Employers across many industries may considering hiring interns for their business. Interns can be a valuable asset, especially during short busy times of the year. There are benefits to interns for both the intern and the employer. However, you may be wondering, “do I have to pay interns?”
At Paper Trails, our goal is to provide you with the knowledge necessary to ensure that your business remains compliant. One area that often goes unnoticed is the treatment of interns. There are specific rules governing their rights that many business owners may not be aware of. In this article, we will explore the circumstances under which you may be required to compensate interns. By the end, you will have a clear understanding of your responsibilities when it comes to paying, or not paying, interns for the work they perform for your organization.
Let’s dive in and get a better understanding of the guidelines surrounding intern compensation.
What are interns?
Before we look at whether you have to pay interns, let’s talk about what they are. Interns are those that are performing an internship. An internship is a temporary job role that’s often related to one’s academic field of study or career interests. This can be a valuable opportunity for individuals to gain hands-on experience in a specific industry. It provides them with the chance to apply the theoretical knowledge they have acquired in a real-world setting, allowing them to develop practical skills and insights.
Benefits of an internship for the intern
By gaining experience in a professional role, interns can learn from experienced professionals and mentors who guide them through their tasks and projects. This exposure to the industry not only enhances their technical abilities but also helps them understand the dynamics and expectations of the workplace. Moreover, internships often offer networking opportunities, enabling interns to build connections with professionals in their field and potentially opening doors for future employment.
Internships hold particular significance for college students and recent graduates. These programs often provide college credit, allowing students to earn academic recognition while simultaneously gaining valuable work experience. This combination of theoretical and practical learning is highly advantageous, as it equips individuals with a competitive edge when entering the job market.
Ultimately, internships serve as a stepping stone for beginners in their chosen career field. They provide a platform for individuals to explore their interests, refine their skills, and make informed decisions about their professional paths. Whether it is conducting scientific research, assisting in marketing campaigns, or analyzing financial data, internships offer a rich and diverse range of opportunities for growth and development.
Finally, internships can, under certain circumstances, provide students with income with they are earning a degree.
Do I have to pay interns?
The Fair Labor Standards Act (FLSA) requires “for-profit” employers to pay employees for their work. Interns and students, however, may not be “employees” under the FLSA—in which case the FLSA does not require compensation for their work. There are tests that will help determine if an intern is considered an employee or not.
What are these tests?
The “primary beneficiary test” is used to determine whether an intern or student is, in fact, an employee under the FLSA. This test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. Courts have identified the following seven factors as part of the test:
- When the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
- If the internship provides training that would be similar to that which would be given in an educational environment. This includes the clinical and other hands-on training provided by educational institutions.
- Is the internship tied to the intern’s formal education program by integrated coursework or the receipt of academic credit?
- Does the internship accommodate the intern’s academic commitments by corresponding to the academic calendar?
- When the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- How much intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
How do these tests work?
The factors that come into play are interrelated and should be carefully analyzed together. No single factor can solely determine whether an intern or student qualifies as an employee under the FLSA. Instead, it is the unique circumstances of each case that play a crucial role in making this determination.
If these circumstances reveal that an intern or student is indeed an employee, they are entitled to both minimum wage and overtime pay, as mandated by the FLSA. This ensures fair compensation for their hard work and dedication. On the other hand, if it is confirmed that the intern or student does not meet the criteria to be classified as an employee, they are not entitled to receive minimum wage or overtime pay under the FLSA.
Why should businesses consider interns?
Interns are an integral part of many businesses. A business or company may decide to create and implement an internship program to help them identify future employees or expand their talent management strategies. Some other reasons a company may use an internship program include:
- By offering internships, companies can establish a positive reputation within the local community and build strong connections with colleges. This not only enhances their brand visibility but also creates a pool of talented individuals who are familiar with their company.
- Interns can take on the smaller, more time-consuming tasks, allowing full-time employees to focus on more strategic and high-priority projects. This optimized task allocation leads to increased productivity and efficient time management within the organization.
- Internship programs can be cost-effective for companies as they may offer college credit instead of monetary compensation. This allows businesses to tap into the potential of talented students without incurring significant financial expenses.
- These young professionals often bring fresh perspectives and innovative ideas to the table. Their diverse backgrounds and experiences can challenge the existing company culture, fostering a more inclusive and creative environment that encourages out-of-the-box thinking.
- By offering internships, companies actively contribute to the development of the local community and provide valuable learning opportunities for students. This involvement not only builds strong relationships but also helps students kickstart their careers by gaining practical experience and industry knowledge.
In summary, creating an internship program can bring numerous benefits to a business or company. It not only aids in talent acquisition and management but also enhances brand awareness, boosts productivity, reduces costs, encourages creativity, and supports the growth of aspiring professionals.
So there you have it. As an employer, you know now how you can determine if an intern should be paid for their work in your organization. Further, you can know see the benefits of having an intern in your business. Should you need further help, feel free to contact us here!