Intern Issues 1: The case for payment

This is the first post in a two part series dealing with payment and internships. In this post I discuss why interns should be paid for work. In part two tomorrow, I shall discuss why interns should not agree to work unpaid.

This series came about after from heated discussions surrounding my recent series of posts in relation to a specific matter, one that has been brought up in parliament. In this case, a magazine rescinded an offer of an unpaid internship to a young woman after she had enquired whether her £5 a day travel expenses would be reimbursed.

My co-blogger Libby T responded to my series with a general argument on unpaid internships. She comes down on the side of the free market and against legislation:  “Free people are able to decide if a course of action is in their own interests or not – and to act accordingly.”  This is the most powerful argument in favour of allowing companies to use unpaid interns and it is something that needs answering. That, I aim to do in this post. While this article deals with unpaid internships that are not merely work shadowing, it can be noted that according to a 2010 survey by the Chartered Institute of Personnel and Development (CIPD), the majority (63 percent) of employers do pay their interns at least the National Minimum Wage (NMW).

Interns and the National Minimum Wage

There is semantic difficulty which often causes confusion. The term intern is used to describe a range of different activities some of which very obviously should be classified as work and in this context, interns are frequently a class of worker.  According to the government, “Whether someone is a worker does not depend on what they are called. Being called an intern, non-employed, a work experience trainee or a volunteer does not prevent someone from qualifying for the NMW.” What is relevant is what they are doing.  The government also make clear that someone who spends their time work “shadowing,” but “does not perform work” is not entitled to the NMW.  The National Minimum Wage Act allows an exemption for voluntary workers, but according to Practical Law Company, an online legal resource available via subscription, “it is not open to an employer to engage people to work on a ‘voluntary’ basis without paying the national minimum wage, if they are otherwise within the definition of a ‘worker’”.

Dupsy Abiola, the founder of Intern Avenue, an organisation that connects employers looking for skilled interns only offers paid internships on her site.  She explained to me as follows: “‘Work shadowing’ involves sitting quietly in the background and classically being ‘seen and not heard’ perhaps asking a few questions.  It does not involve writing articles, answering phones, doing research or any other activity which is useful to the company.  There is no lengthy or fixed durations or ‘working hours.’ Where employers are using interns to provide or produce work which is of benefit to their company then the National Minimum Wage will apply.”

The passing of the NMW into the statute books meant that it is established in law that those that work should be paid. There are certain exemptions. Charity volunteers, for example, are not entitled to the NMW and neither I, nor the legislation would want to prohibit, as an example, a retired person volunteering to work unpaid making tea in a local hospice. But the reality is, as the government make clear, “Most workers who are over compulsory school age and are working legally under a contract of employment or other form of worker’s contract, are entitled to be paid at least the NMW.”

Twenty years ago, unpaid internships, where people were working unpaid for months on end to simply gain “experience”, were virtually unknown. It used to be the case that young people commenced work in paid entry level positions. In certain industries, but by no means all industries, it appears that those paid positions have been replaced with unpaid positions and some companies now exploit graduates in a way that was previously unheard. I posit the theory that the reason that this situation has allowed to develop is that the minimum wage legislation is not being enforced.  According to the government, “refusal or wilful neglect to pay the NMW” is a criminal offence and “employers who deliberately fail to pay the NMW may face a potentially unlimited fine.” While there has recently been a successful claim by an unpaid intern to be paid, cases against companies for failure to pay the NMW appear few and far between. In the event HM Revenue and Customs, the government body responsible for enforcement of the NMW, took a more strident approach to serving notices of underpayment and fines on companies that failed to pay interns who carry out tasks that require payment, I suspect that the amount of companies in breach of the legislation would dramatically reduce.

Arguments against unpaid labour generally

The debate on paying interns reminds me of the one on the National Minimum Wage (NMW) that Tony Blair’s Labour Party pledged to introduce if they won the 1997 General Election.  To recall that debate, I have browsed through old copies of The Times. The Chairmen or Chief Executives of Dixons, Burton Group, Asda, J. Sainsbury and GUS had a letter published scaremongering that the introduction of the NMW could lead to up to 1.8 million job losses (The Times, January 23, 1997). The economist Roger Bootle ridiculed the NMW: “The minimum wage belongs to the God, Motherhood and Apple Pie School of Economics” (The Times, March 24, 1997).  Tim Melville-Ross, Director-General of the Institute of Directors, declared the NMW as “nonsense.” He viewed that its introduction would benefit the wealthy and lead to increased unemployment (The Times, April 24, 1997). The British Retail Consortium predicted dire price rises to cope with the cost of paying staff the NMW (The Times, November 4, 1997). Business in Sport and Leisure argued that depending on the level of minimum wage set, up to 90,000 jobs would be lost in that industry (The Times, November 24, 1997). The Times itself thundered in an editorial that the Bill to establish a NMW is “irrelevant, economically illiterate and potentially harmful” (The Times, November 28, 1997).

