Many of us watched last week as Dr Leah Totton was crowned The Apprentice of 2013. In an exciting final show Lord Sugar deliberated between the baker and the doctor, ultimately plumping for the doctor's vision - a new chain of cosmetic medical centres with fully qualified doctors in charge. Of course although Lord Sugar's Apprentice is offered a very healthy investment of £250,000 to kick-start their own business, things are a bit different for the everyday apprentice in the UK. In recent years, the Government has pushed for businesses to employ more apprentices, encouraging young people into the world of work whilst enabling them to benefit from on-the-job training.
Young workers in business can take many forms - from the employee working full or part time; to an apprentice scheme regulated by the Apprenticeships, Skills, Children and Learning Act 2009 ("ASCLA 2009"); and even the summer work experience student, desperate to gain experience in their chosen specialist field. This variety presents both opportunity and risk for business. Employing young workers can be extremely rewarding for business, representing a great opportunity to secure young talent and guide them in the ways of your business from the outset. However, we cannot escape the fact that young workers come with added regulation and employment law considerations. So, if your business employs young workers, do you know the risks?
Paying the national minimum wage
The first (and most obvious) step is to make sure that young workers are paid the correct rate in accordance with the National Minimum Wage Act 1998. The national minimum wage ("NMW") is an hourly minimum rate which applies to workers who are over the compulsory school age. There are currently four separate rates, as follows*:
- Standard (adult) rate of £6.19 (£6.31) per hour: workers aged 21 or over.
- Development rate of £4.98 (£5.03) per hour: workers aged between 18 and 20 inclusive.
- Young workers rate of £3.68 (£3.72): workers aged under 18 but above the compulsory school age that are not apprentices.
- Apprentice rate of £2.65 (£2.68) per hour: apprentices under 19 years of age or those aged 19 and over but in the first year of their apprenticeship.
*The rates are due to increase on 1 October 2013 to the figures noted in brackets above.
Young workers can clearly be spread across all four of the above categories and so employers must be careful to check that they are offering the correct rates of pay. This is particularly important when a young worker is nearing the cusp of a category - have systems in place to flag up birthdays to your payroll administrator and make sure you cross-check this against the current NMW rates.
The apprentice rate applies when an individual works under a contract of apprenticeship or certain Government apprenticeship schemes (see below for more details). Employers must be careful if they employ an apprentice who is aged 19 or over - for the first twelve months the apprentice rate will apply but thereafter, depending on the individual's age, either the development rate or adult rate would apply. Again, keep tabs on birthdays and service anniversaries to make sure the correct rate of pay is applied.
Work experience and internships
Summertime is a popular time for businesses to take on young workers on internships or for short periods of work experience. This is where it start to become tricky in trying to confirm how much, if anything, an individual must be paid. In some cases, there is no obligation to pay the NMW. Employees under the compulsory school age are not entitled to the NMW, meaning that there is no pay protection for those with a summer job during the school holidays. Likewise, certain types of volunteers also do not have to be paid the NMW. Volunteers are a particularly difficult category to assess and this issue is outwith the scope of this article.
Certain student work placements also fail to attract the NMW. Where the work experience placement is for less than one year and is undertaken as part of a UK-based higher or further education course, it is notable that a business is exempt from paying the NMW. However, work experience that does not form an essential part of a course can qualify for the national minimum wage. A number of businesses have tripped up over this exemption in recent years. The basic premise is that interns and work experience students will be entitled to be paid the NMW if they are workers and no exemption applies. So when will an intern be a "worker"? The Government has produced guidance on this particularly complex area, which can be found here. One particular case tells a familiar story of a student working over a period of a couple of months as an "unpaid intern", yet performing tasks which could equally be expected of full time employees. In Keri Hudson v TPG Web Publishing Ltd an intern who worked for a publishing company for a period of two months was entitled to the NMW. Her role had included taking responsibility for a team of writers, scheduling articles and hiring new interns, which the Employment Tribunal found was enough to render her a worker and therefore entitled to the NMW. Another common situation is that of the "expenses-only" work experience. In Vetta v London Dreams Motion Pictures Ltd, the Tribunal sent employers a clear warning against assuming that an intern can be unpaid, by finding that a movie production assistant engaged on an "expenses-only" basis (and who had signed an agreement to do unpaid work) was, in fact, a worker and therefore entitled to the NMW.
