When is an Intern Considered an Employee?

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Table of Contents

• What is the Internship’s Purpose?
• Will You Pay Your Intern?
• What is the Duration of the Internship?
• Do You Have an Internship Agreement? 
• What Are the Consequences for Mischaracterising a Relationship?
• Key Takeaways

Interns are valuable to many Australian businesses, including those in the start-up phase. While your intern should not perform duties essential to the business’s productivity, you can use them to boost brand awareness, company culture and even provide feedback on processes. Interns are typically students keen to observe and understand how businesses operate in their chosen field. However, you must ensure that your business remains compliant and observes the requirements of a lawful internship. This article discusses the relevant factors to consider when determining whether an employment relationship or genuine internship exists. 

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What is the Internship’s Purpose?

The purpose of an internship is for the intern to observe and learn under the management’s supervision. Additionally, the intern should not have an obligation to work or perform duties for the business or contribute to its productivity or targets. You should clearly state this in the internship agreement. 

However, to learn, train or enhance their skills, the intern may be expected to occasionally perform specific duties for their development that may coincide with the business’ benefit. As a result, an employment relationship might exist rather than an internship. If an employment relationship exists, you would owe the person performing specific duties employment entitlements under the law, including paid remuneration. 

Will You Pay Your Intern?

If an employment relationship does not exist between the intern and your business, then you do not need to pay the intern. As mentioned above, a genuine internship exists where:

• the intern is merely observing, learning under management’s supervision; and 
• you do not require them to perform duties essential to the business. 

Sometimes, businesses provide interns with reimbursements or a stipend, such as for travel or lunch. It would be best to set out the allowance in the internship agreement to avoid the assumption that the payment is intended for wages. Notably, payments comparable to wages would be paid regularly and are calculated regarding time or hours worked. They can also include large lump sum payments and allowances that far exceed the expenses incurred.

What is the Duration of the Internship?

Internship programs should have a set term ideally stipulated in an agreement. Typically, an internship (especially where it is unpaid) should not span long periods. Suppose your business indefinitely engages an intern. In that case, the law is more likely to deem the intern an employee, meaning you would owe them wages and entitlements per the applicable industrial instrument. 

Do You Have an Internship Agreement? 

An internship agreement can help set clear expectations between the business and the intern. It can also assist in demonstrating that the internship is genuinely for the intern’s benefit rather than the company’s. 

If there is no internship agreement, there is an increased risk that the law will perceive the arrangement as an employment relationship. An internship agreement helps set expectations and avoids any confusion between the parties. 

What Are the Consequences for Mischaracterising a Relationship?

If you have engaged an intern, but the relationship is an employment relationship, you may be liable to back pay wages and other employee entitlements. Your business could also face penalties of up to $51,000-$54,000 for each breach of the Fair Work Act. 

Key Takeaways

To help you determine whether your worker is an intern or an employee, you should consider:

• whether the internship is part of a vocational placement;
• the purpose of the arrangement;
• the length of the internship;
• the person’s obligations in the workspace;
• who benefits from the arrangement;
• how important the work is to the business; and 
• what type of work the intern is undertaking.

If you need assistance understanding when interns become employees, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.