Internships are a cost-effective way for companies to tap into a new, younger workforce. They offer an opportunity for businesses to introduce the next generation to the industry while gleaning the benefits of a fresh perspective, energetic work ethic, low cost, or perhaps even free labor. Still, the age-old question, “Do interns get paid?” can be a hot topic.
After all, many aspiring professionals aren’t in a position to work for free, or may feel shortchanged if they don’t feel fairly compensated for their work. From a business perspective, though, paying to teach someone necessary skills in the field can seem counterintuitive. So, should your internship program be paid or unpaid?
Internships: To Pay or Not to Pay?
When it comes to deciding if your company’s internship program will offer paid or unpaid internships, there are multiple factors to consider. For employers, the most significant consideration is that unpaid internships are subject to a number of federal and state laws. As such, the bottom line often comes down to legal concerns.
Along with the labor laws, employers must think carefully about the work experience and educational benefits they can offer interns in exchange for (potentially) free labor.
Legal Considerations of Unpaid Internships
It can be tempting for many employers to offer unpaid internships. These can seem like an easy and cost-effective way to recruit new employees and strengthen your workforce. Still, this isn’t always a win-win scenario. You’ll need to tread lightly if you’re considering this route.
The benefits to interns may come in the form of work experience, vital networking within the industry, academic credit, or even a stipend. While these may seem plentiful on their own, an employer (in any state) offering an unpaid internship program must prove that interns are the primary beneficiaries of the program, rather than merely unpaid employees.
This means that both sides must clearly understand and agree to the uncompensated nature of the work, and the employer must show that interns are on the receiving end of the program’s benefits. The Department of Labor defines the standards for establishing this under the The Fair Labor Standards Act.
In addition to FLSA, there are also specific state laws that may apply. As such, employers considering an unpaid internship program should consult their legal team or HR department before formalizing a program.
Do Interns Get Paid? Requirements for Employers to Consider
The National Association of Colleges and Employers (NACE) is a nonprofit that connects college students and recent graduates with college career services and recruiters. The organization has a position statement on unpaid internships that reaches beyond the FLSA’s definition of a primary beneficiary. NACE maintains that to be considered a valid internship rather than employment, the experience must meet the following criteria:
- The internship is an extension of the classroom experience, allowing students to apply knowledge gained in the classroom. It cannot simply replace the work of a paid employee.
- The skills and knowledge gained from the internship should be transferable to other settings.
- The internship has a predetermined length and includes a complete job description. If you’re not sure how to establish the appropriate length, review our guide on determining the length of your internship program for some helpful ideas.
- Predetermined learning objectives directly relate to the student’s professional goals or academic coursework.
- A supervisor with expertise or an educational or professional background in the field is available to the intern.
- The intern receives regular feedback from the appointed supervisor. See our tips for conducting intern evaluations to learn how to do this.
- The employer provides resources, equipment, and facilities that support the stated learning objectives and goals.
NACE’s position is that if an internship meets all of the above criteria, it may be considered a legitimate internship offered in an experiential educational environment, and interns may be unpaid. However, it bears repeating that you should check your state laws before making a decision to offer unpaid internships.
Free Labor and Working Relationships
Even if an internship program happens to meet all the FLSA and NACE standards to qualify as unpaid, the nature of this arrangement can still be somewhat divisive.
Although you’re now an employer, think back to your early days in the workforce when you were working hard on a degree and ready to work your way up the ladder. You felt worthy of the responsibility, and you were eager to take it on. You were pursuing internship experience because you wanted to gain skills and understanding in the field. Perhaps you hoped that at the conclusion of the internship, you’d have a job offer.
As you worked diligently towards your goal, you wanted to feel valued and appreciated. You probably wanted the reassurance that you were part of the team and not just free labor. Likewise, if an intern isn’t earning at least minimum wage for their efforts, they might feel underappreciated or worse, taken advantage of. Some employers may find that it’s not very easy to establish a relationship of mutual respect and appreciation when an intern isn’t earning a wage.
Demographics of Unpaid Internships
Millions of college students across the country don’t have the financial security to commit to full-time hours without some amount of compensation. Companies that offer only unpaid internships are automatically limiting their internship opportunities to students from a specific demographic — i.e. those that can afford to support themselves without earning a paycheck.
Even when other benefits are offered, like a stipend, college credit, or potential job offer at the conclusion of the internship, it takes a certain amount of privilege to commit to living without any earnings, even for a short-term period. While summer internships or part-time internships may still offer students the chance to earn outside of the intern period, they exclude those who rely on a consistent paycheck to get by in the real world.
A CNN article from 2017 estimated that the cost of a 12-week unpaid internship in terms of living expenses and lost wages could be up to $12,986. This is cost-prohibitive for many aspiring interns, and limits the pool of candidates to those who come from a particular socioeconomic background.
The Bottom Line on Paid vs. Unpaid Internships
Do interns get paid? Ultimately, the decision to pay interns is one that can be looked at from multiple angles. While unpaid internships might offer some financial benefits to you as an employer, the requirements for these arrangements can be challenging to meet. You’ll have to ensure you comply with state and federal laws.
When employers provide paid internship opportunities, they broaden their audience to include those who might not otherwise be able to participate. Offering a modest salary or at least minimum wage can open up the talent pool to other candidates, including recent graduates or those who are not enrolled in college. What’s more, companies that offer paid internships send a strong message to their interns about their value in the workplace.
To learn more about hiring interns, be sure to check out our guide on what you need to know before hiring an intern so you can set up your team for success.