The issue of unpaid interns has generated much debate in recent years - and resulted in proposals from the CIPD that internships should attract a "training wage" equivalent to the apprentice rate. In 2011, as part of its "Big Society" goals, the Government began encouraging businesses to offer paid internships, even if they would be exempt from the NMW. So, one to watch out for - by all means engage young workers during their long summer holidays and, in doing so, enhance their employability but be very wary of the unpaid internship, the bad publicity that this may attract for your business in the long run and, of course, the added cost of back-dated NMW claims. In short, if you are in any doubt about whether you should pay the NMW in an internship situation, we would recommend doing so or, in the very least, seek advice first.
Practical considerations: working hours and health and safety
Practically speaking, a business should ask itself two very important questions when considering taking on young workers: what breaks are they entitled to; and are there any particular health and safety rules to abide by? In addition to the usual rules, young workers (those over compulsory school age but under 18) are afforded extra protection under both the Working Time Regulations and health and safety legislation. For example, young workers may not work more than 8 hours in any one day and 40 hours in any one week. These are strict limits on working time and are not calculated using averages over a reference period (as is the case for workers 18 or over). Similarly, there are restrictions on night work - generally speaking, young workers cannot work between 10pm and 6am unless their contract of employment requires them to work beyond 10pm, in which case young workers cannot work between 11pm and 7am. There is also an increased entitlement to breaks for young workers including daily rest of 12 consecutive hours, a weekly rest period of 48 hours and, where daily working time is more than 4.5 hours, a rest break of 30 minutes is required.
Employing young workers also requires employers to perform additional health and safety checks, namely carrying out a risk assessment relative to the young worker before commencement of the employment or placement. Employers should consider the individual's lack of experience in a business context and the increased risks this may present. For further information on the health and safety implications of employing young workers contact Jim Herd.
A further concern: age discrimination
Aside from the practical considerations of wages, working time and safety in the workplace, employers must comply with discrimination legislation. For young workers, it is impossible to escape the particular relevance of age discrimination. For example, one especially tricky area is recruitment - how do you advertise for a new employee without requiring a set level of experience, thereby excluding young workers from even applying in the first place? This issue is complicated by the Government funding scheme for apprenticeships, which is tiered according to the age of the apprentice. Businesses must be careful not to directly discriminate against older candidates for apprenticeships by limiting places to those below a certain age (which can be tempting for a business as younger apprentices attract greater Government funding).
If your business's preference is to engage a young worker as an apprentice (rather than an employee or work experience student), is there anything in particular you should know? In short, yes! There are two legal forms of apprenticeship:
- Contracts of apprenticeship (the "traditional" apprentice); and
- Apprenticeship agreements (governed by ASCLA 2009).
Apprenticeships run for a fixed term of between one and four years. Traditional contracts of apprenticeship do not need to contain particular provisions and will have "training" as their principle purpose, rather than simply carrying out work on behalf of the employer. Conversely, apprenticeship agreements must satisfy certain conditions and must be in the "prescribed form" as set out by ASCLA 2009, including a statement of the skill, trade or occupation in which the apprentice is training and a statement that the apprenticeship agreement is governed by the law of England and Wales. The Modern Apprenticeship in Scotland is usually a contract of apprenticeship, albeit that these are tripartite agreements between the employer, the apprentice and a third party training provider which ultimately provides a recognised qualification.
It is easy to forget that, regardless of which form of apprenticeship, the individual will be an employee of your business. Therefore, the usual obligations that accompany "employee" status apply and employers can dismiss those on apprenticeship agreements in the usual way before the end of the fixed term (e.g. for poor performance). However, it is important to note that, where the individual is engaged under a "contract of apprenticeship", the employer has limited rights of dismissal because the contract is based on training rather than work performance. For example, where an apprentice is engaged under a contract of apprenticeship, an employer cannot make that apprentice redundant unless there is a business closure or the business fundamentally changes in character.
It is worth noting that, with the aim of simplifying apprenticeship legislation, on 1 July 2013 the Government published a draft Deregulation Bill 2013-14 (which is intended only to apply to apprenticeships in England) and so the specific requirements in this area may soon be changing.
There is much to be said for the role of young workers in business and, with persisting high youth unemployment in recent years, employers should not shy away from this section of society. Provided your business adheres to the guidelines set out above, engaging young workers should be a positive and rewarding experience, both for your business and the young workers themselves.