Interns and volunteers under national minimum wage spotlight

16 December 2023

In its recent bulletin, HMRC flagged the issue of when interns and volunteers are eligible for the national minimum wage (NMW). Whilst most employers might think these individuals are not entitled to the NMW, there are some traps to be wary of. 

Upon an inspection by HMRC, failure to pay the NMW will result in a notice of underpayment for all workers going back up to six years, a financial penalty of up to 200% of amounts underpaid, and, where arrears exceed de minimis thresholds, a referral to the Department for Business and Trade to consider whether to publish the employer’s name. 

They must not be workers

All workers in the UK are entitled to be paid at least the NMW and the definition of a worker is set out in the NMW regulations. Crucially, it does not matter what label is placed on the individual. It is a well held principle that it is the nature of the engagement that counts. The existence of any written documentation has some relevance, but of itself will not be determinative.

Internships are associated with arrangements providing experience for a professional career. However, if interns are going beyond observing the performance of work and are actually performing tasks themselves to the benefit of the provider, they are likely to be workers. 

For an individual to be categorised as a volunteer they must either satisfy the definition of voluntary worker under the NMW regulations or the common law definition of a volunteer. In the latter case, that would generally mean providing their time and effort completely freely, coming and going as they please and not suffering any sanctions if they do not perform their volunteer duties. 

They must not receive pay and benefits

HMRC has highlighted a few examples of situations that have caught employers out. Clearly, any payment being made to the intern or volunteer in respect of work done would indicate they are workers. However, this might take more subtle forms. For example, if the intern is offered a promise of future employment, then this is also likely to indicate they are a worker. 

Whilst it is acceptable to reimburse volunteers for their reasonable out of pocket expenses without that leading them to be considered a worker, such practices should be carefully considered and reviewed regularly. For instance, where ‘round sum’ allowances are paid rather than reimbursement on a pound for pound basis, this may go beyond what is reasonable and may in fact be considered a payment for the work being done.  

Does an exemption apply? 

There are several exemptions in the NMW regulations where individuals on work placements are not entitled to the NMW - for example, students working as a required part of a UK based further or higher education course, provided the placement does not exceed a year’s duration. 

However, it is crucial to ensure that the specific exemption being relied upon does apply in each circumstance. 

With HMRC placing an increased focus on the use of interns, volunteers and workplace students, it is important to ensure that the nature of working relationships are reviewed and that no payments or promises are made, other than the reimbursement of reasonable out-of- pocket expenses. 

For more information, please get in touch with Charlie Barnes or your usual RSM contact.

Charlie Barnes
Charlie Barnes
Director, Head of Employment Legal Services
Charlie Barnes
Charlie Barnes
Director, Head of Employment Legal Services