

ippr and Internocracy’s report explains that confusion among employers leaves them open to claims for back-dated pay from former interns – and cuts off opportunities for many young people.

Their report argues that government, unions and employers’ organisations need to provide clearer guidance to employers about their legal obligations. The report also suggests some ways in which employers could be encouraged to offer more paid internships, such as sharing interns between companies to reduce costs.

It also proposes that unpaid internships in Parliament and MPs’ constituency offices should be banned as part of the Independent Parliamentary Standards Agency’s (IPSA) consultation on MPs’ expenses.

Why Interns Need a Fair Wage by Kayte Lawton and Dominic Potter is free to download from www.ippr.org/publicationsandreports/publication.asp?id=765

Notes

  • Under, the National Minimum Wage Act 1998 anyone doing work for an organisation must be paid at least the minimum wage. This is regardless of how a job was advertised, what the job title is or whether there is a contract in place. Charities, voluntary organisations and statutory bodies are able to employ unpaid voluntary workers but private companies are not.
  • HM Revenue and Customs is responsible for enforcing the NMW Act. The Low Pay Commission has said that HMRC should be more proactive in investigating cases where terms like ‘intern’ and ‘work experience’ are used.
  • In November 2009 Reading Employment Tribunals ruled, in the case of Nicola Vetta and London Dream Motion Pictures Ltd, that someone employed on an expenses-only basis is still entitled to the minimum wage if they can show they are a worker.
  • In its 2010 report to government, the Low Pay Commission said there is evidence to indicate ‘systematic abuse of interns, with a growing number of people undertaking “work” but excluded from the minimum wage’.
  • The Low Pay Commission asked the Department for Business, Innovation and Skills to propose a strategy by summer 2010 for improving awareness of minimum wage requirements among private sector employers and to engage directly with employers in particular sectors.
  • A Chartered Institute of Personnel and Development survey found that just under a fifth of respondents did not pay a wage to interns, just under a third paid less than the adult minimum wage and around half paid interns at least the minimum wage.
  • Internocracy is a social enterprise committed to changing the culture of internships in the UK. See www.internocracy.org/

Contacts
ippr research fellow and report co-author Kayte Lawton: 020 7470 6169 / 07715 110439 / k.lawton@ippr.org
ippr Media Manager: Nyta Mann 07979 602065 /  020 7470 6112 / n.mann@ippr.org