My Lords, I thank the noble Baroness, Lady Donaghy, for raising this issue and giving us the opportunity to have a debate. She brings great knowledge and experience of all employment matters, notably as a former chair of ACAS and now from her work at the CIPD.
Internships can and do provide valuable opportunities for young people taking their first step in the labour market, and we wish to encourage them. Speaking for myself, last July I had the very happy experience of taking an intern from a modest social background here in the House of Lords, and over the years I took a good number of interns when I worked in retail, as part of
sixth-form studies or college vocational assignments. I tried to take people who might not otherwise get a chance to come in and get work experience; that is a great thing that employers, and indeed the public sector, can do.
The term “internship” is of course a relatively new concept—and, I am afraid, like so much else, a bit of an Americanism. As has been said, there is no definition of internships in UK legislation. Individuals undertaking an internship may be workers, employees or volunteers, depending on the reality of the situation and not their job title or what an employer decides should be set out in a contract.
The flexibility of our labour market is a source of pride and there are currently more people in work than ever. In the past year alone the number of people in work rose by 512,000, so employment is now at a record 30.8 million, providing valuable opportunities to young people. Of this remarkable growth, eight out of 10 were employees and eight out of 10 were in full-time jobs. In a labour market as flexible as the UK’s, there are a multitude of possible employment relationships that suit the employer and the individual, and this has to include short-term placements, internships and work experience. There is no single test to determine whether a contract of employment exists and whether an individual is an employee. Only an employment tribunal can determine whether a contract of employment exists. I appreciate that sometimes this can be confusing and unhelpful. Last October, my right honourable friend the Secretary of State announced a review of employment status—rightly, I think—to ensure that these issues are considered. We hope that the review will conclude in March.
The noble Baroness’s amendment asks the Government to publish a report which would assess the growth of internships over the past five years, their incidence by sector, their average length and the subsequent career choices of interns. We are not convinced that it makes sense to write the requirement for a report into the Bill. Internship and work experience policy is a matter for the Government to consider as part of their normal work on employment policy. As I have said, we are looking at the issue in the context of a review of employment status, conscious of the need to preserve good practice in relation to work experience, where it exists.
I understand the concerns raised about pay and social mobility, and that some young people will not know about the opportunities or be able to find internships. I assure noble Lords that the Government are keen to work with employers and young people to ensure access to high-quality graduate opportunities and that is why we fund the Graduate Talent Pool service—which more people have probably heard of now, as a result of the Question in the House answered by my noble friend Lord Popat and because of the discussions on this Bill. The service is free to employers and graduates and provides information on all aspects of internships.
My noble friend Lord Storey asked about volunteers. Genuine volunteers who are not workers and who willingly give their time for free are exempt from the national minimum wage. The Government’s Social
Mobility Business Compact seeks to influence business to remove barriers to social mobility and to promote open and fair access to opportunities. This is what the noble Lord, Lord Watson, and my noble friend Lord Storey seem to be seeking. There are a number of strands to this, including work experience and paid internship opportunities. We are involving education providers—schools, colleges and universities —so that they build up links with business and other employers, including charities, which is another important area.
There is an issue about the entitlement to the minimum wage and I should explain that an intern’s entitlement depends on their employment status. If the intern is an employee or a worker, they are entitled to at least the national minimum wage from day one, and all other rights attached to their employment status. If the intern is a volunteer, they are not entitled to the national minimum wage but can receive reasonable out-of-pocket expenses. This may be the only way that people can get work experience. I worry that regulation could be perverse in its effect, especially with small businesses which probably cannot afford the great schemes we have been talking about that are provided by the big accountancy and insurance companies and so on. It is quite a complex subject.
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Obviously, we need to ensure that interns are not used as a way of avoiding the national minimum wage, which has been a sense of the discussion this afternoon. HMRC prioritises calls from interns to the Pay and Work Rights Helpline, and I reassure the noble Baroness that HMRC will investigate every complaint. We recently increased HMRC’s enforcement budget from £8 million to £9.2 million, and will also increase the budget by a further £3 million in 2015-16, which will take the total to £12.2 million. The extra money will go towards increasing the number of HMRC compliance officers to identify businesses that exploit their interns who should qualify for the minimum wage by not paying them the appropriate rate.
There is a place for unpaid work experience; for example, for students working for one year as a required part of a UK-based higher education course. Another example would be participants in some government schemes, such as the Government’s traineeships programme, which is designed to provide training or work experience, or to help in seeking or obtaining work. However, we recognise that when the terms and conditions of an internship make that person a “worker”, they are entitled to the minimum wage. However, we do not require everyone on work experience to be paid the minimum wage. They are learning, broadening their experience, and businesses that provide them with the opportunities are making a social and usually local contribution. As the noble Lord, Lord Storey, said, volunteering and sandwich courses and so on must be supported. In looking at those issues, we have to bear that in mind. On volunteers, I further clarify that an employer can take on an intern on an unpaid or expenses-only basis only where the intern is not a worker or where some other exemption applies. I have already talked about student work placements.
In conclusion, discussion of intern policy is an issue of the day, and will be taken forward in a number of forums now that the debate has been started and the numbers seem to be growing. It can be very valuable, and of course we need to ensure that the national minimum wage is observed. I hope that the noble Baroness has found my comments helpful and that she will agree to continue the discussion with me outside the Bill, but for the moment I ask her to withdraw her amendment.