A question of legality – the law surrounding unpaid internships

Research Fellow Rebecca Montacute explores why graduate interns continue to work unpaid and looks to what we can do to fix it.

For many, internships are an essential first rung on the professional ladder, especially in highly competitive industries such as media, politics and fashion. The placements can help interns gain vital experience, skills and contacts. However, they don’t only benefit the interns themselves, with most doing real work for their employers, often taking on task which would otherwise be done by other members of staff.

The work that interns do, and are expected to do by their employers, means that in most cases they are legally entitled to be paid the minimum wage. Despite this, in our new report, Pay as you go? Internship pay, quality and access in the graduate jobs market we found that 70% of all internships are not paid, most commonly receiving nothing, or in some cases receiving only expenses or a small allowance below the minimum wage. 58,000 such unpaid placements take place every year, over half of which are more than four weeks in length, with 11% lasting for more than six months.

These unpaid placements are a major road block to social mobility. It costs an intern £1,100 for every month they work unpaid in London and even in a more affordable city like Manchester, working unpaid still sets an intern back £885 per month. Especially for long placements, these sums are out of reach for anyone without family who can help them to foot the bill, or who can offer somewhere for them to stay rent free.

So if these unpaid internships are illegal, why are they still happening? We found that very few young graduates know they should be paid, with around half unaware that unpaid internships are illegal in most circumstances. This is a big problem, given the government relies on young people to self-report any unpaid internships that they suspect are illegally not paying the minimum wage. And interns don’t just need to be well informed to act, they also need to be brave. Interns will have worked unpaid to build up contacts in the industry they want to work in, so reporting their employer means putting everything they worked unpaid to build at risk.

Unfortunately, even if an intern does report, that far from guarantees that action will be taken. There is a loop-hole in the current law, sometimes allowing employers to claim that their interns weren’t expected to work, and therefore were not entitled to the minimum wage, even when doing the same work as other employees. Given that, it’s no wonder there have been no prosecutions for unpaid internships under the minimum wage act.

Unscrupulous employers aside, even if an employer does want to stay within the law, we found considerable confusion among employers as to what the law actually is. For example, half of employers incorrectly thought that an internship which gave an intern an allowance below the minimum wage was legal. In fact, out of several scenarios we put to employers, the scenario the largest proportion thought was illegal (a student completing a six-month unpaid placement as part of a university course), was the only scenario that was definitely legal.

Unfortunately, the government believes that the law that covers unpaid internships is adequate, and the only action they are currently taking is an enforcement campaign, targeting employers who are advertising unpaid internships online. However, given the level of confusion among both employers and young people, a clarification of the law is clearly needed.

We also found that unpaid internships are the least likely to be advertised. Targeting employers advertising unpaid placements online is therefore only touching the tip of the iceberg. The government should extend their information campaign on the minimum wage and internships to all employers, as well as running an information campaign to inform young people of their rights.

Fixing the law is difficult, because any change needs to still allow short work experience placements and genuine volunteering work, while also very clearly preventing the long, unpaid placements which act as a major barrier to access.

That’s why the Sutton Trust is supporting a ban on unpaid internships over four weeks in length, as proposed in Lord Holmes’ bill, which, with the support of Alec Shelbrooke MP, is having its second reading in the House of Commons today.

We think that all interns doing real work should be paid, but this bill strikes the balance between ending long unpaid placements, still maintaining current protections for interns doing real work for less than four weeks, and while also protecting short work experience and shadowing opportunities. Such a ban would clarify the position for both employers and young people.

There is considerable support for such a change, with 66% of graduates and 73% of former interns supporting a ban. But regardless of any changes to the law, employers can take the lead, and pay all their interns at least the national minimum wage, and ideally the Living Wage.

Doing so is in their interest, as otherwise they will continue to recruit from the narrow range of young people who can afford to work unpaid, missing out on a much deeper pool of potential talent.

Rebecca Montacute is Research Fellow at the Sutton Trust and co-author of ‘Pay As You Go?‘.