Legal unpaid work is limited and most positions in businesses are paid. However, businesses who hire unpaid workers could be at risk of reputational and financial damage if they are not following correct practice.

Employers who are not meeting the Fair Work Act guidelines can be penalised for breaking the law by paying workers’ compensation and fines up to $63,000 for corporations and $12,600 for individuals.

If no employment relationship exists between the worker and employer, then the worker does not legally have to be paid. An employment relationship can involve:

• Intention to perform work for the employer under the arrangement.
• Helping with the ordinary operation of the business.
• Working for a long period of time.
• An expectation of payment.
• The employer receiving the main benefit of the arrangement.

Unpaid work is legal if the work is to provide someone with experience in that particular job or industry, to provide training and skills as part of formal programs (e.g. university placement), to test someone’s job skills, or if it is volunteer work for a Not-for-Profit organisation. These include:

Vocational placements

A vocational placement is a formal work experience that is part of an educational or training course. The aim of vocational placements is to give students important skills to help them transition smoothly into the workforce through industry experience.

The placement must be approved through the legal authorisation of the institution delivering the course; programs offered at universities, TAFE and schools will meet this requirement. If the work meets the definition of vocational placement under the Fair Work Act, then the position can be legally unpaid.

Internships and work experience

An internship or work experience arrangement is a type of on-the-job training, where someone works to gain experience in a particular occupation or industry. This type of work can be legally unpaid if it is a vocational placement or if there is no employment relationship.

Trials and skill demonstrations

This is when someone is asked to perform work or undertake a trial in order to be evaluated for a job position. This work trial is used to determine someone’s suitability for the job on offer. It can be unpaid if:

• It is necessary to evaluate someone’s suitability for the job.
• The trial is only for as long as necessary to demonstrate the skills required for the job.
• The worker is supervised by the potential employer or other appropriate staff for the entire duration of the trial.

Volunteering

Work is counted as volunteering when its main purpose is to benefit others, such as a church, sporting club, government school, charity or community organisation. A genuine volunteering arrangement occurs when:

• The parties did not intend to create an employment relationship.
• The volunteer is not obligated to attend the workplace or perform work.
• The volunteer doesn’t expect to be paid for their work.

So in some circumstances unpaid work can legally be appropriate in businesses, however it is important to have clear guidelines around this to make sure correct practices are being followed. If you need some guidance on unpaid work for your business then please contact our business advisers.