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How unpaid staff can cost your business in the long run

StaffUnpaid staff sound great, but have you thought for a minute about the implications from a business, accounting, tax and legal perspective?

 

I know, I know – starting a business is hard work. Cash flow is ….well….often non existent, so advertising for a volunteer role, or an unpaid role, unpaid staff (or any other variation of those terms) does sound like a solution to all your problems. Hallelujah.

But just have a think for a minute.  If this was legal 100% of the time wouldn’t we all be doing it?

Remember the old saying, “If it’s too good to be true it probably is”- well that saying exists because it is true.

See here is the low down on whether “unpaid staff” should really be classified as unpaid work arrangements or are they really an employee and therefore minimum wage applies:

  • What is the nature and purpose of the arrangement? So is this a learning experience or are you asking someone to assist with the day to day operations of your business?  Are you expecting the person to do productive work or are they just learning and developing their own skills.
  • How long is the arrangement for?  Don’t get fooled into thinking that short must mean unpaid as this is not always the case.  You need to review each situation in isolation and review it from every angle.
  • Significance to the business? So is the work you are asking someone to do for free normally done by paid employees?  Is this work mandatory for the business to operate?  The higher the importance and significance, the more chance the role is that of an employee.
  • What are the obligations of the role/person?  Are they just learning or observing or are they helping the business benefit in its daily operations?
  • Where are the benefits (and to whom)? If the relationship is a genuine unpaid work arrangement then all benefits should flow through to the person who is doing the unpaid role.  If a business is the one gaining significant benefit from the work….this tends to indicate an employee relationship.

So why am I being such a hard nose when it comes to unpaid work arrangements and advertising for unpaid staff?

Here’s the thing.  I believe that if you have a job description and are expecting people to help your business operate, grow and flourish – you need to pay the person you hire for that role.  The main benefit in that relationship is your business.  No doubt in my mind.

Secondly, we should be supporting and valuing the skills and experience of the people we think can help our business grow….not offering to not pay them for this.  This makes no sense to me at all.

Whilst free help sounds great – the consequences can be catastrophic.  Fines, back payments in superannuation and tax, claims against your business for failing to meet minimum wage levels – you name it.  Is it worth the risk to your business, your brand, your reputation or damaging relationships with suppliers?

So next time you offer an unpaid role to someone, have a think about how you would feel if someone asked for your services for free – as chances are – you have just done exactly that to someone else.