Despite the fierce objections, the introduction of the NMW in 1999 did not signal the end of the world, far from it. Last year, in a debate on the NMW, Lord Morris of Handsworth was able to tell the House of Lords “none of the predictions of the merchants of gloom and doom have occurred. The hysterical forecasts about economic Armageddon have proved to be totally without evidence and completely without foundation. The reality has been that the introduction and development of the minimum wage was accompanied not by job losses but by rapid job creation.”  The BBC reported (December 3, 2010) that according to researchers at the Institute of Government who polled 159 members of the Political Studies Association, the NMW has been the “most successful government policy” in thirty years, more successful than the Northern Ireland peace process, devolution and Margaret Thatcher’s privatisation policy.

Those who oppose compelling companies to pay interns at least the NMW for working are, by definition, opposed to the NMW. But they have lost this debate. Not only has the NMW been enacted, in their manifestos for the 2010 General Election all three major political parties were committed to its retention. The onus is not on me to justify why the NMW should be paid, the onus is on Libby T and those that think like her to justify why they believe the NMW legislation can be ignored. Do they think that parliament has no legitimacy?

There is a cost to doing business in this country. Those costs include payment of taxes, the cost of compliance with regulations and obeying labour laws including the NMW.  There may be companies who do not want to have to pay for these things but that does not mean that the employment law of this country does not apply.  As many commentators have stated, ‘life is not always fair.’  Companies did not leave the UK because of the requirement to comply with health and safety regulations, likewise hoards of companies are not going to leave the UK because they need to pay their interns.

Weak arguments for non payment

Internships as training

Arguments about training or inexperience clearly do not apply to situations where students and graduates are actively working for the company.  It is disingenuous to suggest that asking someone young (as is true in many cases in media) to write articles, do detailed research, run a website or help reduce the costs of an unprofitable business is ‘training.’   The reality is that professional work experience never ends.  An employee who progresses up any organisation will learn skills which will benefit the organisation.  Companies do not ‘deduct’ this as training because it simply a feature of working anywhere. Consequently, it is also disingenuous to argue that because the intern benefits from the experience, even if that benefit is greater than the benefit the company receives, that the intern does not need to be paid. The logic follows that the cost of the training is irrelevant as to whether or not someone is deserved of the NMW. For example, it might be true that a three month intern in a technology company spends the first three weeks learning how to use a very expensive piece of equipment. The cost of that equipment should not be taking into consideration when determining if the intern is entitled to at least the NMW.

Libby T argues, “Interns often have no skills and even those with new qualifications may have no practical experience. Their use to the company is limited.” Writing in the Guardian, Shiv Malik has pointed that contrary to this claim, according to research carried out by YouGov on behalf of Internocracy, “Almost a fifth of British businesses have admitted to using unpaid interns to ‘get work done more cheaply’ and prop up company profits during the recession.” It can also be noted that some companies seem to rely on unpaid interns. In an interview for a documentary broadcast on BBC2 earlier this year, the joint Managing Director of a PR company that acts for Calvin Klein admitted that out of his 70 staff, 20 are unpaid interns. It is not surprising that he referred to those interns as a “vital resource.”

Company type

Libby T complains that I “lump multinationals, investment banks and struggling niche publications together.” The implication of this is that either small companies should be treated differently to large companies; that certain industries, e.g. media, should be treated differently to others, e.g. finance; or that struggling or unprofitable companies should be treated differently to profitable or successful companies, in a decision as to whether a company should pay interns.  There is no basis in the legislation for any of these claims.

There are plenty of small companies that do pay their interns. Tanya de Grunwald of Graduate Fog has also highlighted that large companies such as Harrods and Reed are included among those that use unpaid labour.

In so far as different industries, Inspiring Interns, a recruitment agency that specialises in finding unpaid interns for companies (and, according to Graduate Fog, charges those companies, £500 per month per unpaid intern that they locate), currently has advertised unpaid internships in finance, in information technology, in cosmetics, and the list goes on.

Impecuniosity is not an excuse for not paying an intern.  Ultimately, a business that cannot afford to pay its staff is not a proper business.  Perhaps the reason why some companies are struggling may be because they have failed to realise that it is their staff (at all levels) that will make or break their company. Organisations which run dubious internship programs with transient and demotivated candidates will inevitably reap what they sow.  Employers are not charities but neither are workers.  Even if we did not have a national minimum wage, smart companies have always paid for quality staff because they deserve to be paid and that is what great business are built upon.  Only a tyrant or a fool would argue otherwise.

Libby T also claims that some companies may have skilled staff who are able to allow young people to shadow them, but no budget to pay interns. She does not feel that it would make any sense to restrict such unpaid roles. In response, nobody is arguing that such positions, unpaid work shadowing, should be banned. But one wonders how this theoretical example from Libby compares to the actual example of Reed, who, last month, advertised for a 3 month intern to work unpaid, but with travel and lunch expenses, as a receptionist. One can also wonder how it compares to a currently advertised position for a trilingual intern to spend three to six month updating a database and translating documents in French and German for no pay. There are countless further examples.

