The facts on unpaid internships
- Interning is becoming a pre-requisite for graduates looking to access the professions. In his role as the Government’s adviser on social mobility, Alan Milburn reported in March 2012 that over 30% of newly hired graduates had previously interned for their employer, rising to 50% in some sectors.
- The 2012 Wilson Review into business-university collaboration found that “lack of work experience appears as a key barrier to young people, including graduates, in securing employment”.
- The National Council for the Training of Journalists (NCTJ) found in their 2013 report that 82% of new entrants to journalism had done an internship, of which 92% were unpaid. 
Unpaid internships are unaffordable for young people from low-middle income households
- However, it is impossible for many young people to intern because unpaid internships are unaffordable. In the largest online UK internship survey to date, 87% said they were paid nothing or below the NMW. The IPPR has estimated that there are over 100,000 unpaid internships.
- Most interns are unable to claim Jobseekers Allowance (JSA) as they are unavailable to accept offers of employment and attend Jobcentre Plus interviews.
- The vast majority of internships are located in London, e.g. 80% of law internships, 61% of PR internships (PRCA/Intern Aware). The LSE estimates that a month’s living costs for a young person in London amounts to £1,000, a substantial cost given that most internships last between three to six months. This need to relocate compounds the problems of a lack of payment.
- Two out of five (43%) people aged between 18 and 24 believe unpaid internships act or have acted as a major barrier to getting a job. (YouGov, 2012). Two out five (40%) people who thought about applying for an internship have reconsidered because they couldn’t work for free, while two out of five (39%) of people offered an internship have to turn it down for financial reasons.
- 84% of people over 35 said that a young person in their family could not afford to do an unpaid internship in London. (Survation, 2013)
The legal position on internships
- Most interns have set hours and responsibilities and are therefore “workers”, and entitled to the NMW. The Low Pay Commission reported in 2013 it “received a substantial volume of evidence suggesting a growth in the terms ‘internship’, ‘work experience’ or ‘volunteer’ to denote unpaid activities that look like work and to which the NMW should apply.”
- There is a lack of awareness about the law. Just 12% of employers are aware of their legal obligations to pay interns if they are “workers”. 80% of young people are unaware of the Government’s Pay and Work Rights Helpline.
- Where young people have taken employers to employment tribunals they have been successful. Working with employment lawyers, we have secured tens of thousands of pounds for former unpaid interns.
Stakeholders’ views on the issue
- Fair internship schemes are better for employers as they allow them to access a wider and more diverse pool of talent.
- This is recognised by a range of employers (e.g. Ernst & Young and KPMG) and employer bodies as diverse as accountancy’s ICAEW, PR’s PRCA, the creative industries’ Arts Council and Creative Skillset, and architecture’s RIBA – which now expels members that use unpaid interns.
- In the latest report by the Government’s Social Mobility and Child Poverty Commission, Alan Milburn called for an “eradication” of unpaid internships, reporting that “firms should openly advertise and pay internships a wage – not just as a matter of legal compliance but because it will enhance their ability to identify and develop talent from a wider range of backgrounds.” It also called for better enforcement of the NMW.
- McKinsey & Company: “Not everyone can afford to take unpaid work in order to build skills or experience. Indeed, there is a risk that, by providing unpaid internships, companies exacerbate socio-economic differences—by ensuring that the best work experience opportunities go to young people from wealthier backgrounds.”
- Dozens of university careers services refuse to advertise unpaid internships.
- There are high levels of support for fairer internships in the media – including major publications representing the whole political spectrum.
- Trade unions also support action on internships, and in her Guardian profile TUC General Secretary Frances O’Grady said this is one of her priorities.
- International organisations, including the European Commission, OECD, and the UN, are all concerned about the effects of unpaid internships on social mobility.
Proposals for action
Based on discussions with HMRC, national polling, surveys, and hundreds of conversations with unpaid interns and employers, we have highlighted several areas in which NMW enforcement could be improved. None of these proposals would undermine the effectiveness of Government back-to-work schemes and have all been developed in recognition of the state of the public finances.
A four week rule
At no point in NMW legislation is a “worker” defined sufficiently. The law on the issue is “notoriously complex”. We have noted that advisers at HMRC are not consistent in their advice about when NMW is due and when it is not.
