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Internships explained.

By: Sam Freeman, Specialist Employment Relations Consultant.

Internships explained. (Last Updated On: March 14, 2018)

As an Employment Relations Consultant with Employsure, I am constantly on the road speaking with small business owners about challenges they face. In my role, once a client signs up with Employsure, I spend time getting to know the ins and outs of their business and identify any areas of concern that need to be addressed.

Internships are something I’ve noticed many employers are uncertain about. With small businesses often being relaxed environments, it can be easy for employers to take on workers looking for work experience without formalising an arrangement. However, there are strict legal obligations regarding unpaid work that must be considered before entering into such an arrangement, as failure to comply with specified conditions can result in heavy penalties under the Fair Work Act.

In the current economic climate, younger workers are often enthusiastic to get industry experience through interning, while small businesses are equally keen to have the assistance. So how can employers enter into a lawful arrangement for unpaid work?

What is an internship?

Internships are work arrangements that are unpaid.  They are different from usual paid work due to the length and purpose of the arrangement.  Strict legal guidelines apply as to what defines an internship and care should be taken to establish the legitimate nature of the relationship from the outset.

Employers can also engage a person in unpaid work as part of their educational or training course.  This is called a vocational placement, and similar to internships there are strict guidelines that apply – usually in coordination with the relevant educational institution.

If the purpose of the work experience, placement or internship to give the individual work experience, it is less likely to be an employment relationship. But if the person is doing work to help with the ordinary operation of the business or organisation it may be an employment relationship. The more productive work that’s involved (rather than just observation, learning, training or skill development), the more likely it is that the person is an employee.

Intern or employee?

There are four main considerations when determining if an individual is an intern or employee.

Length of time

Generally, the longer the period of the arrangement, the more likely the person is an employee.

Significance to the business

Is the work normally done by paid employees? Does the business or organisation need this work to be done? If the person is doing work that would otherwise be done by an employee, or it’s work that the business or organisation has to do, it’s more likely the person is an employee.

What is the person doing?

Although the person may do some productive activities as part of a learning experience, training or skill development, they are less likely to be an employee if they aren’t expected or required by the business or organisation to come to work or do productive activities.

Who’s getting the benefit?

The person who’s doing the work should get the main benefit from the arrangement. If a business or organisation is getting the main benefit from engaging the person and their work, it’s more likely the person is an employee.

Fee for placement.

Some businesses match intern candidates with employers offering internships – much like a recruitment agency or labour hire firm, and these businesses may charge a prospective intern a fee for the service they provide. Often, these businesses will not charge the prospective intern if they are unable to find a placement.

These businesses effectively act as the ‘middle-man’ or ‘recruiter’ between the intern and the employer, but the intern is never directly employed by the business assisting with their placement.

When assessing if an internship should be paid or unpaid, employers must consider a few factors, including if the internship is linked through a tertiary education program and if the intern is performing work that contributes to the day to day operations of the business.

An internship can be a great way to gain exposure to an industry a person intends to build their career, provides exposure to a professional environment, and can be a platform to obtain paid employment.

Each situation needs to be considered on a case by case basis and we encourage our clients to call Employsure for assistance prior to engaging interns.

Example: Unpaid internship.

A radio station has advertised an internship program for high school or university students interested in a career in radio.  The internships have been advertised as unpaid positions and students are allowed to select the hours they spend at the radio station over a two week period.

The radio station is careful to make sure that the role is mainly observational. The students are getting the main benefit from the arrangement.

In this example there is no employment relationship and the interns don’t have to be paid.

Example: Paid internship.

Philip is a final year accounting student. He agreed to do an unpaid internship with an accountancy firm and was promised a job once he graduates.

Philip attended the firm for three days a week.  He prepared customer tax returns and company financials.  The firm charged clients for the work he did.

Although Philip had agreed not to be paid, he did work that would have otherwise been done by a paid employee. This indicates an employment relationship existed. As such he should be paid for all the hours he worked.

I’ve had the pleasure of working with many small business owners and in my experience, they genuinely want to do the right thing by their staff. But with Australia’s complex system of workplace relations, I’ve seen so many employers caught out through a lack of knowledge of relevant legislation. I recommend all employers considering an internship program carefully check their obligations before going ahead to ensure the arrangement is fair and legal.

Sam Freeman, Specialist Employment Relations Consultant.

Sam is a dedicated human resources professional with over 13 years experience. She is an expert in employee relations, performance management, training and development, termination and redundancy, recruitment and selection. Sam is passionate about helping clients to achieve compliance by successfully finding solutions to suit their needs.

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