Internships have great potential to be a win-win for both employer and intern. The intern gains knowledge about an industry and a position. They also get a glimpse of the responsibilities of working for a business—whether in the field or an office. As an employer or manager, you hold up a mirror to your processes when training and employing an intern. You also get the assistance of an able-bodied, able-minded person who is ostensibly eager and willing to help with a full range of tasks in order to learn.

Of course, internships must be handled differently depending on the industry and the business. Variables include where to look for interns if they aren’t looking for you, how organized and demanding the internship program should be, and whether the intern or interns should be paid. A final but no less important factor is what kinds of regulations govern internships, and how best to remain compliant taking advantage of this win-win opportunity.

Especially now in this uncertain climate, interns can be a boon to your business at a low cost or no cost, while providing young people or career-changers with an entry-point into the workforce in an otherwise difficult hiring market.

Why hire interns? A business case

As we touched on briefly above, there are many business and HR advantages to hiring interns. Interns can actually save money on hiring while increasing productivity and profitability. Practical advantages for the business include the following:

  • Access to inexpensive labor. Interns learn by doing, and any help they give comes at either no cost or a lower cost than the labor of a typical employee.
  • A pool of potential hires at your fingertips. When you advertise for an internship, you cast the net widely for people interested in the kind of work you have—and you begin connecting with these people.
  • A chance to vet a prospective employee over time. With an internship program, you will get a much better sense of a person’s or multiple peoples’ KSAs (knowledge, skills and abilities) than you would from their resume or even a series of interviews. So you can truly vet them without the commitment of making a hire.
  • Strengthen your brand and community standing. Hosting interns is a respected act that casts a positive light on your brand wherever you advertise it. Interns who have positive experiences may also spread good words about your brand themselves. When you advertise the internship locally, it can build your relationship with your community and serve to help young people there. It can also support your company’s diversity efforts.

An internship is also beneficial to the intern, as it should be, by providing the following practical gains:

  • A first-person view inside a certain industry or job before they spend time and money on education or certification programs or even start a career
  • A competitive advantage when looking for a job
  • A network of contacts within a field or industry
  • Experience with meeting workplace demands and reaping the rewards

HR’s role in internships

If an internship program hasn’t been established yet, HR can play the role of convincing company executives of its practical as well as its public benefits.

Once an internship program has been decided on and established, the HR department has the primary responsibility for the success of the program. This will mean holding periodic meetings with the department heads where the intern is working to check in on progress or issues, as well as meeting directly with the intern to hear their perspective.

Ensuring an intern is satisfied, and switching them to a different department if need be, could make the difference between benefitting and not benefitting from their presence at the company. HR might also gain useful insights on departmental culture and any negative behaviors from interns, who will have less at stake in being candid than an employee would.

Legal issues and compliance concerns

There are legal and compliance issues to take into account when it comes to hiring interns, especially if you don’t plan to pay. But a couple of the issues are age-related. For instance, companies should be careful to avoid violating state and federal child labor laws by hiring interns under the age of 18. They should also avoid discriminating against older applicants seeking internships based on their age, as these people may be just as qualified.

In order to prevent companies from taking advantage of free labor, the government includes provisions in the Fair Labor Standards Act (FLSA) regulating when an intern must be classified as an employee and when they do not need to be.

At private, for-profit sector businesses, most but not all interns are considered employees under the FLSA and covered by minimum wage and overtime pay laws. But even if you are a private business, the government does offer a way to determine if you can legally hire an unpaid intern.

Unpaid internship defined

An unpaid internship is a position in which a person agrees to do certain tasks without pay in order to reap non-monetary benefits, such as academic credit, training or important real-world knowledge they can apply to their careers.

The test for qualifying unpaid interns and students

In 2018, the Department of Labor relaxed the rules for legally hiring an unpaid intern. The six-factor test that was in place prior had stated that the employer could not “gain an immediate advantage” from the intern’s work, but the structure and language of the test have changed.

To determine whether interns must receive minimum wage pay, the DOL now offers the “primary beneficiary” test. It’s a seven-factor test that covers such factors as expectation of pay, training and academic credit to determine who benefits most from the internship. If the answers reflect that the intern benefits most, then an unpaid internship is acceptable by the government.

Best practices for unpaid internships

According to SHRM, legal experts recommend getting responses to three questions in writing from your potentially unpaid interns:

  1. Does the intern understand that there will be no monetary compensation for their work?
  2. Are both parties clear that the internship will only last while beneficial learning is still occurring?
  3. Are both parties clear that there is no promise of a job at the close of the internship?

For interns who are currently enrolled in an academic or technical course of study, experts advise checking if the intern’s educational institution will provide credit for the skills they are learning in the internship.

Finally, it’s important to research your state and local laws regarding interns. Some states have regulations that are stricter than or just different from the federal rules. The wisest route is to consult with your legal counsel before trying to bring on an unpaid intern or interns.

Paid interns are employees

It is crucial to understand that paid interns are not in a separate category from employees, nor are they governed by different federal laws than employees.

This means that paid interns are entitled to the minimum wage and overtime pay rules for employees as set out in the FLSA, among other protections. And remember any state minimum wage overrides the federal one, and you must follow whichever is higher.

Wages versus stipends

Your instinct might be to pay an intern some kind of flat-rate stipend rather than a wage. At private companies, however, interns typically need to be paid the applicable minimum wage for hours worked unless their professional or academic benefit—as well as the extent to which they will be benefiting, and for how long—is abundantly clear.

If you are offering a lawful unpaid educational internship by DOL standards, there may be a situation in which you could provide an expense reimbursement stipend to the intern. The two criteria—aside from ensuring that the unpaid program itself meets DOL standards are:

  1. That stipends are acceptable within the unpaid educational internship program (i.e. if any institution that is granting credit or working with you on the program allows them); and
  2. That the stipend goes toward reimbursing the intern for food, gas, etc. rather than for work performed

Staying above board with your internship program

For an organization of any size, offering internships can provide a great advantage to you and the intern. When their learning coincides with some benefit gained by you in terms of smoother company operations, it’s a success. It also presents one more layer of Department of Labor compliance that you need to keep track of, whether your intern program is paid or unpaid.

You’ll need to have records showing that you heeded the law by answering the questions or having the intern answer questions about their benefits, that you made arrangements to work with an educational institution and secure them credit there, or that you have treated them rightfully as an employee and are paying them at least minimum wage for all hours worked.

Arcoro can help you keep track of all wage and hour paperwork through our Time and Attendance module, whereas our Onboarding and Core HR modules help ensure that you are fully compliant in your treatment of every employee on your staff, without the headache. Our ATS module can even help you find and hire great interns. Get in touch today to learn more.