Many small businesses get asked about unpaid work. A job applicant offers to come in for free, or a student wants experience over the holidays. It can feel like a fair swap for both sides. Under Australian workplace law, though, unpaid work is only lawful in limited situations.

Getting this wrong can mean paying for every hour the person worked. This guide explains the main types of unpaid work and where the lines sit. It draws on guidance from the Fair Work Ombudsman under the Fair Work Act.

The types of unpaid work

The Fair Work Ombudsman groups unpaid work into a few types. These include vocational placements, unpaid job placements, internships, work experience and trials. People take them on to gain experience, build skills or show they can do a job. Some also volunteer their time to a not for profit organisation.

The label you give an arrangement does not decide whether it can be unpaid. What matters is whether the person is actually an employee. If they are, they are entitled to pay and conditions under the Fair Work Act. That includes at least the minimum wage, the National Employment Standards and any award or enterprise agreement that applies.

Employees also have to be paid for required training. The Fair Work Ombudsman’s guidance on unpaid work gives the example of a compulsory online course before a first day on the job. Required team meetings and time spent opening or closing the business must be paid too.

Unpaid work trials

An unpaid trial is a short demonstration of skills for a vacant job. The person works under supervision so the employer can see if they have the skills needed. The Fair Work Ombudsman says this can be unpaid only in narrow circumstances.

Each condition matters. Fair Work guidance says a trial is likely to be lawful only when all of these points apply. If even one is missing, the person should be paid.

• The trial is needed to show the skills required for the job.
• It only involves skills that are directly relevant to the vacant position.
• It runs no longer than needed, which could be from an hour up to one rostered work period, depending on the job.
• The person is directly supervised the whole time.

Any time beyond what is reasonably needed to show the skills must be paid at the right minimum rate. A week of unpaid work with set hours is a clear warning sign. The Fair Work Ombudsman gives a barista example along these lines and says that person should be paid for all hours. Set weekly hours and duties covering other staff point to an employment relationship.

If you want longer to assess someone, there is a simple option. You can hire them as a casual employee or on a probation period. You then pay them for every hour they work. That gives you time to judge their work without the legal risk.

Student and vocational placements

A vocational placement is formal work experience that is part of an education or training course. Its aim is to build practical skills and get the student ready for work. The Fair Work Ombudsman says a placement can be unpaid only when it is approved by an institution such as a university, TAFE or school. The course must also require it, and the person must have no entitlement to pay.

Problems often start after the placement ends. If you keep the student on for extra days the course does not require, that work falls outside the placement. It may create an employment relationship, which means those hours should be paid. Keep the dates of the placement clear in your records. If you track hours in a spreadsheet, our guide on why your team is struggling with Excel may help keep those records tidy.

Internships and work experience

Unpaid internships and work experience outside a formal course are harder to justify. Fair Work guidance says they can only be unpaid if there is no employment relationship. That generally means there is no expectation of productive work. The arrangement must mainly benefit the person doing it and give them genuine learning or skill development.

How an employment relationship is judged

There is no single test that decides whether someone is an employee. Decision makers look at the real substance of the arrangement, including how it works in practice. A written agreement is part of the picture but does not settle the question. The Fair Work unpaid work fact sheet lists several factors that are weighed together.

Purpose and importance to the business

One factor is the main purpose of the arrangement. If it is learning and skill development, that points away from employment. If the person is doing productive work that keeps the business running, it suggests employment. Work that paid staff would normally do, or that brings in significant revenue, makes an employment relationship more likely.

Duties and who benefits

The person’s actual duties matter too. Mainly observing, with minor tasks that are part of learning, suggests there is no employment relationship. If the business gets more benefit than the person, employment becomes more likely. Regular rostered hours, covering staff breaks and following a manager’s direction are also signs of employment.

Volunteers in not for profit groups

Genuine volunteers are not employees and do not need to be paid. They give their time freely, usually to help others, in places such as charities, community groups and sporting clubs. A gift or meal that is not linked to hours or performance does not make someone an employee on its own. Calling a person a volunteer does not settle it, though, if the real arrangement looks like employment.

Practical steps for employers

Before you offer any unpaid arrangement, write down its purpose, its length and who will supervise the person. Keep trials short and focused on the skills the job needs. If you are hiring for a busy period, think about whether paid casual or temporary staff are a better fit. Our article on the pros and cons of hiring temporary labour covers that choice.

Remember that other laws still apply even when unpaid work is lawful. Fair Work guidance notes that work health and safety and anti discrimination laws continue to apply. Some Fair Work Act protections also cover people in lawful unpaid arrangements. Treat a trial participant or intern with the same care you give paid staff.

Plan the setting too. If you are moving premises, our guide to relocating to your new office can help you give new starters a proper place to work. Overseas staff are another group to handle with care. If you are sponsoring an overseas worker for your small business, settle their pay and conditions before they start any work.

This guide is based on Fair Work Ombudsman guidance under the Fair Work Act. Laws and processes can differ between states for some employers, and they change over time. Check the current guidance before you set up any unpaid arrangement.

Frequently asked questions

Can I ask a job applicant to do a free trial?

Only if the trial meets strict conditions. It must be needed to show relevant skills, be directly supervised and last no longer than necessary. Fair Work guidance says this could be anywhere from an hour up to one rostered work period, depending on the job.

Do I have to pay a university student on placement?

Not if it is a genuine vocational placement. It must be approved by the institution and required by the course, and the student must have no entitlement to pay. Extra days beyond what the course requires may need to be paid.

Is an unpaid internship legal in Australia?

It can be, but only where there is no employment relationship. The intern should not be expected to do productive work. The arrangement should mainly benefit the intern and give real learning or skill development.

What if someone has already worked for me unpaid?

If the arrangement was really employment, the person may be owed pay for the hours they worked. Check the Fair Work Ombudsman guidance and get advice on your situation. Fixing the problem early is usually simpler than waiting for a claim.

This article is general information only and is not legal advice. For advice on your own situation, speak with a qualified lawyer or contact the Fair Work Ombudsman.