Accounting internships: what you need to know

Content Summary

Mark Phillips | August 2019

This article was current at the time of publication.

Australia’s accounting, consulting and professional services sector has long had a reputation for offering some of the best internships.

In the 2019 Top Intern Programs study, created from a survey of more than 1300 undergraduates who were part of an intern program for 2018-19, eight firms – ShineWing Australia, PwC, Pitcher Partners, Accenture, and KPMG among them – were listed in the top 40.

Of course, it’s not only large firms that offer internships. Many accounting majors see benefits interning at small-to-medium practices because of the greater opportunity for exposure to the day-to-day operations, instead of perhaps just one or two aspects.

The downside is that smaller firms tend to operate with limited time, budgets and personnel. Despite the best of intentions, internships can become a legal minefield.

“Internship is an American term and has no meaning in Australian law,” says Hall Payne Lawyers principal Luke Forsyth.

“The majority of internships operating or being advertised are probably unlawful. What our law recognises is vocational placement.”

In late February this year, legal action brought by the Fair Work Ombudsman made this especially clear, with $329,133 in penalties awarded against a fashion industry start-up for underpaying three workers more than $40,000.

Sydney-based Her Fashion Box Pty Ltd was penalised $274,278 and its sole director a further $54,855 in the Federal Circuit Court.

One of the employees worked two days per week for almost six months without pay under a so-called “unpaid internship” before receiving a one-off payment of $1,000. She was underpaid $6,913.

“Business operators cannot avoid paying lawful entitlements to their employees simply by labelling them as interns” Fair Work Ombudsman Sandra Parker says.

According to InternsAustralia, “internship providers often treat internships as a novel, unregulated relationship. Increasingly, they are seen as a channel for gaining labour without the costs and other obligations that come with hiring an employee.

“Our research indicates that the majority of university students complete multiple internships. Most are unlawfully unpaid or underpaid, with the average intern losing $6,000 in wages over the course of their internship[s].”

Ignorance is no defence

“Accountancy firms taking on interns as part of their CPA or CA are probably OK, as they’re doing it to complete their qualifications,” Forsyth says.

“Those taking on ‘workterns’ – which is not defined under section 12 of the Fair Work Act – need to be aware that they are entitled to a minimum wage.

“In most cases, I don’t think people do this deliberately – they just don’t know – but to the extent that smaller accounting firms are taking on interns in sections such as accounts receivable, it’s simply not working. They might describe it as work experience, but there are a lot of people out there doing junior admin for free on the basis that they’re going to get a job.”

That may or may not come to fruition, but things can get ugly if the relationship sours.

“If you have engaged someone as an intern and employed them later on, if the relationship goes south, they will come and see someone like me and I’ll ask how long they were engaged as an intern,” Forsyth says.

“They’re entitled to claim the money they weren’t paid, which makes it worthwhile bringing a claim against their employer.

“The reality is you’re creating a potential liability for yourself, which is not just having to repay unpaid wages and entitlements. If they make a complaint to the Ombudsman, under the Act a business can be liable to pay up to $63,000 per contravention. When engaging an intern, you can end up contravening the Act in three or four different ways, all carrying separate fines. Eventually, you’re going to get done.

“Unless they are legitimately part of a vocational requirement, internships are best avoided.”

Six tips to avoid the accounting internship trap

Although the Fair Work Act 2009 does not define an intern and common law leaves room for uncertainty, according to Melbourne-based employment lawyer Peter Vitale there are important considerations for all principals.

“I use the neutral term ‘principal’ rather than ‘employer’,” Vitale says. “All of the issues will be determined by reference to objective evidence, not the arrangement the parties thought they were entering into. Documented arrangements calling the relationship an internship are of limited value if the objective facts contradict that proposition.”

He says key matters include:

  1. Whether or not the parties intended to enter a legally binding contract, which is an employment contract.
  2. Whether the intern is under an obligation to attend the principal’s workplace, or free to come and go. The former is more likely to indicate an employment relationship.
  3. Whether the so-called intern is performing productive work that benefits the principal. If so, it is indicative of an employment relationship.
  4. Is the intern’s main purpose to observe and learn, which might indicate no intention to create an employment relationship, or are they performing work normally performed by employees of the business?
  5. What is the length of the arrangement? Any arrangement of more than a day or two is more likely to be defined as employment.
  6. Is the intern on a placement required as part of a legitimate vocational training course or schoolwork experience? If so, under the Fair Work Act 2009 the intern is not considered an employee and therefore not entitled to any of the entitlements of an employee.

“For businesses looking to engage trainees on an unpaid basis, my recommendation is, unless they come as a requirement for a formal training course, don’t do it,” Vitale warns. “The Fair Work Ombudsman is very vigilant about these issues. The legal uncertainties and substantial penalties for getting it wrong mean that a prudent, risk-averse business should play it strictly by the book.”