Unpaid work, though occasionally contentious, can offer advantages to both employers and the individuals involved. 

Student placements, work trials and internships, for example, can grant employers a chance to train individuals new to an industry and to assess a person’s job skills while providing them with invaluable work experience and training. 

However, while unpaid work is not inherently illegal, it is crucial for employers to thoroughly grasp the specific regulations and criteria governing it to ensure its lawful and fair implementation.

Is it okay?

In short, yes. Unpaid placements are lawful under certain circumstances—for example, when they are categorised as vocational placements linked to a specific educational or training course. 

However, the law prohibits the exploitation of workers when they are fulfilling the role of an actual employee.

This is because vocational placements are meant to offer students valuable skills, facilitating a smoother transition from academic studies to the professional world.

If you have been approached by a student looking for work experience, it is important to ensure that it is a genuine placement associated with their learning institution. 

It might also be prudent to contact the institution directly to discuss the finer details, including insurance and whether it can genuinely be unpaid.

Other situations

In addition to student placements, there may be other situations where unpaid work is permissible, but this is assessed on a case-by-case basis and employers should check with the HR in Practice service before providing any unpaid work. 

As a rough guide, when the work is not part of a vocational placement, the following factors should be considered.

Will the work be for the benefit of the individual or the business?

Typically, an unpaid work arrangement should primarily benefit the person undertaking the role. 

If the work primarily benefits the business, it is likely to require payment.

How long will the arrangement last?

The longer the arrangement, the more likely it is to require payment. 

That being said, it is not uncommon for relatively short engagements to be considered an employment relationship and therefore require payment.

What is the nature of the work?

When an arrangement primarily consists of work that is productive for the employer and the business—rather than focused on meaningful learning, training and skill development—it is more likely to require payment.

In other words, unpaid work (when not part of a vocational placement) should almost solely benefit the individual (not the business), should only be for a brief period and should be largely observational.

What about unpaid trials?

An unpaid trial can be permissible if it is purely to demonstrate a skill or skills associated with a particular role.

The engagement should be brief (a maximum of one shift, although sometimes as little as 15 minutes is necessary) and the individual should be under direct supervision the entire time.

Let it be clear—this is unrelated to a probation period. 

A probation period is generally between three and six months and must be paid because an employment relationship has already begun. 

Although a probationary period functions somewhat similarly to a trial, in that it provides a chance for both employer and employee to evaluate whether the employment relationship is right for them, it should be viewed differently from a trial session used to quickly determine whether an employee has the relevant skills to perform a job.

Alternatively, you could engage an individual as a casual employee for a short duration to see if they are a good fit. 

If their performance is satisfactory, you can simply convert their employment to a permanent role. 

If not, termination can be largely seamless.

What happens if unpaid work is unlawful?

Where unpaid work is found to be unlawful, not only would employers be required to provide the individual with back pay in accordance with their minimum entitlements had they been engaged as an employee, but businesses and individual employers may be subject to additional penalties for contravention of the Fair Work Act 2009.

Employers should also be aware that their business might be placed under heavier scrutiny in the future, including regulatory bodies undertaking unplanned investigations and audits. 

Another aspect that is often overlooked in these situations is the potential for reputational damage to the business, which can have a flow-on effect on talent attraction, retention and business performance.

In summary

If you are considering engaging someone to perform unpaid work, ensure that what you are doing is lawful and permissible.

It’s important to bear in mind that, outside of vocational placements, employers should evaluate the beneficiary of the arrangement, its intended duration and the specific tasks the individual will be expected to undertake.

Taking these proactive steps will contribute to your compliance with regulations and help prevent potential complications in the future.

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