Do you have to pay interns?
Internships are a great way for students and individuals to get experience and an idea of what’s in store for them in a given industry or job.
However, the latest investigation by Fair Work into a popular startup has uncovered serious contraventions regarding the non-payment of ‘interns’. While some businesses may act dishonestly, most businesses are simply trying to do the right thing when they provide opportunities to gain experience in their workplace.
The term ‘internship’ is a very confusing one as it can mean different things in different situations. In some cases, internships may fall within the scope of an employment relationship and require payment for services provided by the ‘intern’.
There are a number of circumstances that are commonly associated with unpaid work, such as internships, volunteering, vocational placement, work experience, and work trials or skill demonstrations. According to Fair Work the purpose of unpaid work is to:
- give a person experience in a job or industry,
- test a person’s job skills or competencies for a job,
- volunteer time and effort to not-for-profit organisation or cause.
How do you know if you should pay your interns?
The primary factor that determines whether work should be paid or unpaid, is whether or not an employment relationship exists between the employer and the individual.
An employment relationship may exists where the following conditions are present:
- There is intention to enter into an agreed arrangement to undertake work for the employer.
- A commitment by the person to perform work for the benefit of the business or organisation, and not as a part of running their own business.
- The expectation to receive payment for such work.
Additional factors to consider include the intended length of time the individual will be with the business, the reason for the arrangement, the significance of the work to the business, and who will benefit from the arrangement.
Ultimately, in order to be considered lawful unpaid work, the ‘intern’ or person undertaking work experience should benefit the most from the engagement.
Circumstances where an employment relationship may not exist
Work Experience & Vocational Placements
Interning or partaking in work experience provides a valuable opportunity for learners and individuals looking to gain experience in a particular industry or job. “Unpaid work experience and internships can be lawful if it is a vocational placement, or if there is no employment relationship found to exist.”
According to Fair Work, vocational placements occur when the unpaid work is a requirement of the educational course or formal training the individual is undertaking. They may experience in an observational role, or performing tasks that provide a meaningful learning, training, or skill development experience.
Work Trials & Skill Demonstrations
Work trials or skill demonstrations, “can be legally unpaid if it is necessary to evaluate someone’s suitability for the job.
Some factors to consider include if:
- It involves no more than a demonstration of the person’s skills, where they are relevant to a vacant position.
- It is only for as long as needed to demonstrate the skills required for the job. This will be dependent on the nature and complexity of the work, but could range from an hour to one shift.
- The person is under direct supervision of the potential employer (or other appropriate individual) for the entire trial.”
Volunteer work refers to work undertaken for the purpose of benefiting someone else. For example, this may include a sporting club, church, government school, charity or community organisation.
While the concept of working for the benefit of someone else can be an indicator of an employment relationship, genuine unpaid volunteer work must include that:
- The parties did not intend to create a legally binding employment relationship.
- The volunteer is under no obligation to attend the workplace or perform work.
- The volunteer doesn’t expect to be paid for their work.
What’s your responsibility as an employer?
In determining whether work should be paid or unpaid, employers should consider the individuals working obligations to the business, type of tasks undertaken, and the reason for the arrangement. If the work is lawfully classed as unpaid, there may be other laws that may still apply to the individual including, workplace health and safety, or discrimination. It is up to the employer to ensure that these conditions are met and maintained.
If the work is classed as paid work, it is up to you as the employer to ensure that all employment standards are met, including:
- A minimum wage.
- The National Employment Standards.
- The terms of any applicable Award or registered agreement.
Still not sure if you should pay your interns?
Each employer will likely have different circumstances for their interns, which is why we recommend contacting Fair Work on 13 13 94, or seeking legal advice for information on compensating individuals for unpaid and paid work.
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Greens MP introduces franchise wages bill
A new bill called the Fair Work Amendment (Recovery of Unpaid Amounts for Franchisee Employees) Bill 2015 was introduced to Parliament last week. The bill, sponsored by Melbourne Greens MP Adam Bandt, is a direct response to the recent 7-Eleven saga, in which the Fair Work Ombudsman has already found over $600,000 in underpaid wages and entitlements. The bill aims to prevent this by making the franchisor responsible for correcting underpayments if the franchisee is not able to pay staff correctly and on time. You can read the text of the bill here, as well as its explanatory memoranda. Nobody would argue that it’s fair how 7-Eleven staff were underpaid, but this bill skirts a fine line that all franchisors should be aware of. The bill is written in the typical legalese of the Fair Work Awards and the National Employment Standards, but the gist of it is: If a franchisee employer does not pay an employee by pay day, then the employee, or someone acting on their behalf, can give the franchisor a written demand for payment. The employee doesn’t need to do this immediately. They have 6 years from the pay day in which they can make this request. The franchisor has 14 days to pay the employee what they’ve requested. If the franchisor doesn’t pay the employee within the given 14 days, the employee (or a lawyer) can take the franchisor to court. So if the franchisor disagrees with the employee’s written request… it must go to court! The court must add interest to the amount already owed to the employee. This interest is calculated from the pay day (so at this point it’ll already be 14 days worth). In short, if this bill became law, every franchisor in Australia would have unknown liabilities on their books for the wages of everyone who’s ever worked at one of their franchises any time in the past 6 years. And they could get these written notices if a franchisee gets their payroll out an hour late. This bill could certainly set a precedent for even more responsibilities for head office over what franchisees are doing. We think this could significantly change the dynamics of franchise agreements and cause a lot of headaches. It’s important for franchises to be ready for this sort of thing. Whether mandated by law or common sense, as a franchisor you need to be sure that your franchisees aren’t doing dodgy things with payroll that are going to see your brand on the front page of the Australian. About the author Jake Phillpot is a Director of Tanda, a specialist time and attendance company focusing on the interpretation of Australian Modern Awards and Enterprise Agreements. Tanda maintains templates of popular Modern Awards including Fast Food, Hospitality, Retail, and Restaurant. These templates include the Fair Work mandated minimum wages of all levels of staff, as well as rules for penalty rates, allowances, and overtime based on the times that staff worked. For more information, read a Franchise Case Study with Red Rooster or call Jake on 1300 859 117. You can also request an enterprise POA.
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Drop out of school if you want to get ahead
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