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New UK HMRC Guidance When Recruitment is a Bit of a Trial

It is a common feature in many sectors for potential new recruits to undertake a work trial prior to being offered a permanent role. This type of trial, normally undertaken without pay, has obvious potential for the exploitation of the would-be employee. It certainly leads to a grey area when it comes to National Minimum Wage (NMW) and National Living Wage (NLW) compliance through the question of “when is a work trial actually work?”

For a start, the potential recruit must be a worker in order to be eligible for NMW/NLW and so some form of contract between the company and recruit must exist. That will be easily inferred by HMRC from any conditions attached to the trial, such as confidentiality or health and safety obligations. After that, the activities being performed and time spent completing them must qualify as ‘working time’ for NMW/NLW purposes. HMRC has set out a number of factors which its new guidance says it will consider when addressing these questions:

  • whether a “work trial” is genuinely for recruitment purposes (if it is not, it will generally be considered to be work and the individual will be eligible to be paid the NMW / NLW) so the employer would need to be able to point to specific vacancies it is hoping to fill and show that the usual internal consents and budgets were in place, etc.

  • whether the trial length exceeds the time that the employer would reasonably need to test the individual’s ability to carry out the job offered (in the Government’s view an individual conducting a trial lasting longer than one day is likely to be entitled to the NMW / NLW in all but very exceptional circumstances);

  • the extent to which the individual is observed (ie suitability actively assessed) while carrying out the tasks;

  • the nature of the tasks carried out by the individual and how closely these relate to the job offered (where the tasks are different from those which the job would involve, this may indicate that the employer is not genuinely looking to test the individual’s ability, but rather to get the tasks carried out);

  • whether the tasks carried out have a value to the employer beyond testing the individual (where the tasks are carried out in a simulated rather than real environment, this will normally indicate that they do not have such a value and that the individual is not “working”);

  • whether trial periods are important (aside from recruiting) to the way the employer runs its business (for example, where trial periods are used by the employer as a means to reduce labour costs, this is likely to indicate that the individual is “working”).

As with all NMW/NLW guidance, this is not definitive and each situation will be judged on a case by case basis; however, the very fact that the guidance has been updated to address this issue demonstrates that it is something HMRC is coming across on a relatively frequent basis.

Employers which use unpaid work trials should ensure there are clear guidelines put in place regarding how these trials should be conducted, their duration, the activities to be undertaken and the dominant purpose of the trial. It will be crucial to be able to demonstrate to HMRC, should it come knocking, that the trial is there to assess competency as part of the recruitment process and nothing more than that.

© Copyright 2018 Squire Patton Boggs (US) LLP

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About this Author

Senior Associate

James is a Senior Associate in our Labour & Employment Practice based in our Manchester office.

James advises clients on all areas of contentious and non-contentious employment law. He has considerable experience in handling complex employment tribunal claims, including multi claimant actions, discrimination, whistleblowing and TUPE.

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