House of Lords Have Debated Internships

The House of Lords have been officially discussing internships. Read the full debate here.

Small Business, Enterprise and Employment Bill - Report (3rd Day)

Amendment 74B

Moved by Lord Mitchell

74B: After Clause 151, insert the following new Clause—

“Growth and impact of unpaid internships

(1) The Secretary of State must publish a report on the growth of unpaid internships within the United Kingdom labour market over the past five years.

(2) The report shall include details on, but is not limited to—

(a) the incidence of unpaid internships by industrial classification;

(b) the average and median length of unpaid internships;

(c) an analysis of those who undertake unpaid internships including details on age; gender and ethnicity;

(d) the impact of unpaid internships on social mobility;

(e) the impact of unpaid internships on graduate prospects; and

(f) current legislation and provisions available to address the exploitation of unpaid internships.”

Lord Mitchell (Lab): My Lords, in moving this amendment, I restate my interest as the chairman of Instant Impact, a graduate recruitment company.

In speaking to her amendment in Grand Committee, my noble friend Lady Donaghy asked the Minister to respond to several questions. Some were addressed and some were not. I aim to push these points a little further. Whether we like it or not, intern experience is a key component of many CV statements. Competition for top jobs is fierce. In my time, I have looked at many CVs and found that each one seems to be more impressive than the last. Much time and energy are expended by a candidate to show himself or herself in the best possible light. In my day, you could wing it and hope that it would be all right on the night; today, that is no longer the case. These days, organisations look for the brightest and the best. They look at not just the quality of their degree or of the university they attended, but at the kind of person they are. Is he or she well rounded? Will they fit into the team? Do they have resilience? Can they articulate an argument? Will they make a positive contribution to the organisation? And perhaps the most important question of all: what is their employment experience?

We on these Benches support internships, much as we support schools’ work experience. The relationship between schools and business needs to be much improved and there is nothing better than sixth formers spending time getting to understand the work environment. In such situations we understand that it is unrealistic to expect payment. However, this amendment is concerned not with work experience but with internships, which often become quasi-employment or, indeed, actual employment.

A couple of weeks ago, I read an article in the Sunday Times which highlighted a recruitment company that charges young people a fee of up to £3,000 to secure unpaid internships in the City. I have been present at a charity auction which raised tens of thousands of

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pounds by offering internships at a major fashion magazine. Such extreme examples illustrate the lengths to which people will go to spice up their CVs. The media, fashion, advertising, PR as well as high-tech and, indeed, our Palace of Westminster, are the prime offenders. They have bright young things working for them free of charge simply because they can. They get away with it because people are desperate for good jobs and they want the kudos of good names on their CVs. In some ways it resembles the unpaid pupillage that used to exist in the legal profession. It was banned there; it now ought to be banned in the wider world.

The Chartered Institute of Personnel and Development estimates that there are 20,000 unpaid interns. I bet that it is significantly more. The Sutton Trust says that the cost to a young person of being an unpaid intern in London is nearly £1,000 a month. A poll has said that 70% of the population say that unpaid internships are unfair and 65% of businesses want to end them. Many have suggested that the full minimum wage should come into effect after a four-week internship. Intern Aware, to which I pay tribute, has lobbied hard on this issue and I have much sympathy with this position.

7 pm

In Grand Committee, the noble Baroness the Minister stated that mechanisms are in place to ensure that there should be no unpaid interns. However, I think she knows—I know this for certain—that the powers available are rarely enforced. I would love to hammer the Government harder on this issue, but the truth is I do not have the data in my hands—hence this amendment.

I suspect that the Government are sympathetic to our position. After all, both the Conservative Party and the Liberal Democrats believe in meritocracy and equal opportunity for all our young people, but they, too, do not have the data in their hands. Getting the best job available is the first and possibly most important step on a long career path. Surely, we owe it to our young people to ensure that artificial barriers are not put in their way. We need the level playing field that compulsory payment for work would introduce.

The amendment asks the Secretary of State to engage a study that reports on the growth of unpaid internships in the UK labour market over the past five years. The report should include: the incidence of unpaid internships by industrial classification; the average and medium length of unpaid internships; an analysis of those who undertake unpaid internships, including details on age, gender and ethnicity; the impact of unpaid internships on social mobility; the impact of unpaid internships on graduate prospects; and current legislation and provisions available to address the exploitation of unpaid internships.

