Understanding When Interns Should Be Paid or Unpaid

Tips for Understanding When Interns Should Be Paid or Unpaid

Interns are a great resource for businesses to train young professionals and build lasting relationships with local schools and colleges. Many companies utilize both paid and unpaid intern positions to develop young talent, but it’s not always easy to know when an intern should actually be an employee or whether an unpaid intern should be paid.

For help with human resource decisions like this, contact ESS – Employer Support Services. Our HR professionals can help you classify your employees and determine whether an intern meets the criteria for being a paid or unpaid intern.

[Related: How to Classify Your Employees]

Energetic male holding a clipboard.Employee Classification: Employee or Intern?

It may seem like the difference between an employee and an intern is simple: one is a permanent position, and the other is meant as a temporary training position. However, there are federal guidelines put in place to protect interns from being taken advantage of by employer misclassification.

The Fair Labor And Standards Act (FLSA) outlines what makes an intern an employee with a simple seven-factor test. These guidelines are known as the “primary beneficiary test” and are used by the court to determine if the classification of an intern is the correct choice.

The seven factors in the FLSA guidelines are:

  • The extent to which 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.
  • The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  • The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  • The extent to which the 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.

If an intern meets the requirements for employee classification, they are entitled to pay (at least minimum wage) and overtime wages under FLSA. Misclassifying an employee as an intern could result in fines and back pay, so it’s crucial to understand when an intern should be an employee and vice versa.

As a leading HR support service provider, ESS is committed to ensuring your employees are properly classified. You can trust our experienced professionals to deliver exceptional service and useful advice. Contact ESS today for help with determining if an intern should be an employee.

When Should an Unpaid Intern Be a Paid Intern?

Boss helping an intern understanding the job.Deciding between an unpaid and a paid internship is a decision your company shouldn’t take lightly. Unpaid internships come with a host of legal barriers and laws you need to ensure you are following. Typically, you should only hire an unpaid intern if you are offering the internship in return for college credit.

But offering college credit isn’t the only consideration. You must look at your state and local laws to see what is required to hire an unpaid intern. This situation is escalated when your company operates in multiple states. You’ll need to check with each state, county or parish, and the locality to make sure your internship is legal.

[Related: Payroll Reporting]

Get Qualified Employee Classification Help from ESS

Knowing when an intern should actually be an employee or determining whether an internship should be unpaid or paid can be hard for a busy business owner. That’s why ESS offers qualified human resources services that help every business, from small start-ups to large corporations. With ESS on your side, you can be confident knowing your employees have been classified correctly and your internship program is legal.

Contact ESS – Employer Support Services today.

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