A large number of companies in the leisure & hospitality sector engage students on a variety of different arrangements to help them gain working skills and experience to develop their careers. Typical arrangements can include one or two weeks of work shadowing by students in education, or internships for individuals who have left education which can be longer (anything up to one year) and may involve being given specific tasks and responsibilities.
The legal status of such individuals can be uncertain. This briefing is intended to summarise the key issues to be considered and provide a checklist of what to consider when bringing interns or students into your organisation.
We were recently instructed on a case involving a hotel which took on interns who were students on an international work experience programme for a three month placement. The interns had not been paid, and neither they nor their college had any expectation that they would be paid during the placement. HMRC investigated the hotel and found that because the students had been placed on a rota and were required to turn up to work, they were ‘workers’. As a result they were entitled to be paid the National Minimum Wage and the hotel received a heavy fine. Each case will turn on its own facts but this should serve as a reminder of the potential ramifications for your businesses if you don’t routinely audit your work experience and internship arrangements.
What does the law say about internships and work experience?
There is no single definition of interns or students however there are numerous key pieces of legislation which apply to students and interns undertaking work placements. These include the Working Time Regulations 1998, the Education Act 1996, the Children and Young Persons Act 1933 and the Health and Safety (Training for Employment) Regulations 1990. One of the most important is the National Minimum Wage Act 1998.
Are you required by law to pay National Minimum Wage (NMW) to interns and students?
Sometimes, yes. Whether NMW is payable depends primarily on the type of arrangement the business has with the student or intern as NMW must be paid to any individual who qualifies as a ‘worker’. Whether a student or intern can be categorised as a worker is case specific, but ultimately a worker is someone who is engaged under a contract (oral or written) to do work or services personally and who is not genuinely self-employed and in business on their own account. Tribunals assessing worker status will consider various factors when looking at existing relationships such as the obligation on a business to offer work and on the individual to accept it if offered.
However there are certain exemptions aimed at work experience schemes and NMW is not payable where an individual is:
- working as a required part of a UK based further or higher education course lasting less than one year or
- of compulsory school age or younger than school leaving age and undertaking work experience or
- undertaking work experience of a purely shadowing or observing nature or
- attending various training schemes funded by the government or EU Lifelong Learning Programmes or
- volunteering in certain charitable or non-profit-making schemes which provide limited and specified benefits and expenses (such as lunch and/or travel expenses)
What power does HMRC have?
HMRC can carry out investigations and checks at any time and ask to see payment records. If HMRC finds that an organisation has not been paying the correct rates of pay, any arrears must be paid back immediately. There may also be a fine and the Government publishes the names of offenders on the internet. Due to the ability of HMRC to look into historical payments it is recommended employers keep records for three years.
What steps should you take to protect your organisation?
When taking on students and interns you should consider:
- What is the role that you are expecting them to undertake? What activities will they be carrying out? Is it purely shadowing and observing or will they be expected to perform certain tasks and responsibilities? Are they on a rota?
- What course (if any) is the student taking? Is it part of a higher or further education programme?
- The length of the placement. The longer the placement the more likely the individual could be seen to be a worker.
- On what terms do you engage students and interns? What do you pay them (if anything)? Do you cover any accommodation, lunch or reasonable travel expenses?
- What is your record keeping policy-could you easily obtain 3 years of records in the event HMRC investigate your organisation?
The Leisure and Hospitality team at Boyes Turner provide advice on all aspects of student and internship work; if you have any queries or require assistance please contact the Leisure and Hospitality sector on 0118 952 7711 or email leisure&[email protected]r.com.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.