By using the powers under s41 of the National Minimum Wage Act 1998, the Secretary of State could give clarity to interns, those on short term work experience and employers. (Excluding existing exemptions) he should designate individuals who have undertaken a period of work experience for over four weeks to be a “worker” under the meaning of the National Minimum Wage Act.
As a result of the high levels of media interest in the issue of unpaid internships, the announcement of this new piece of secondary legislation would receive very high levels of press coverage meaning it would not be necessary to mount an expensive marketing campaign to inform interested parties.
As this is secondary legislation, it would not interfere with current NMW exemptions for groups such as students doing work experience as part of a course, charity volunteers or jobseekers on the Work Programme.
With the help of leading employment barrister Simon Cheetham, of Old Square Chambers, we have drafted text which, if enacted using s41 would allow the Government to clarify the law for all concerned:
“(1) “Work experience” includes observing, replicating, assisting with and carrying out any task with the intention of gaining experience of a particular workplace, organization, industry or work-related activity.
(2) A “provider” within this section is an employer or other supplier of work who provides an individual with work experience.
(3) Any person undertaking work experience for a single provider for a period exceeding 4 weeks shall be deemed to be a “worker” under section 54 below.
(4) Nothing in this section will prevent a person who has been undertaking work experience for a period less than 4 weeks from being a worker under section 54 below.”
More prosecutions for non-payment of the NMW
There has not been a single prosecution for non-payment of the NMW in the last two years – and there have been only eight prosecutions since the law was passed in 1998. While we appreciate that prosecutions are not suitable in all circumstances, if this tool was used properly it would act as a credible deterrent, particularly for businesses which would be less concerned about the reputational effects of “naming and shaming”.
Third parties should be able to complain about non-enforcement of the NMW
A provision for complaints by third parties is important as it allows for other parties to be the “eyes and ears” for HMRC, which has a Minimum Wage enforcement team of approximately 150 people. It also means that whistleblowers need not be directly affected by the non-enforcement of the law, helping to reduce the impact of vulnerable workers being afraid to report their own employers.
According to BIS guidelines, HMRC enforcement can be initiated by complaints by third parties. However, there is no mechanism for doing this as the complaint form on the Pay and Work Rights Helpline website does not allow third party complaints. Callers to the helpline have been informed that only those in work can complain, contrary to regulations.
We were grateful for the Minister’s decision to share with HMRC 100 unpaid internship adverts that we believed may have been breaking the law. We would be happy to set up a more regular procedure of crowdsourcing for unpaid internship adverts, and with Intern Aware acting as the filter, share adverts with BIS to expedite investigations. We could share this information at a regular interval with the Department.
HMRC’s Pay and Work Rights Helpline should also be updated to provide clarity on the process of investigation and information about confidentiality, as many unpaid interns are currently intimidated by fears of being “blacklisted” if they report illegal practice. This would help address criticisms about guidance on NMW enforcement from the Low Pay Commission.
Improvement is needed to HMRC’s “risking” process
HMRC’s risking process, whereby sectors and companies are proactively sought out for investigation for non-payment of NMW, leaves out workers who are being paid “off the books”. The detection methods HMRC uses to tell who is not paying NMW are based on tax receipts and returns, which do not pick up people who are not being paid at all.
However, there are a very high number of adverts for unpaid internships online that specify set hours and tasks, but specify wages below NMW or none at all. While recognising that these internships could be in breach of employment law, HMRC refuse to consider investigating these adverts or sending letters to companies that advertise for unpaid interns reminding them of their duty to pay NMW.
 McKinsey, Education to Employment: Getting Europe’s Youth into Work, 2014: http://mckinseyonsociety.com/downloads/reports/Education/A4E2e_DOWNLOAD_BOOK_FINAL.pdf
 National Minimum Wage: volunteers and interns - Commons Library Standard Note: http://www.parliament.uk/business/publications/research/briefing-papers/SN00697/national-minimum-wage-volunteers-and-interns
 41 Power to apply Act to individuals who are not otherwise “workers”.
The Secretary of State may by regulations make provision for this Act to apply, with or without modifications, as if—
(a) any individual of a prescribed description who would not otherwise be a worker for the purposes of this Act were a worker for those purposes;
(b) there were in the case of any such individual a worker’s contract of a prescribed description under which the individual works; and
(c) a person of a prescribed description were the employer under that contract.
Point 2. 2. 1, Policy on HM Revenue and Customs Enforcement URN 11/529, January 2011