To pay or not to pay? How to properly compensate interns

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Problem: I would like to hire interns, but I am not sure how to compensate them. I know some organizations offer unpaid internships while others pay interns more like they would their employees. How do I know if I should pay my interns and, if I do, what should I pay them?

Internship compensation is incredibly complex and can be difficult to navigate. While technically it is legal to hire unpaid interns if certain criteria are met, it is better for the intern and for your organization to pay them.

Many organizations seeking unpaid interns believe that the experience the intern will gain is valuable, meaningful and provides enough benefit that the internship doesn’t require monetary compensation. The experience is the compensation. While it’s true that internships are beneficial and provide meaningful work experience, there are several negative side-effects to unpaid internships.

First, unpaid internships drastically reduce your applicant pool. According to the U.S. Census Bureau, nearly half of all college students work part-time to support themselves through school, and 20 percent work full-time. With rising tuition costs and increased student debt, many students are not able to afford an unpaid internship. This is evident in reports indicating that unpaid internships receive fewer online views and fewer applicants than paid internships. Students are seeking paid opportunities.

Second, unpaid internships limit your recruitment to students with a higher socioeconomic status — students with enough financial resources that they can afford to work for free. Students in lower socioeconomic brackets, and a disproportionate number of minority students, will not be able to consider unpaid internships due to their financial constraints.

Third, it is no surprise that students seek paid internships first. If you offer an unpaid internship, your organization becomes their second or third choice. As a result, top talent will be drawn to other organizations. If you want to attract a wide, diverse and talented pool of candidates, a paid internship is a better option.

Several studies suggest that paid interns report a more positive experience. Paid interns are more driven to perform. Challenging work coupled with a paycheck results in interns who are engaged, motivated and able to pay their bills resulting in less stress and greater productivity at work.

There are three steps you can take to ensure that you are properly compensating interns:

1. Review the Department of Labor Factsheet No. 71: The U.S. Department of Labor offers an overview of guidelines to determine if an intern can be classified as an employee according to The Fair Labor Standards Act. Courts have used the “primary beneficiary test” to determine if there is an employer-employee relationship between the intern and the organization. If an employer-employee relationship is evident, the intern is entitled to minimum wage and overtime pay. The guidelines include several gray areas open for interpretation. If you want to avoid the possibility of violating The Fair Labor Standards Act, your best option is to pay interns at least minimum wage.

2. Know your industry average: The average hourly wage for an intern varies greatly according to the industry. For some internships minimum wage is acceptable. For other industries, the hourly average wage exceeds the minimum wage. Do your research. Review other internships posted and compare wages. Note that not all organizations and industries publicly post intern wages. If you are having difficulty finding wage data, refer to step three.

3. Contact a career services professional at your local college or university. They are knowledgeable about internship compensation and collaborate with employers to help with their internship needs. If you are unsure about paying an intern or want to pay an intern but are wondering about the appropriate wage, rely on your local career services professionals for support.

Dr. Meghan Stidd is the director of the UCCS College of Business Career Development Center where she manages the College of Business Internship Program and assists organizations interested in recruiting students for internships and full-time positions. She is the Colorado State Representative for the Cooperative Education and Internship Association. Contact: oped@uccs.edu.

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