So, You Want to Hire an Intern But Aren’t Sure About Paid or Unpaid Internships…
Internships are a form of work experience that enable working professionals to broaden their experience and further develop their skillset and knowledge in any given field. Through an internship, individuals are given the opportunity to work for a company, contribute to projects, participate in meetings, and gain a deeper understanding of their chosen industry.
But internships do have a tendency to lend themselves to controversy, uncertainty and inequity. And many people wonder whether unpaid internships are legal in Australia.
In this article, Employment Law Expert and Associate Director of BlueRock Law Catherine Stephens outlines everything employers should consider before employing an intern to ensure mutually beneficial outcomes and compliance, and avoid avoidable penalties.
The Importance of Correctly Classifying an Intern
As a business owner, before you make the decision to hire an intern, it’s essential that you first classify the person as either:
- An unpaid intern
- An employee (a paid intern)
It’s important to note that there are limited circumstances in which an intern can be considered an unpaid intern and, as such, employers must assess whether the arrangements between the parties creates an employment relationship. Unpaid internships in Australia must meet strict criteria.
What Can Happen if You Incorrectly Classify an Intern?
Failure to properly classify an intern may result in exposure to claims for underpayment of wages, penalties for breach of industrial statutes and instruments. Definitely something to avoid!
What Are Some Examples of Allowable Unpaid Internships?
Unpaid work experience or internships can be permitted if:
- The intern is a student or on a vocational placement
- There is no employment relationship
What Are the Indicators of an Employment Relationship?
When determining if an employment relationship exists, employers should consider the following:
- What was agreed to?
- The reason for the arrangement
- The length of the arrangement
- How important the work was to the business
- The work that the person was doing
- Who benefits from the work?
Indicators of an Employment Relationship: what was agreed to
Agreements for work experience and internships may differ depending what each person agrees to. Things to consider include:
- Whether a person thought they were agreeing to work for the business as an employee
- A person’s commitment to work for the business’s benefit (not as part of running their own business)
- If a person believed that the business would pay them for their work
Indicators of an Employment Relationship: the reason for the arrangement
If the purpose of the arrangement is to give an individual work experience, it’s often less likely to be an employment relationship. However, if the person’s work is to help with the ordinary operations of the business, it may be an employment relationship.
The more productive work that’s involved, the more likely it is that the person is an employee. With this in mind, activities that are less likely to indicate an employment relationship include:
- Skill development
Indicators of an Employment Relationship: the length of the arrangement
The longer the arrangement is in place, the more likely the person is an employee.
Indicators of an Employment Relationship: how important the work was to the business
Activities that are likely to indicate that the person is an employee includes:
- Work that a paid employee would usually do
- Work that the business has to do as part of its day-to-day operations
Indicators of an Employment Relationship: work that the person is doing
As part of their learning experience, training, or skill development, the person may complete some productive tasks. However, if the business doesn’t expect or require the person to come to work, or complete productive tasks, they’re less likely to be an employee.
Indicators of an Employment Relationship: who benefits from the work
The person completing the work should be receiving the main benefit from the arrangement. If the business is getting the main benefit, it is more likely that the person is an employee.
What is the Difference Between a Paid and Unpaid Internship?
A paid internship is most easily defined when:
- An intern performs work that is billed to clients and would be performed by paid employee (even if the intern and the company agreed that there was no employment relationship)
- When an intern is going to be hands on and performing work for the benefit of the company rather than for predominantly their own benefit
- The employer is receiving the majority of the arrangement
An unpaid internship is most easily defined when:
- An intern attends a company to observe and learn, and sets the duration of their attendance at the company over a two week period
- A role is mainly observational and the students get the main benefit of the agreement
Regardless of whether an intern is paid or unpaid, it’s important to document the relationship and make it clear to both parties whether it is a paid or unpaid internship.
For further information on classifying interns or intern agreements, contact our BlueRock Melbourne-based Employment Lawyer for a free consultation.