Unpaid internships benefit those whose parents can afford to support them and detrimentally affect those whose families simply cannot afford to do so. This is a problem we need to solve, but we need the data available to do so. I beg to move.

Baroness O'Cathain (Con): My Lords, I wonder who would collect the data. Could we be assured that the data would always be fully acknowledged? I can see companies saying, “Well, I’m not going to fill in that form”. Many is the time one gets questionnaires and

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just throws them out. I am slightly concerned about the way in which this could be done. I agree with the noble Lord that there is an awful lot of difficulty in this whole area, partially because careers advice is not great in schools. As a result, people are really desperate to know what sort of jobs would be available. If they are offered an unpaid internship I can see them being tempted to take it, but I absolutely agree that it creates yet more haves and have-nots. But how does the noble Lord think that it would actually work?

Lord Storey (LD): My Lords, that is the important issue. Let us be quite honest about this: a number of MPs, for example, have unpaid interns with parents who can afford to bankroll them. But if a young person is living on a council estate in Newcastle or Liverpool, how on earth would they be able to come to Westminster and have that experience? If we talk about social mobility, opportunities for all, the raison d’être of internships should be about providing those opportunities for every single person. It does not happen, which is very sad indeed.

I am pleased to say that some internships are paid and one applauds the businesses and individuals who pay interns at the minimum or living wage. Many internships are unpaid and there are businesses—advertising, for example—where the whole ethos is to take on unpaid interns who fight their way to the top. That is true of other businesses as well. It is interesting to look at America, where legal action is being taken against those companies that do not pay internships. In many cases, those businesses are putting their hands up and saying, “Right, we are going to pay our interns”. The same should happen in this country. We have work experience, which is about helping not the employer but the person gaining that short work experience. We have volunteering which, as the name says on the tin, is about volunteering because you want to do something good for a particular cause. Maybe for the first few weeks, an internship should be at your expense, but if it is any longer, you should be paid at a living wage.

I know the Government are sympathetic to this. I think right across this House we are sympathetic about it. There are issues to do with taxation and salaries that we need to understand. I realise it is very late in the day and the Minister cannot give any commitments. I guess nothing can change now, unless we push this to a vote, and I perhaps hope we do not. However, perhaps the Minister can meet us to go over in our own minds about how we might take this forward. I have talked to Ministers and I know that there is a degree of wanting to support this move.

Baroness Neville-Rolfe: My Lords, I am grateful to the noble Lord, Lord Mitchell, for giving us the opportunity to come back to the important subject of interns, to my noble friend Lady O’Cathain for her helpful and insightful comments, and to my noble friend Lord Storey for reminding us that this is a complex subject. I will begin by answering his first question. Obviously, I would be entirely happy to meet him to talk through this issue. I do not think it is possible—as I will come to explain—to do anything in this Bill, but that does not mean that we should not be exchanging comments, knowledge and evidence on this very important area, which I am also passionate about.

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I think we all agreed in Committee that we wanted to encourage internships and that they should be fair, open and transparent in order to encourage candidates from a wide variety of backgrounds. The flexibility of our labour market is a great source of pride, as we discussed earlier. Of the growth of 2 million jobs in this Parliament, nine out of 10 were employees and nearly eight out of 10 were full-time jobs, so there are a lot of opportunities for young people, the unskilled and the long-term unemployed. Youth unemployment fell in the past year by 188,000, so that is good news.

Obviously in any part of the labour market, not just internships, we have to take action where there is any exploitation of individual workers. The use of internships is relatively new in the UK labour market. There is a lot more practice elsewhere, especially in the United States, and there is no definition of internship in our legislation. Individuals undertaking an internship will be workers, employees, or volunteers, depending on the reality of their employment relationship, and not their job title or what an employer decides should be set out in a contract.

Where the intern is an employee or a worker, they are entitled to at least the national minimum wage from day one and all other rights attached to their employment status. The Government are very clear that employing unpaid interns as workers to avoid paying the national minimum wage is illegal. Through tougher enforcement measures, such as increasing the maximum penalty fourfold, and naming and shaming employers, we have shown that we will crack down on employers who break that law. The Bill will also ensure that the maximum penalty is calculated on a per-worker, rather than per-notice, basis, as we discussed in Committee. We have also increased HMRC’s enforcement budget from £8 million to £9.2 million and we will increase the enforcement budget by a further £3 million in 2015-16.

