24 January 2011
Do you have any interns?
These days it is common for organisations to take on young people as interns to carry out tasks within their organisations, offering the interns valuable working experience and perhaps a chance to secure a permanent job with them.
Should interns be paid?
Whether or not an intern is in fact an employee is a legal matter, and you will need to take specific employment law advice on this. This factsheet sets out the possible consequences of an intern being an employee and the subsequent employment tax issues.
Internships can be unpaid, paid, provide reimbursement for expenses, or a combination of these. Internships last at least three months or longer depending on the requirements of the organisation, and provide opportunities for young people to gain experience in their chosen field and help them, and you as the engager, determine whether or not they have the skill to succeed in a particular career.
What must be considered is whether the intern is a worker, voluntary worker or volunteer? This is important because you must determine whether there is an entitlement to the National Minimum Wage (NMW), which may mean that there is an employment relationship with all the responsibilities that entails. A worker must be paid.
Students engaged in work experience placements, or shadowing, as part of a higher or further education course, where the placement does not exceed a year, are exempt from the NMW.
Workers
It is not the job title that will indicate the status of an individual; the facts will prevail and status will be determined by the arrangements in place and what happens in practice. If the intern:-
· has a job description,
· is expected to work set hours, and
· is carrying out the work personally,
then they are likely to be classified as a worker and under the Act will be entitled to at least National Minimum Wage (NMW). This will mean that the worker should be treated as an employee, which may lead to PAYE tax and National Insurance Contributions liabilities.
Under the National Minimum Wage Act 1998 a worker is defined as someone who is ‘doing the work personally for someone else and is not genuinely self-employed’.
The table below highlights the difference under NMW between workers, voluntary workers and volunteers:-
|
Characteristics
|
Employer
|
Qualify for NMW
|
|
Worker
|
Works under a contract of employment or a contract personally to perform work or provide services
|
Any employer or organisation
|
Qualifies, unless a specific exemption applies
|
|
Voluntary worker
|
Works under a contract of employment or a contract personally to perform work or provide services
|
Charity, voluntary organisation, associated fund raising body or statutory body
|
Does not qualify due to a specific exemption provided certain criteria are met
|
|
Volunteer
|
Not a worker
|
Any employer or organisation
|
Does not qualify
|
NMW, for the period starting on or after 1 October 2010, for workers aged 18-20 is £4.92 per hour; workers aged 21 and over £5.93 per hour; and for workers aged under 18 (but above compulsory school age) £3.64 per hour.
If you do have interns and would like to discuss any concerns you may have in respect of your arrangements, or any employer compliance issues, please contact our Employment Tax team.
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