Hiring someone as an employee is illegal without paying them the minimum wage. Under the Fair Work Act, it is clear that you must pay your employees for the work they complete. But are those doing internships or work experience equally entitled to pay? How long can someone do work experience, and to what extent can you ask them to do work that does not relate to their studies without paying them? The short answer is that you do not have to pay someone if they take part in a vocational placement or no employment relationship exists. In any event, you should clarify your payment obligations with an experienced employment lawyer.
What is a 'Vocational Placement'?
Under the Fair Work Act, the definition of 'employee' does not include 'vocational placement'. A vocational placement is a formal work experience arrangement that is part of an education or training course. If your staff are undergoing a vocational placement, these are lawfully unpaid arrangements regardless of whether an employment relationship exists.
However, a 'vocational placement' must meet several criteria before you take on unpaid persons. These include the following:
- there is a placement that an educational or training institution has initiated as a course requirement;
- there is no entitlement to pay;
- it must be compulsory placement as part of a course or subject within the course; and
- the institution must be recognised as an educational institution, such as a TAFE College, school or university.
To Pay or Not to Pay?
If you meet the above four conditions for a vocational placement, the Fair Work Act pay entitlements will not apply to these students. That being said, you should consider paying your interns on an obligation-free and discretionary basis. This is because not everyone has the financial capacity to undertake unpaid work during their studies. By offering your interns pay, you can have a much greater pool of applicants to select from.
Alternatively, if the placement does not meet the four requirements, it will not be considered a vocational placement under the Fair Work Act. However, this does not necessarily mean that the employee will immediately be entitled to pay. In this instance, you should also consider whether the person is in an employment relationship.
How Can I Determine if There is an Employment Relationship?
Whether a person is in an employment relationship will depend on various factors. Namely, whether the arrangement to work involves an employment contract.
Generally, an employment relationship will not be created if there are:
- no intention to create a legally binding relationship between the intern and the employer, such as when work is entirely voluntary;
- neither party is required to service the other party's needs, i.e. the intern does not have to work, and the employer does not have to provide work; and
- nothing of value passes from one party to another.
Additionally, an employment relationship will not likely exist where:
- the purpose of the arrangement is for the person to gain "experience" rather than filling someone else's role in your business;
- the person is the main beneficiary of the arrangement;
- you do not set targets for performance as with your other employees; and
- the arrangement does not last a long period of time.
In saying that, if your arrangement is not a vocational placement and you believe an employment relationship exists, you may need to pay the student. If you are in doubt, it would be wise to seek legal advice.
Key Takeaways
Whenever work experience placement is part of an educational course, it will be less likely that an employment relationship exists. In these circumstances, you may be under no obligation to pay the person undertaking the vocational placement. To ensure that your arrangement meets the criteria of a 'vocational placement', it may be prudent to formalise the relationship in writing.