Baroness Morgan of Huyton (Lab): While I recognise that it cannot be done now in the Bill, it would be helpful to investigate the difference between work experience and internships. All of us are absolutely committed to work experience; the noble Baroness, Lady O’Cathain, and I have discussed this on several committees recently. Work experience cannot go on for ever; it cannot go on for week after week or month after month. There is a real difference. We need to encourage work experience, but that is, in essence, very different from the sorts of internships one comes across. One talks to people who are on their third unpaid internship and are clearly working. They can reach the age of 25 or 26 before they get paid employment. That is in particular sectors of the economy. Collectively, around the House, I think we are anxious to make sure, in encouraging social mobility, that we differentiate properly between work experience and internships.

Baroness Neville-Rolfe: I thank the noble Baroness for her intervention. She is absolutely right: we need to think about work experience and internships. I will come on to mention the work we are doing. We should certainly look at both aspects.

Before I finish on enforcement—this is an important point and I was asked about it in Committee—in this financial year alone HMRC has identified more than

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£41,000-worth of arrears for 21 interns who were underpaid the national minimum wage, so enforcement is taking place in this area.

One of the issues that we believe may make some interns uncertain is determining their employment status, which is obviously an essential precursor to understanding what their rights are and whether they are entitled to the national minimum wage. Determining an individual’s employment status can be difficult, as the noble Baroness showed so clearly. There is no one single test to determine whether a contract of employment exists and therefore whether an individual is an employee. We understand that, at times, this is very confusing. It affects various employers, but it also affects interns. Therefore, my right honourable friend in the other place the Secretary of State announced a review in October of employment status to consider these issues. The review will conclude soon.

I understand the concerns raised about pay and social mobility. Some young people probably do not know about opportunities or have access to internships that already exist. That is why the Government fund the Graduate Talent Pool to ensure that all young people have access to internships. That service is on GOV.UK. It is free to employers and graduates, and provides information on all aspects of internships. I am sure that we can do more, but I think it is good that we have done that. We want to encourage social mobility in particular and the Government’s Social Mobility Business Compact, which was launched in 2011, gets employers to commit to fair and open work experience and paid internship opportunities. I know from personal experience that many employers provide such internships and not just for the privileged few. We need to encourage that and keep it going.

My noble friend Lady O’Cathain mentioned career advice. We have recently committed new resources to career advice. That is an interesting addition to the debate.

I turn to the amendment. Internships are not formally defined and therefore the Government do not collect reliable information on a consistent basis that would allow the robust provision of data sought in the amendment. The Government have undertaken research on wider issues that may relate to internships, such as social mobility. We need to be properly informed of the issues around internships to ensure that policy is set appropriately to maximise flexibility and prevent exploitation.

As part of our employment status review, the Government are gathering information through consultation with stakeholders to understand both the current position of groups in the labour market and whether future changes are appropriate. This includes internships and will no doubt provide useful information and data for future discussions.

In summary, I understand and share some of the concerns raised in this debate. We take exploitation of interns very seriously and we already try to act through national minimum wage enforcement to prevent exploitation. Other employment measures in the Bill, such as changing the penalty regime, will of course be helpful. There must be more that the Government can do—that is why we have undertaken a review of

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employment status—but I hope that the noble Lord will support what the Government are doing and will be content to withdraw his amendment.

7.15 pm

Lord Mitchell: My Lords, I thank the Minister for that reply. What she has said is certainly very helpful. If I detect the mood in your Lordships’ House at the moment, everyone seems very supportive of improving the situation regarding internships, ensuring that these young people are paid and taking the necessary action on it. I thank the noble Baroness, Lady O’Cathain, for the supportive comments that she made. She made a fair point about how the information will be gathered. I suspect that lots of companies are deluged with information; one more piece of information is probably not a good thing, but all the same, it has to be obtained otherwise decisions cannot be taken. The noble Lord, Lord Storey, has been very supportive on this all the way through. I thank him very much for that, and for the helpful comment from my noble friend Lady Morgan.

As I said, there is unanimity in the House on this issue, for which I certainly feel very grateful. I will of course withdraw the amendment.