After compensation, the biggest difference between paid and unpaid internships is the level of commitment involved for the company and the intern.
A paid internship is more structured, as interns are expected to show up according to a schedule and perform specific, on-the-job tasks. This will require employers to be more intentional upfront about the purpose and goals of providing a paid internship. Though it requires more effort from the hosting company, a paid internship maximizes the benefits that both the company and the intern reap.
Are unpaid internships legal?
Unpaid internships are legal in the U.S. under certain circumstances, making it tricky to classify employees and interns correctly.
For-profit companies are legally required to pay those classified as employees, but interns don’t necessarily fall into that category. The U.S. Department of Labor has compiled a list of factors to determine whether students and interns qualify as paid employees under the Fair Labor Standards Act (FLSA). If an intern doesn’t meet the criteria, they are presumed to be employees and must be paid at least minimum wage and overtime.
Of the DOL’s seven factors, the two that most clearly define an unpaid internship relate to academic credit and internship timing. That is, if the intern receives academic credit from their educational institution and it coincides with the academic calendar, they might not be legally entitled to compensation.
Conversely, if an intern is not receiving academic credit and the internship takes place from February to March to handle a company’s influx in demand, the intern might qualify as an employee — even if only temporarily — and therefore be entitled to minimum wage and overtime pay.
Should interns be paid?
In short, yes, interns should be paid. Ethics are not the same thing as legality. Given that about 60% of internships are paid, this suggests that paid internships are the norm. The average wage for an intern in the U.S. is $16 per hour, but this depends on industry and location. In addition, as with regular employees, companies need to be aware of potential pay inequities among paid interns.
Unpaid internships disproportionately exclude individuals from low-income backgrounds who cannot afford to work for free. This economic barrier limits opportunities for those who may be just as qualified but lack financial support, further perpetuating socioeconomic inequalities.
Certain circumstances might call for unpaid internships. For example, small businesses and non-profit organizations might not have room in their budgets to pay an intern.
So, unpaid internships that offer student interns academic credit might be the best course of action if the organization isn’t legally obligated to pay them. Some universities and colleges have programs that subsidize students for the duration of their unpaid internships.
Additionally, given that paid interns follow a structured program and schedule, an unpaid internship can offer a more exploratory approach, giving the intern freedom to tour various parts of the business and develop their professional interests.
The business value of paid internships
There are plenty of ways paid internships add value to the organizations that offer them. They support a company’s commitment to diversity, equity, and inclusion (DEI), make recruiting simpler, increase intern engagement, assist in maintaining a positive employer brand, and make recruiting easier. Bolsters recruiting efforts
Paid internships are 32% more likely to result in a full-time job offer than an unpaid internship. This suggests that paying interns attracts top talent and thus supports a company’s recruiting strategies.
Paying interns is also a way to fill the recruiting pipeline with potential candidates for current and future roles at the company. The paid internship serves as a trial period during which the company develops a relationship with the intern. Paid internships can therefore be leveraged strategically to save recruiting teams time, money, and resources.
Boosts motivation and engagement
While there’s no causal relationship between compensation and motivation, it’s safe to assume that compensation correlates with engagement. Paying interns will likely motivate them to stay engaged and do their best work, provided there’s ample mentorship and support in place.
Further, paid internships allow interns to be more fully present because they don’t have to work one or more side jobs to eke out a living during the internship. The stress of earning money elsewhere to financially support themselves only distracts interns from focusing on the goals of the internship.
Improves or maintains favorable company brand
An internship is the start of a business relationship with junior professionals that could last well after the end of the internship, whether the intern ends up at the company they interned at or not. Paying interns contributes to a positive experience and increases the chances of an intern becoming an employee someday or recommending the company to others.
Supports commitment to diversity, equity, and inclusion
Job candidates and employees are paying increasing attention to how a company treats its employees, including interns, and how a company acts on broader social issues.
An unpaid internship program contradicts a company’s commitments to DEI because it can exclude talent that can’t afford to work for free. By contrast, those who can are more likely to come from more privileged backgrounds. However, that’s not necessarily always the case, as other research from 2019 points to the overrepresentation of minority groups in unpaid internships and of white students in paid internships.
Paid internships improve a company’s reputation in a competitive labor market and mitigate the negative economic and social effects of unpaid internships.
Challenges of offering paid internships
Businesses offering paid internships may run into challenges, including:
Increased complexity with correctly classifying interns for payroll and tax purposes.
Greater upfront planning and organization requirements.
Consistent monitoring of the intern’s workload.
It can be tricky to know how exactly to classify employees for payroll since interns don’t fit the definitions of freelancer or independent contractor. Plus, a company paying its interns will need to justify that expense to management.
To make sure the company gets value out of the intern’s work, there needs to be a plan in place with specific outcomes and value-added tasks assigned to paid interns. The intern’s supervisor will then need to keep an eye on their workload as the internship progresses to make sure they don’t get too much work or have to do insignificant things like getting coffee orders. Maximize paid internships through micro-internships
Though there are numerous benefits of traditional paid internships that last a full semester, they may not be the most practical or strategic option for some businesses. Micro-internships are a flexible alternative that can be tailored to provide value for both employers and their interns — they’re shorter than the usual 3-month summer internships, aren’t tied to any academic calendar, and entail short-term projects that the intern assists with. Micro-internships can also be structured to meet legal requirements by providing well-defined projects with clear educational value, making them more likely to satisfy the DOL test.
As a result, micro-internships offer employers ultimate flexibility in how they manage paid internships. They’re also a great way to develop an ongoing work relationship with an intern during their studies that’s similar to a freelancer or independent contractor.
Paid internships don’t need to be long. Given the brevity of micro-internships, they’re a low-cost way to get immediate help with business needs and move critical projects forward. They also serve as an all-around solution to potential legal obligations, ethical considerations, recruiting efficiency, positive company reputation, and the company’s bottom line.
