For many organisations, particularly in the third sector, volunteers and interns are essential components of the workforce. Volunteers and interns provide much needed skills, and are often flexible in terms of their time commitments. There are also obvious financial benefits to engaging individuals on that basis. These characteristics can be incredibly attractive to organisations, particularly those facing funding issues or fluctuating demand for services.

The widespread use of volunteers and interns is a frequent news item, and was back on the political agenda in April of this year when David Cameron unveiled a plan to give certain workers the right to take three days’ paid leave to volunteer (this plan appears to have since been shelved, or at least there has been no further sign of it to date).

However volunteering remains a popular activity: a briefing paper published by parliament last month reported that in 2014/15 47% of adults in England volunteered at least once a month on either a formal or informal basis (this was a fall from the previous year, but was up from 41% in 2010/11). The rate of “formal volunteering” (which includes activities such as sports coaching and education for adults) was 27% in 2013/14.

There is no single statutory definition of volunteer, and similarly there is no universal definition of internships. There is therefore a risk that organisations wrongly categorise individuals as volunteers or interns, when in fact they are in reality workers or employees. There have of course been a number of high profile cases on the status of volunteers from an employment perspective, which provide helpful guidance to organisations in terms of engaging volunteers and interns.

Predictably, this status issue is not particularly clear-cut. However such cases have established, amongst other things, that volunteer agreements may be binding employment contracts and expenses may (depending on how they’re structured and administered) be wages. Interestingly, the Supreme Court confirmed in X v Mid Sussex Citizens Advice Bureau & another (in which we acted for the respondent) that volunteers are not protected by discrimination legislation. The individual was not engaged under a legally binding contract and therefore was not covered by the Disability Discrimination Act 1995 or the Equal Treatment Framework Directive.

Where an individual is in reality a worker or employee, they will of course be protected by the relevant employment rights applicable to workers and/or employees. If individuals have been wrongly categorised by an organisation, there may also be tax implications. The tests for employee status from an employment and tax perspective are not identical. In both cases, whether an individual is an employee is a question of fact. From a tax perspective there is no statutory test to determine employee status, and status will be determined by the application of various tests established by case law (which creates scope for ambiguity and misinterpretation).

Of course, for any individuals who are actually employees, the employer has an obligation to operate PAYE and therefore deduct income tax at source, as well as to pay National Insurance Contributions. Those obligations apply to each and every occasion on which an employee is paid. If an employer is found not to have complied with the those obligations, there is a risk that they will face a potentially significant back-dated claim from HMRC. If HMRC considers that there has been any deliberate avoidance of those obligations, an employer may face an assessment for a greater number of past years and greater penalties.

As set out above, the issue of status is complicated, from both an employment and tax perspective. Furthermore, getting an assessment right in either the employment or tax arena does not necessarily mean that it is correct for the other, and there are potential risks of making a wrong assessment. Employers would be well advised to revisit the issue of volunteer and intern status on a fairly regular basis, as case law in this area is frequently developing. Legal advice should always be sought, in order to mitigate against the risk of a costly and reputationally damaging finding being made in either the employment or tax arena.

Posted on 21/08/2015 in BWB Publications

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