There are many types of unpaid work, including vocational placements, internships, work experience and even job trials. For some of these arrangements, it may be unlawful for the work to be unpaid, while in other situations it might be perfectly acceptable. Ultimately, whether work can be unpaid hinges on the nature of the working arrangement. The Fair Work Act allows for unpaid work where the arrangement is a vocational placement or where there is no employment relationship. This article will take you through the factors that indicate when:
- an employment relationship forms; and
- you must pay your staff and provide them with other minimum entitlements.
Employment Relationship
Unpaid work is only lawful if there is no employment relationship between the person and your organisation. However, suppose an employment relationship can be shown to exist in the circumstances. In that case, the person is considered an ‘employee’, which makes them entitled to certain conditions in the Fair Work Act.
You should consider the following factors in all your employment arrangements, since making a position unpaid does not always make it reasonable. Furthermore, job roles can develop over time, meaning some positions that start as lawfully unpaid may evolve into an employment relationship that attracts other entitlements.
Is There an Employment Contract?
An employment contract exists:
- where there is an intention to create a legally binding arrangement;
- where there is a commitment to performing work for the benefit of the organisation;
- if the person receives something in return for their work; or
- if the person is not doing the work for their own business.
Notably, an employment contract can be written or verbal. Where there is an employment contract, there is usually an employment relationship.
Continue reading this article below the formWhat is the Nature and Purpose of the Agreement?
The law might consider your arrangement as an employment relationship if the work involves productive work. However, you will need to assess each arrangement on a case-by-case basis. For example, you should consider whether:
- the productive work is incidental to the individual’s training and learning experience; or
- they are participating in productive work but in a purely observational role.
What is the Length of the Arrangement?
Employment relationships can be for a short amount of time. However, the longer the period of work, the more likely there will be an employment relationship. For example, a two-week engagement is more likely to be a vocational or work experience placement.
What is the Significance of the Arrangement?
Where the person is doing work that is significant to the business and the business needs the work to be done, the individual may likely be an employee. If the person is doing work your paid employees usually do, they will be even more likely to have an employment relationship. For example, an observational role is unlikely to constitute an employment relationship.
What Are the Benefits of the Arrangement?
In an employment relationship, the organisation will benefit significantly from the person’s work. However, in an arrangement where the person is developing and learning skills, the person benefits the most from the arrangement, making it unlikely to constitute an employment relationship.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
You should consider several factors when determining when an employment relationship is created. Carefully considering these factors is essential to ensure that your staff are correctly compensated and receiving all the benefits they are entitled to. Some of these factors include:
- whether there is an employment contract;
- the nature and purpose of the agreement;
- the length of the arrangement;
- the significance of the arrangement; and
- who benefits from the arrangement.
If you need assistance understanding who constitutes an employee and what this means for you as an employer, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
When determining when an employment relationship is created, a number of factors should be considered. Some of these factors include whether there is an employment contract, the nature and purpose of the agreement, the length of the arrangement, the significance of the arrangement and who benefits from the arrangement.
You cannot amend employment contracts provided you first gain your employee’s consent.
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