So you want to hire an intern?

So you want to hire an intern?

Your business is growing and you are finally in the right spot to outsource some of your duties to an employee but before you hand over a piece of your responsibilities, you would like to see how this person copes. You decide to look for an intern, but what must you consider from a legal and tax standpoint?

An intern’s rights depend on their employment status. If an intern is classed as a worker, then they’re normally due the National Minimum Wage – £8.72 per hour for those 25 years and over as of April 2020.

Internships are sometimes called work placements or work experience. These terms have no legal status on their own. The rights they have depend on their employment status.

This guide should help you establish what things you must consider when hiring an intern.

Last updated: 1st August 2020

Contents:
Employment status
Worker
Employee
Self-employed and contractor
References

Employment Status

In employment law a person’s employment status helps determine:

  • their rights
  • their employer’s responsibilities

The main types of employment status we’ll consider here are:

Worker

A person is generally classed as a ‘worker’ if:

  • they have a contract or other arrangement to do work or services personally for a reward (your contract doesn’t have to be written)
  • their reward is for money or a benefit in kind, for example the promise of a contract or future work
  • they only have a limited right to send someone else to do the work (subcontract)
  • they have to turn up for work even if they don’t want to
  • their employer has to have work for them to do as long as the contract or arrangement lasts
  • they aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client

Employment rights

Workers are entitled to certain employment rights, including:

  • getting the National Minimum Wage
  • protection against unlawful deductions from wages
  • the statutory minimum level of paid holiday – most workers who work a 5-day week must receive at least 28 days’ paid annual leave a year (including bank holidays)
  • the statutory minimum length of rest breaks
  • to not work more than 48 hours on average per week or to opt out of this right if they choose
  • protection against unlawful discrimination
  • protection for ‘whistleblowing’ – reporting wrongdoing in the workplace
  • to not be treated less favourably if they work part-time

They may also be entitled to:

Workers usually aren’t entitled to:

Casual or irregular work

Someone is likely to be a worker if most of these apply:

  • they occasionally do work for a specific business
  • the business doesn’t have to offer them work and they don’t have to accept it – they only work when they want to
  • their contract with the business uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’ or something similar
  • they had to agree with the business’s terms and conditions to get work – either verbally or in writing
  • they are under the supervision or control of a manager or director
  • they can’t send someone else to do their work
  • the business deducts tax and National Insurance contributions from their wages
  • the business provides materials, tools or equipment they need to do the work

Employee

An employee is someone who works under an employment contract.

Employment rights

All employees are workers, but an employee has extra employment rights and responsibilities that don’t apply to workers who aren’t employees.

These rights include all of the rights workers have and:

Some of these rights require a minimum length of continuous employment before an employee qualifies for them. An employment contract may state how long this qualification period is.

Working out employment status for an employee

Someone who works for a business is probably an employee if most of the following are true:

  • they’re required to work regularly unless they’re on leave, for example holiday, sick leave or maternity leave
  • they’re required to do a minimum number of hours and expect to be paid for time worked
  • a manager or supervisor is responsible for their workload, saying when a piece of work should be finished and how it should be done
  • they can’t send someone else to do their work
  • the business deducts tax and National Insurance contributions from their wages
  • they get paid holiday
  • they’re entitled to contractual or Statutory Sick Pay, and maternity or paternity pay
  • they can join the business’s pension scheme
  • the business’s disciplinary and grievance procedures apply to them
  • they work at the business’s premises or at an address specified by the business
  • their contract sets out redundancy procedures
  • the business provides the materials, tools and equipment for their work
  • they only work for the business or if they do have another job, it’s completely different from their work for the business
  • their contract, statement of terms and conditions or offer letter (which can be described as an ‘employment contract’) uses terms like ‘employer’ and ‘employee’

Self-employed and contractor

A person is self-employed if they run their business for themselves and take responsibility for its success or failure.

Self-employed workers aren’t paid through PAYE, and they don’t have the employment rights and responsibilities of employees.

Someone can be both employed and self-employed at the same time, for example if they work for an employer during the day and run their own business in the evenings.

Employment rights

Employment law doesn’t cover self-employed people in most cases because they are their own boss.

However, if a person is self-employed:

  • they still have protection for their health and safety and, in some cases, protection against discrimination
  • their rights and responsibilities are set out by the terms of the contract they have with their client

Working out if someone is self-employed

HM Revenue and Customs (HMRC) may regard someone as self-employed for tax purposes even if they have a different status in employment law.

Employers should check if a worker is self-employed in:

  • tax law – whether they’re exempt from PAYE
  • employment law – whether they have an employee’s rights

Checking if they’re exempt from PAYE

Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:

  • they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit
  • they can decide what work they do and when, where or how to do it
  • they can hire someone else to do the work
  • they’re responsible for fixing any unsatisfactory work in their own time
  • their employer agrees a fixed price for their work – it doesn’t depend on how long the job takes to finish
  • they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work
  • they can work for more than one client

There are special rules for businesses supplying workers, for example an employment agency.

Checking their employment rights

Someone is probably self-employed and doesn’t have the rights of an employee if they’re exempt from PAYE and most of the following are also true:

  • they put in bids or give quotes to get work
  • they’re not under direct supervision when working
  • they submit invoices for the work they’ve done
  • they’re responsible for paying their own National Insurance and tax
  • they don’t get holiday or sick pay when they’re not working
  • they operate under a contract (sometimes known as a ‘contract for services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’, ‘consultant’ or an ‘independent contractor’

Contractors

A contractor can be:

  • self-employed
  • a worker or an employee if they work for a client and are employed by an agency

There’s a special scheme for self-employed contractors and sub-contractors working in the construction industry called the Construction Industry Scheme (CIS).

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