Are Unpaid Internships Legal in Australia?

Are Unpaid Internships Legal in Australia?

In Australia, internships are becoming increasingly popular as businesses recognise their value. Internships are very useful as they benefit both employers and students. Many university students engage in internships as a way of gaining experience in a particular field. As a result, many internships are unpaid.

This raises the question—are unpaid internships legal in Australia?

In this article, we explain whether unpaid internships are legal in Australia and answer other frequently asked questions.

Read along!

Table of Contents

What is an unpaid internship?

An unpaid internship refers to an arrangement where an individual undertakes structured work experience at a business for the purpose of gaining skills, knowledge, and experience within an industry. An intern is commonly a student or trainee wanting to enter the industry. Therefore, most internships are unpaid and continue for a specified time period.

Interns are generally expected to reflect on their internship experience regarding what they have learned. Sometimes unpaid internships or placements are required as part of a student’s degree or course. Alternatively, many students participate in internships to gain insight into a certain career path. 

If you’re an employer interested in recruiting interns for your business, check out our guide on how to hire volunteers or interns.

According to the Australian Government’s Fair Work Ombudsman, unpaid internships are legal in Australia. However, according to the Fair Work Act 2009, the legality of unpaid work arrangements depends on the following factors:

  • The existence of an employment relationship or 
  • Whether or not the arrangement includes a vocational component

In simple terms, unpaid internships are only legal when they’re vocational placements, or if an employment relationship is not present between the employer and the intern. For an internship to be legal the following conditions have to be present:

  • During the internship, the intern can’t be required to perform “productive” tasks
  • The internship should primarily be benefitting the intern instead of the employer
  • The internship must clearly outline that the intern will receive meaningful learning experiences, training, or the development of skills 

A primary factor that will determine whether the unpaid internship is legal is how it is structured. For example, in some circumstances, it can be found that an intern is, in fact, an employee instead. Therefore, the individual should be treated as an employee. In this circumstance, the employee should be provided with the minimum wage that is legally required for the work they are performing. 

Furthermore, as a result of being found to be an employee, they must also be provided with the other minimum employment entitlements employees are entitled to. Similarly, any applicable enterprise agreement or award should apply to the individual.  

Another crucial factor that needs to be considered when determining whether an unpaid internship is legal is its purpose and nature. For example, if the purpose of the internship is for the business to make an intern perform tasks that an employee would perform, then the internship is illegal. 

However, if the primary purpose of the internship is to provide the intern with a valuable learning experience, training and to help them develop their skills, the internship would be considered to be legal.

The length of the internship is also crucial because if the internship lasts for a long duration it is likely that the internship is an employment relationship instead. However, you should be aware that an employment relationship can exist even for shorter arrangements between employers and individuals.

Furthermore, it is important to consider who is receiving the most benefit from the internship. If it is found that the employer is benefitting from the internship more than the intern then it can be strongly argued that an employment relationship exists rather than an internship.

Do you have to pay an intern?

A common question small businesses ask is whether you have to pay an intern? The simple answer is no. Therefore, as the purpose of an internship is for an individual to obtain experience and exposure to an industry, payment is not legally required. The Fair Work Act 2009 regulates this area. 

Section 12 of the Fair Work Act 2009 defines the term vocational placements. Unpaid internships are legal when an intern is undertaking a vocational placement. Section 12 of the FWA states that an intern who participates in a vocational placement doesn’t have to be paid by their employer. However, it does state that vocational placements have to be part of a training course or the intern’s education.

Furthermore, for the internship to be legally classified as a vocational placement, it must also receive authorisation according to an administrative arrangement or state, territory or commonwealth legislation. 

Internships are also defined as ‘vocational placements’, that ‘provide students with the opportunity to apply theory and skills they learned while studying in a professional workplace’. As a result, internships that meet the Fair Work definition of ‘vocational placements‘ can be lawfully unpaid.

It is now clear that internships can be legally unpaid. However, as an employer, there are still a  few important things you should note. Firstly, as an employer, you should make sure that all your interns sign an Internship Agreement. If you don’t have an internship agreement for your business, you can use our internship agreement template. An Internship Agreement covers the following:

  • Nature of relationship
  • The terms of the internship
  • The title the intern will have
  • The facilities the intern will be able to use during the internship
  • Time period
  • Role and responsibilities
  • Confidentiality
  • Intellectual Property
  • How the internship will be terminated
  • Learning objectives/obligations
  • Equipment usage

It is important for both employers and interns to understand that this is not an employment relationship and that an internship agreement is not the same as an employment agreement.  Both parties should understand that the primary purpose of the internship is for the intern to observe the business’s operations and learn from practical experience.

 It’s also important to note that due to the intern not being an employee that they won’t be entitled to any leave benefits such as sick leave or annual leave.

Before the internship begins, both parties should decide how long the internship will last in order to avoid confusion later on. The length of an internship typically varies from 4-12 weeks, either as blocks of full-time work or as part-time work, which could even be between 1-2 days of work a week. As an employer, you must ensure that you don’t mischaracterise the relationship. If it’s discovered that the relationship between you and the individual is a relationship between an employer and an employee, rather than an employer and an intern you will face trouble including financial penalties. Breaches to the Fair Work Act 2009 can be up to $54,000.

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Frequently Asked Questions (FAQs)

What is the purpose of unpaid internships?

The purpose of unpaid internships can include the following:

  • To provide an individual with work experience in a position or industry they are interested in
  • To assess an individual’s skills in the workplace
  • For an individual to be able to contribute time and effort to a not-for-profit organisation 

What is a vocational placement?

Vocational placements refer to planned formal work experience included in an educational or training course. The purpose of vocational placements is to allow students to obtain crucial skills that will assist them in successfully transitioning into the workplace following the completion of their studies. Whereas the benefit of vocational placements for businesses and industries as a whole is that they assist students by providing them with valuable learning experiences and increasing the number of graduates who are prepared for work. 

What is the difference between an intern and an employee?

One of the main ways to differentiate between an intern and an employee is whether there is an employment contract involved in the working arrangement. Employment contracts between individuals and businesses can be created either verbally or in writing. However, employers should be aware that employment contracts can be created between an individual and an employer if the individual performs tasks that are considered work for the business.

An employment contract will be found even in the following situations:

  • Where the individual and employer say that there is no employment contract
  • Where the individual and the employer have agreed that the individual won’t be paid for the work that is being performed

Furthermore, to establish that an employment contract exists, the following characteristics have to be present:

  • An intention between the employer and the individual for the arrangement to be legally binding
  • The individual must have committed to work for the business’s benefit
  • The individual can’t perform the work as part of their own business
  • The individual must be working for a reward (which could be training or experience)

Conclusion 

To conclude, unpaid internships are legal. This is because the purpose of an internship is to provide a person, usually a student or trainee, with experience in the industry. The value of an internship is primarily with the intern as they are able to develop skills and knowledge in an enriched learning experience.

If you’re an employer and you’re unsure whether the internships you are providing to students are legal you should hire a lawyer for legal advice to avoid legal consequences. 

Contrastingly, if you’re a student undertaking an internship, and you believe there might be a chance that there is an existing employment relationship, you should hire a lawyer. 

A lawyer can provide you with legal advice to help you determine whether you are an employee and that you should be paid for the work that you are doing.

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