Internships: To Pay or Not to Pay?

Jul 13 2018

Thinking of getting an intern next month when college kids go back to school? Internship programs are a great way to find and train great entry level talent, but if improperly managed, they can be a real hassle. One of the biggest questions you’ll have to answer is whether you’re going to pay your interns. Here are some facts you should know before you make your decision:

1. Internships are a kind of employment and are subject to Federal scrutiny by the Department of Labor (DOL). The bottom line is that under new DOL classification, interns at private sector companies almost always require compensation for their work under the DOL’s assessments.

2. In January 2018, the DOL began utilizing a new list of questions to determine whether interns are entitled to compensation. The decision hinges on who benefits most from the internship. For example, is the intern responsible for his or her own work, or simply shadowing and/or complementing the work of an existing employee? The DOL provides an online test to help employers answer this question. To take the test and see if your interns should be on your payroll, click here.

3. If you do pay your interns, you must still comply with state and federal laws pertaining to minimum wage and overtime pay.

4. An alternative option to paid internships is a stipend program. This is a great way to promote your company while also helping interns with funding for important things like books, courses, travel expenses, and even accommodation. You may also be able to count it as a tax deduction if certain criteria are met. However, be aware that a stipend is not a substitution for compensation if it is owed, and it requires detailed documentation of how the funds were spent.

5. Unpaid internships carry more risk and require programs with considerable structure, documentation, and a mindful awareness of the factors that the DOL considers when evaluating the primary beneficiary status.

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