Consensual free labour

Libby T claims “Interns are not in fact slaves – they are free to leave – so if they remain, it must be because they believe they’re benefiting themselves.” This point is misleading and also entirely irrelevant. The law in this regard is clear and has nothing to do with consent. One cannot consent to work in an unsafe work environment and likewise one cannot consent to violate the national minimum wage laws.  What Libby T fails to recognise is that many employers (and indeed interns) are unaware of the legislation. Shiv Malik points out that according to the YouGov Survey, already mentioned, “only 12% of company managers and 10% of young people knew unpaid internships could be illegal under employment law.” Commenting on this, Ms. Abiola informed me that she believes that employers who use unpaid interns are putting themselves at risk.  She refuses to offer unpaid internships on her site.

The pragmatic case for paid internships

The problem with unpaid internships is not the law, the NMW legislation is sufficient; it is law abidance and enforcement.  Away from the legal requirement to pay interns that carry out work entitled to at least the NMW, there are pragmatic reasons for paying interns:

1. A key reason for paying interns is the ability to attract the best.  A senior lawyer at a prestigious US law firm said to me the reason that they pay their interns is because “our internships are part of our recruitment process, and it makes sense to us to ensure that we get the best of the best: not just those who can afford to work for free.” His firm is not the only one. The truth is that the applicants for an unpaid internship are limited to the pool of people who can afford to work for free. Those from less financially well off backgrounds may simply not be able to do so. On a similar basis, the available labour pool is restricted further, because even if a young person can afford to work for free, they may not be able to afford to move elsewhere to work for free. For example, someone who lives in Blackpool might be the best potential recruit for a position available at an organisation in London, but if it is an unpaid position, the person from Blackpool would not apply if they could not afford the rent on somewhere to live within a reasonable commuting distance of the place of work.

Candidates may claim that the main reason they wish to carry out the internship is for experience and not for financial gain. Irrespective of the truth of this, if two competing organisations are both offering similar internships with a difference that one is paid and the other unpaid, then, it seems intuitively obvious that the one offering the paid internship will attract the better candidates.

In the event that it is common practice in an industry to use unpaid interns, then a company that breaks the mould might find themselves with a competitive advantage. If this does not happen, whole industries might lose out of the chance to recruit some very talented people. As an example, I am aware of an exceptionally bright and capable American woman, a graduate of Yale University, who informed me that she took a job in investment banking solely because she “could not afford to work in publishing.”

Libby T implies that a campaign to name and shame companies that appear not to be treating interns or intern applicants fairly “will promote nepotism and make ‘who you know’ even more important.”  The reason for this is because companies “will most likely not advertise internships any longer. Instead they will be informally organised through someone who can vouch for the prospective intern.”  Perhaps Libby is correct, companies that act unethically or potentially illegally, should not advertise the fact.  This does not take away from the fact that nepotism is not the most efficient hiring practice. Successful companies hire from broad applicant pool based on merit.

2. The majority of companies pay their interns. These companies are not charities. Staff retention and attraction is a major cost and getting talented staff early is the holy grail. The 2010 CIPD survey concluded: “Three-quarters (76%) of organisations agree that internships can be used as a way to test potential new staff …[and] seven in ten (69%) believe that internships are a good way to develop new talent in an industry.

3. An employment lawyer I spoke to, who wishes to remain anonymous, informed me that companies that use unpaid interns and do not provide them with an employment contract place themselves at substantial risk because they have will have little or no contractual protection against the intern utilising confidential information or intellectual property gained while at the organisation.

4. Organisations that do not pay their interns can damage their brand. Interns Anonymous is a website set up by disgruntled former interns which has generated lots of adverse media attention for offending employers. Stella McCartney is a fashion house named and shamed for its “toxic” atmosphere on Interns Anonymous in a story that was ultimately picked up by both Private Eye and the Daily Mail. Alexander McQueen is another fashion house that has received adverse publicity for its treatment of interns. An employment law expert barrister informed the Guardian that based on the material of which he was aware, he was fairly confident that the company was in breach of the NMW legislation.  Organisations should also be aware of the ease that a disgruntled unpaid intern or a former unpaid intern has to cause damage to their reputations simply via writing derogatory statements about them on social networking sites such as Facebook. Young people know how to use such sites and once a depreciatory comment is written, it might well remain on the internet for ever.

Against this, Internocracy, a self-declared “social enterprise passionate about changing the culture of internships for the better in the UK” encourages interns to write in and recommend employers who provide a worthwhile internship experience.

5. If unpaid interns are not paid and they take the organisation to a tribunal to recover the NMW, the time taken and legal costs that might be incurred defending the case, even if won, could well make it a Pyrrhic victory. Moreover, an employment tribunal hearing is public and therefore can be reported.  Accordingly, if a journalist picks up on the story, as they might, particularly if it is a high-profile employer, bad publicity could ensue.  It might be simply easier to pay the interns the NMW for the duration of their internship to reduce the risk of such an action being taken.

6. Because there are far more young people staying on in higher education than a generation ago, those entering the work force are, on average, more educated with a commensurate higher skill base now than then. Young graduates can provide fresh energy and ideas to an office. Skills developed at university such as critical thinking or problem solving might be beneficial to an organisation in ways not even thought of before the intern came to the organisation in the first place. This is worth paying for.

The second part of this series, “Intern Issues 2: The case for not working as an unpaid intern,” will be posted on this blog tomorrow.