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Internships: To Pay or Not to Pay?

written by: •edited by: Bright Hub Staff•updated: 5/21/2015

Offering a seasonal internship is appealing to many companies. It’s a great way to gain new insight into your business, as well as get low-cost or even free work. But there is much more to an internship than free labor, and treating your interns that way could have some serious legal ramifications.

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    NASA Intern Many students, as well as those changing careers, turn to internships as a valuable way to gain experience and insight into a job. Students and recent college-graduates see internships as a stepping stone to employment, with some companies hiring interns permanently, or at the very least, providing networking opportunities. With the increasing competitiveness of the job force, having an internship on a resume could be a deciding factor in getting a dream job. Companies could benefit as well, using interns as a low-cost way to tackle projects as well as look for potential new hires. Types of internships vary, and a lot of companies offer unpaid internships. But is this a good idea?

    Ideally, internships should be mutually beneficial, with the intern gaining a valuable learning experience and the company gaining fresh perspectives and injecting new life in to a project or task. With companies increasingly concerned about the bottom line, unpaid internships have become very popular. While some interns gladly accept this offer in return for resume filler, others accuse companies of using these internships as free labor -- a few have even filed lawsuits.

    These class suits drew a lot of attention, and according to USA Today, resulted in fewer offerings of unpaid internships, as companies do not want to take on the risk of a potential lawsuit. However, a simple search of any online job site will find hundreds of unpaid internships still being offered.

    It is true some of these are completely legitimate; plenty of students will still jump at the chance to put in unpaid hours with a publishing company or film studio in return for training in a very specific and competitive job field. To stay on the right side of labor laws, companies should take special care to make sure they are fulfilling the legal requirements of a training program, and not simply looking for someone to complete undesirable tasks such as making coffee, filing or filling out paperwork.

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    What are the Legal Requirements of an Unpaid Internship?

    Unless you are a non-profit, companies have to meet six legal criteria in order to offer an unpaid internship.

    According to the U.S. Department of Labor, the six criteria are:

    1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
    2. The internship experience is for the benefit of the intern;
    3. The intern does not displace regular employees, but works under close supervision of existing staff;
    4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
    5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
    6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

    Essentially, the internship should offer valuable training experience to the unpaid intern. If they are fulfilling duties that are the same as an entry-level employee, they should be considered an employee and therefore have rights to minimum wage and benefits. Non-profits have a little more freedom as they are typically allowed to accept volunteer work.

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    You Get What You Pay For

    Even if your company does meet the six criteria, unpaid is not necessarily a better option. If you can’t afford to pay an intern minimum wage, can you really afford the time it would take to recruit and train them? You cannot expect a newcomer to immediately fit into your company and perform meaningful work right away. It can take days, possibly weeks, to train a new-comer. Unless you have a solid plan in place, you could be wasting your own time as well as the interns. Committing to pay makes both you and the intern take the job more seriously.

    Another downside to unpaid internships is that the pool of applicants is diminished. Only those who can afford to work for free can apply. Some have even accused companies offering unpaid internships as being discriminatory. Not only that, smart students desiring a paid internship will be competing fiercely for them, leaving your position only available to those who have not already snapped up a more lucrative position. You may be missing out on some of your best candidates by not offering a more competitive internship program.

    Are there advantages to unpaid internships? Sure, they’re free! However, the bottom line is, if you are going to bother hiring an intern, it pays to do it right. You value yourself as an employee, and you would expect to get paid to put forth your best effort. If you want the same in your intern, design a program that is mutually beneficial and offer compensation accordingly. If you do not feel you have the time or money to support such a program, it may not be worth it. You may also want to consider whether the position could be better filled by a temporary or part-time employee.