When is unpaid work permitted?

While unpaid work is generally not permitted, there are limited situations in which it is allowed. The main types of lawful unpaid work are:

• vocational placements undertaken as part of an education or training course,
• unpaid internships or work experience,
• work trials, and
• volunteering.

There are strict rules around these types of unpaid work. It is important for businesses to understand these rules because getting it wrong can have serious legal consequences, such as significant penalties and compensation for underpayment of wages and other employment conditions.

Vocational placements

A vocational placement is a placement undertaken by a student as a mandatory component of an education or training course (e.g. a university degree or TAFE course).

A vocational placement does not have to be paid if:

• there is no entitlement under a contract, award or enterprise agreement for the person undertaking the placement to be paid by the host business/organisation,
• the placement is a mandatory part of the course, and
• the institution providing the course (e.g. the university or TAFE) is authorised by law to require the completion of the vocational placement as part of the course.

Unpaid internships and work experience

Work experience and internships are arrangements where a person attends a business or organisation with the aim of gaining industry-specific knowledge, skills and experience.

To be lawfully unpaid, the work experience or internship arrangement must not create an employment relationship. In practice, this means that:

• the person must not perform productive work that benefits the business – i.e. they must not do work that the business would otherwise pay for, including work done by employees or contractors,
• the arrangement mainly benefits the person undertaking the work experience or internship, and
• the arrangement provides a meaningful learning experience with the primary aim of training or the development of skills or knowledge.

Work trials

As part of a recruitment process, an employer may ask a candidate to undertake a work trial to check whether they have the practical skills required to perform the role.

Unpaid work trials are permitted as long as:

• they only involve a demonstration of skill, as opposed to the person doing productive work for the employer that would otherwise have been done by an employee,
• they only last for as long as necessary for the employer to assess the person’s skills, and
• the person is under direct supervision for the duration of the trial.

Volunteering

Volunteering involves a person performing work for the benefit of an organisation (such as a charity, sports club or other community or not-for-profit organisation), with no expectation of receiving anything in return.

Volunteers are not entitled to payment, although they may receive reimbursements for expenses or an honorarium in recognition of their efforts.

Key factors that distinguish a volunteer from an employee are:

• there is no intention on the part of the volunteer or organisation to create an employment relationship,
• there is no obligation for the volunteer to perform the work, and
• the volunteer has no expectation of payment for the work.

Knowing the difference matters

If the requirements of an unpaid work arrangement outlined above are not met, it may instead be an employment arrangement giving rise to obligations to pay wages or salary and provide other employment-related entitlements.

Failure to comply with employment obligations can result in penalties and compensation for underpayment of wages and other employment conditions.

Other legal obligations

It is important for host organisations to be aware of their other legal obligations in relation to unpaid workers. For example, there may be requirements in relation to workers compensation, public liability insurance or industry-specific regulations.

Key take aways

• Organisations that plan to host unpaid workers should check the legal requirements for the particular arrangement before agreeing to act as a host.
• The host organisation should ensure that the unpaid worker is aware of how the arrangement will work, including that there will be no payment, and that the worker is happy to go ahead on that basis.
• If the unpaid work arrangement changes over time, the host organisation should check whether arrangement has turned into (or may turn into) an employment relationship.
• The Fair Work Ombudsman’s website contains free resources and information about unpaid work.