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cityguru
cityguru, Solicitor
Category: Employment Law
Satisfied Customers: 13325
Experience:  Senior lawyer with 30 years experience
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We are engaging a student placement in our office. I

Resolved Question:

We are engaging a student placement in our office. I understand that a student placement on a bona fide course of study (degree course) is exempt from the National Minimum Wage Regs. I have checked this with the Gov website and it is correct.
However, my specific question is:
Does the above exemption entitle us to pay an allowance (e.g. a flat monthly training allowance of say£700), or only out of pocket expenses for which the student must submit receipts to support the expenses claimed.
My confusion is that a volunteer can only be paid 'out of pocket' expenses, otherwise they become captured by the NMW Regs. However, the student placement exemption is a specific exemption allowing the placement to be outside of the NMW Regs, but does that mean we can pay them an allowance (for which they don't have to prove out of pocket expense), which therefore does not go through the payroll, but rather is paid as an expense or on invoice like a supplier?
Submitted: 11 months ago.
Category: Employment Law
Expert:  Ben Jones replied 11 months ago.

Hello let me check the rules and i will reply later today

Customer: replied 11 months ago.
Ok thanks. I look forward to hearing from you.
Expert:  Ben Jones replied 11 months ago.

I have looked into your query in more detail but unfortunately it is not something I can assist with. I will therefore ‘opt out’ and a colleague better placed to deal with the nature of your query should hopefully pick this up soon. Please do not reply in the meantime as that will just assign the question back to me and you will experience a delay. Thank you

Expert:  cityguru replied 11 months ago.

Hi the answer to your question depends on the status of the student. Just because there is an exemption from paying the national minimum wage , it does not mean you cannot pay them. If the student qualifies for exemption because this is work experience the student is required to undertake as part of their course then the exemption applies and you can pay them some allowance below the minimum wage. If on the other hand this is just voluntary work experience and you are relying on them being a volunteer then no you cannot pay them - This is to avoid employers exploit in this as a loophole.

Let me know if I can clarify more

Customer: replied 11 months ago.
Hi, thanks for your reply. This will be a student placement as part of their degree course. So can you please clarify:
1. Am I OK to pay them a flat training allowance of £700 per month without them having to prove expenses?
2. Do I have to pay it through the payroll as PAYE, or just pay it as a cheque without deductions?
Expert:  cityguru replied 11 months ago.

Yes you are ok to pay them a flat allowance of £700 per month. This sum is over the minimum threshold for National insurance and all employees even if they are under the tax allowance limit should be dealt with through your payroll. You are required to register all employees.

Customer: replied 11 months ago.
Hi, thanks for that.
Do you mean that the student placement, although they are exempt from NMW, must still be treated as an employee (contract of employment, PAYE etc).
The agency we used to source the student, treats their own placements differently:
they pay them an allowance, but not through the payroll, and the student provides a pro forma invoice and a receipt for the payment.
I also attach the guidance provided by this agency (2 attached files).So I wonder if they are seeing in differently and have found a legitimate way of engaging the student but not as an employee, or are they just getting away with it?
I'm struggling with the definitions (student placement, intern, volunteer, worker, employee etc) and the treatment of each in terms of Contract, Pay, Tax, NI.Sorry to drill this to such a fine point, but I don't want to get it wrong.
My ideal outcome is to pay them a training allowance, without putting it through the payroll and registering them as an employee. I don't know if it is possible to achieve that.
Thanks for your ongoing assistance.Regards,
***** *****
Expert:  cityguru replied 11 months ago.

Thanks. I have read their guidance and by and large I agree with it. If you read it it makes it clear that if the work is a requirement of the course then the Minimum Wage does not apply. In the other note however it does say - as I said - that if this is a UK student then you "may" have to pay tax( see para 5 f the Guidance on NMW If they are in fact not doing that then they are acting in a way that is inconsistent with their own guidance. You can try treating the student as self employed and just pay them gross. IF you do that the risk is that HMRC may challenge you for not deducting PAYE and NI. If this is a short term arrangement then you may be happy to take that risk. Although the student is exempt from NMW it does not mean they are not an employee. There is an expres exemption for this type of employment.

There are many industries where lots of people are treated as self employed although that treatment is undoubtedly subject to challenge.

cityguru, Solicitor
Category: Employment Law
Satisfied Customers: 13325
Experience: Senior lawyer with 30 years experience
cityguru and other Employment Law Specialists are ready to help you
Customer: replied 11 months ago.
Ok, thanks for all your advice.
I think I now have enough to make the decision on how to proceed.
I think the safest approach is to recognise them as an employee, pay them through the payroll, and rely on the exemption from the NMW.
Thanks again.
Expert:  cityguru replied 11 months ago.

No problem let me know if you need any further assistance

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