Guide: Startup Internships and Student Placements

In this blog we outline the rules surrounding the Fair Work Act, letting Australian startups determine whether they can gain an advantage from internships or student placements.

Across the globe, companies use interns as a means to an end. They get a committed, resourceful, and often highly competent individual for nothing. Interns fight for places for anything from mundane jobs to skilled employment with high-paying equivalents. In return most interns get a pat on the back and, if they’re lucky, travel expenses. It’s a dream scenario for startups seeking to keep salaries low and equity high. It’s also likely to be illegal.

What many employers and interns don’t know is that internships are heavily regulated across the world. Rules are similar in the UK, US and Australia, but employers often enter into unlawful arrangements without understanding the implications or regulations. This blog will help you tell the difference between an intern and an employee so you stay the right side of the law and still benefit from the freshness and enthusiasm of industry noobs.


The law: Can you benefit?

Australian businesses are subject to tough rules regarding internships. Though startups may curse the recent implementation of the Fair Work Act (2009) for preventing free access to intelligent and qualified people, the clue’s in the name, it’s only fair. There are still ways to gain an extra pair of hands in the office without the cost – you just have to deliver value to the individual in other ways. Read on to find out what you can and can’t do in Australia, and see if your business could benefit.


Work experience and internships

Just like the US and UK, internships and work experience are heavily regulated in Australia. The rules are almost identical in all three countries, with employers treading a thin line between what constitutes employment and what is deemed an internship or work experience. The rules focus on five elements:

Reason for the arrangement – What is the individual there to do? If they become an active member of your team or fulfil a role a paid employee would normally do, they’re an employee not an intern.

How long it lasts – If it’s for an extended period of time, they’re probably an employee.

Importance to the business – If they fulfil a significant business role, they’re an employee too.

Productivity levels – If the person isn’t expected to have a high level of productivity, they’re probably an intern.

Who benefits – If the company gets the most benefit, the person is likely to be an employee.

The main takeaway is that the advantage with an internship or work experience is supposed to lie squarely in the intern’s court. The purpose of an internship (in the view of the law) is to up-skill an individual so that they gain something, that should happen by a process of mentoring and guidance. Essentially, it should be a learning process rather than an active role for the intern.

So for startups seeking to get something concrete back for their investment of time and resources, the best option is to consider student placements.

Student placements

Unlike work experience and internships, student placements allow the individual to practically apply their learning without pay. They can become a productive member of the team, but still need to meet certain criteria or you may run the risk of falling the wrong side of the law. Student or vocational placements should have the following traits:

There must be a placement – Placements can be organised and initiated by the individual or through an education or training institution, and must be in line with course requirements.

There must be no pay entitlement – This one’s simple, if you begin to pay the student under a contracted agreement, they become an employee in the eyes of the law.

The placement must be a course requirement – However the placement is arranged, whether with the student or through an institution, the placement should directly respond to a course requirement.

The placement must be approved – The institution offering the course has to be authorised under Australian, state or territory law – so university, TAFE college or school courses are safe. 

If the above requirements are met, businesses are not required to pay the students as detailed by the Fair Work Act (2009), although you can pay at your own discretion. It’s a great way to have an extra pair of hands around the office, and you’re likely to also benefit from plenty of bright ideas and a refreshing enthusiasm (something your employees might have lost). 


It’s your choice

Though most internships will take up resources and time, without returning any direct profitability, you may be surprised by the effect mentoring has on your employees. They need to know their job to teach it to someone else, and being exposed to all that youthful exuberance and admiration only ever helps people to stay in love with their job.

The real takeaway here is that you can still benefit from unpaid work as long as you do it right. The law supports the fair treatment of acting employees which is something we can only applaud. In the end, no-one can decide if student placements or internships are right for your business but you, but if you can see the advantage there could well be a wealth of benefits waiting for you.


For more information on unpaid work, check the government portal here. To apply for funding and support for your digital startup, contact us or fill in this form.