The use of internships is on the increase as employers look to cut costs and/or attract high calibre graduates and try out prospective employees before making a commitment to a permanent contract. If managed carefully, this can be a low cost way to acquire highly motivated staff.

However, care must be taken. Employers must remember that the national minimum wage (NMW) legislation will apply in situations where the intern is a ‘worker’ – broadly, where there is a contract of employment. Students undertaking work placements as part of a degree or course and volunteers are exempt from the NMW rules but even issues can arise. For example, volunteers must be free to come and go as they please and be under no obligation to perform work. In addition, student work placements cannot exceed twelve months.

While it is normal for employers to reimburse interns for any necessary work-related expenses (e.g. travel costs), it is vital that such payments are specific and cannot be construed as a reward for work. Clearly, advertisements for internships must be worded carefully, particularly if you are looking to acquire post-graduate interns. In some circumstances, employers may prefer to pay interns the NMW so that temporary contract arrangements can more robust.

HMRC is currently taking a close interest in the issue and, in December 2011, wrote to 102 fashion houses thought to be using interns to warn them about the issue. It is understood to be carrying out compliance visits this month as fashion houses gear up for London Fashion Week in February.

This update comes courtesy of our startegic partner PKF(UK) Ltd.