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National Minimum Wage

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Now that the National Minimum Wage (“NMW”) increase has come into force, from 1 October 2011, Business Link and DirectGov have updated their guidance which includes advice on payments involving internships and work experience placements.

This was an area of uncertainly previously, with numerous organisations receiving criticism for using “interns” as “cheap labour”. However, the guidance casts more light and certainty on this area.

The increase

New rates:

(a) The standard (adult) rate (workers aged 21 and over) will rise to £6.08.

(b) The development rate (workers aged between 18 and 20) will rise to £4.98.

(c) The young workers rate (workers aged under 18 but above school leaving age who are not apprentices) will rise to £3.68 per hour.

(d) The rate for certain apprentices (those under 19 years of age or those aged 19 and over but in the first year of their apprenticeship) will rise to £2.60 per hour.

(e) All other apprentices will continue to receive the national minimum wage at the appropriate age rate.

(f) The accommodation offset will rise to £4.73 per day.

Most workers in the UK over school leaving age are legally entitled to be paid at least the NMW. It makes no difference:

(g) if they are paid weekly or monthly, by cheque, in cash or in another way

(h) if they work full time, part time or any other working pattern

(i) if they work at their employer’s own premises or elsewhere

(j) what size employer they work for

(k) where in the UK they work

The NMW is a statutory minimum. As such, the employee and/or employer cannot agree a lower rate of pay, and even if the employee’s contract of employment states a lower rate of pay the obligation is on the employer to pay at least the NMW. This is particularly relevant at times when the Government increase the NMW. Although it may state in a person’s contracts of employment that they are entitled to a lower rate, the employer will be under the obligation to pay them the new rates from 1 October 2011.

“Interns” and “work experience”

The term ‘work experience’ generally refers to a limited period of time that someone spends with an employer. It can give the person the opportunity to learn about working life and the working environment, the chance to “shadow” the employer’s employees and/or a chance to actually try certain tasks. The nature, length and arrangements for work experience vary greatly.

Work experience is sometimes referred to as a ‘placement’ or an ‘internship’. Internships are often positions requiring a higher level of qualification than other forms of work experience, where the person can gain experience for a professional career. However, the term ‘intern’ has no legal status. If an employer has any ‘interns’ they will be treated in the same way as someone doing work experience for NMW purposes.

Whether or not a work experience student or ‘intern’ is entitled to the NMW will depend on the arrangements under which they are working. Either the person will be a worker eligible for the NMW, a worker who is expressly exempt from being eligible for the NMW or not a worker and therefore not eligible for the NMW.

The following, are not entitled to receive the NMW:

(l) Students doing work experience as part of a UK based higher or further education course, where their placement does not exceed 1 year. This does not include those students who take a gap year, or who take on work which is not a part of their course

(m) Those who are of compulsory school age.

(n) Those who are engaged as a genuine volunteer for a charity, a voluntary organisation, an associated fund raising body or a statutory body. They must only receive limited and specific benefits such as reasonable travel or lunch expenses and are not entitled, under the terms of their employment, to receive any other monetary payments or benefits in kind.

(o) Those who participate in Government and European programmes have no entitlement to the NMW for work done as part of the programme.

The guidance has made it clear that the person’s entitlement to the NMW does not depend on the person’s job title, instead it is based on the arrangement with the employer and within the organisation itself and the tasks that the person is being asked to complete.

In addition, the guidance has made it clear that a person is not automatically exempt from being paid the NMW just by virtue of them being labelled a “work experience student” or– ‘intern’ or by having their work at the organisation described as a “placement”, “internship” or “unpaid work”.

A work experience student or ‘intern’ will not be entitled to the NMW if they are merely shadowing an employee of the organisation and not expected to perform any work themselves. In addition, if there is no obligation on the work experience student or ‘intern’ to attend work and they will suffer no detriment if they fail to provide their services, then they will not be entitled to the NMW.

However, if the work experience student or ‘intern’ is actually completing “proper” work, are expected to attend work during specific hours and would be subjected to a detriment if they failed to do so, this a strong indication that they are likely to be considered as “workers” and are, therefore, entitled to receive the NMW.

The new guidance comes in response to certain public criticisms of a number of organisations that were taking on ‘interns’ and paying them little or no money to do substantial work for them. The guidance makes it clear that by just labelling someone as an ‘intern’ an organisation can no longer avoid the obligation to pay the person the NMW if they are completing actual work for the organisation.

Action points for employers

Check with your payroll department to ensure that all employees’ are receiving the NMW or above.

Identify any work experience students or ‘interns’ in your organisation. If so assess the type of work they are asked to perform whilst they are at your organisation. In particular, whether this is “proper” work or genuine experience such as shadowing.

Depending on the outcome of the assessment above, it may be that you need to re-evaluate your organisation’s strategy in relation to taking on work experience students and ‘interns’. This may include evaluating the type of work given to them or whether your organisation wishes to continue with such schemes at all in light of the new obligations, above.

Consider keeping records of agreements that the organisation makes with the work experience student or ‘intern’, the tasks they are asked to perform and the hours they are asked to work. It is helpful to create a “paper-trail” in the event that a work experience student or ‘intern’ attempt to bring a claim against the organisation for failure to pay them the NMW.

If you have any questions about the changes in national minimum wage or would like some guidance on the new changes contact the Employment Team on 01332 226 149

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