New Deal talking points: Will a ban on unpaid internships make a difference?

Unpaid internships have been subject to media scrutiny for years. The previous Conservative government took some steps to target exploitative unpaid internships, but this fell short of any legislative action. 

Back in 2017, the Taylor Review of Modern Working Practices recommended the government “stamp out” exploitative unpaid internships. Taylor’s view was that the existing laws around when interns should be paid were already clear and so he recommended more enforcement action taken by HMRC. The Conservative government confirmed that it would act on Taylor’s recommendation and, shortly after, HMRC went on to write to over 500 businesses reminding them that interns should be classed as workers and paid the minimum wage.

Whilst this may have prompted some improvements, a BBC enquiry in September 2020 reported unpaid internships were on the rise again as a result of the pandemic. Labour have now put this issue squarely back on the agenda as a way to improve social mobility.

What’s the deal with internships?

There is no legal definition of an internship or work experience. The terms can sometimes be used interchangeably, and an “internship” can be used as a label for all sorts of working arrangements. 

An intern’s employment status is crucial; it determines what employment rights they will have. As we explore in our guide to different types of work contract, an “intern” is not a legal status. Depending on how an internship operates in practice, the intern could be an employee, worker or volunteer. The most significant implication is that only workers and employees are entitled to the national minimum wage. 

Some forms of work experience or internships can lawfully be unpaid. For example, an intern who is work shadowing but not actually performing work will not qualify for the national minimum wage. But if an intern is required to carry out certain tasks or the intern is getting some form of reward for work (including a promise of future employment), they are likely to be considered a worker and should be paid accordingly. The analysis of an intern’s status can be a grey area in practice and legal advice should be sought on the particular arrangements.

What will be the New Deal?

Labour’s New Deal says that they will “ban unpaid internships, except when they are part of an education or training course”. What Labour consider to be an “internship” and how any new law will be enforced is yet to be confirmed.

What could a ban look like?

It is unclear exactly how Labour will legislate for such a ban. Previous attempts to reform the law give us some insight into possible approaches Labour could take:

• A total ban. Labour have said in no uncertain terms that that they will ban unpaid internships, with only a narrow exception if the internship is part of an education or training course. How Labour define an “internship” in future legislation will be important: 
  
  • The National Minimum Wage (Workplace Internships) Bill (which did not progress after the 2017 election) stipulated that interns should be paid at least the national minimum wage. The bill defined an internship as an employment practice where an intern “undertakes regular work or provides regular services” with the purpose of meeting learning objectives or to gain experience of working for that employer or to provide practical experience in an occupation. 

  An intern who undertakes work or services on a regular basis is already likely to be considered a “worker” and entitled to the national minimum wage. Whilst an express ban of such arrangements will provide clarity for employers and interns, adopting this definition would not go much further than the current law (although it may capture some voluntary arrangements). 

• There were two Private Member Bills in the 2019-2021 parliamentary session which sought to limit any unpaid work experience to four weeks. Whilst neither bill passed, it is interesting to note that they referred to the wider term of “work-experience”, defined as “observing, replicating, assisting with and carrying out any task with the aim of gaining experience of a particular workplace, organisation, industry or work-related activity”. 

This definition arguably captured a broader range of working arrangements, including more informal work shadowing. This would have a much bigger impact for businesses (but is a less likely option if Labour opt for a total ban). 

• A ban based on duration. An alternative approach would be to ban unpaid internships or work experience which exceeds a certain duration. The previous Private Member Bills referred to a 4-week timeframe. This a more nuanced approach which might be perceived as Labour backtracking on the hard-hitting promise of a ban.

This would be a similar approach to that adopted by some of our European neighbours. For example, in Germany a voluntary internship must generally be paid if it is for longer than 3 months. Last year, the European Parliament voted to ban unpaid internships. Although this has been postponed several times, a tougher approach may be on the horizon in Europe too.

How would a ban be enforced?

Although there have been media reports of unpaid internships for years, there are rarely tribunal claims or criminal prosecutions in practice. Enforcement will usually depend on individuals bringing a claim or reporting a breach, which interns may be more reluctant to do than permanent staff. Internships allow students or graduates to bolster their CV and enhance their professional experience. Interns will often have an eye on securing permanent employment or a positive reference and they are therefore in a particularly vulnerable position.

Exploitative arrangements may therefore be better targeted with more proactive enforcement. In conjunction with bringing into force an express ban, it is possible we could see stronger enforcement under the new Labour government. Labour have committed to establishing a new state enforcement agency called the Fair Work Agency. Although its exact remit is unclear, the National Minimum Wage Enforcement Team will be absorbed into this new body. The Fair Work Agency will have powers to inspect workplaces, bring prosecutions and levy fines and it is possible internship arrangements could be under increasing focus.  

What can employers do now?

Given there is already a national minimum wage risk to have unpaid working interns, we would expect most responsible employers to be largely unaffected by any ban in practice.  Many employers have already taken steps to review their work experience and internship programmes to remove barriers to entry and limit nepotism. 

Whilst we wait to see what the final legislation will look like, here are some proactive steps employers can take now:

• Review your practices: Carry out an audit of all work experience placements or internships to understand what formal and informal work experience is offered throughout your business. It is important to dig behind the label and understand what type of work or learning is carried out in practice.
• Consider expenses: No matter how the government legislate for a ban, Labour’s intention is to improve social mobility and allow all talent to build their skills. Social mobility is increasingly on the agenda of large corporate employers. Even if a work experience period is lawfully on an unpaid basis, employers can improve access for all interns by covering necessary expenses such as travel, accommodation and meals. Although some employers can be tempted to introduce a flat expenses payment, this can create confusion (even if it is a more generous). If an expenses payment is not based on expenses which have actually been incurred, it could be perceived as a payment for work done. 
• Broader focus on social mobility: Aside from expenses, other steps can help employers boost social mobility. Businesses could target schools in social mobility “cold spots” or consider broadening the entry routes into the business or the amount of required experience necessary before recruitment. One option to consider could include offering apprenticeships. During a work experience placement, employers could offer mentoring and networking opportunities, as well as CV support and interview practice.

More information about Labour’s employment reforms can be found on our policy dashboard.