Paid vs. Unpaid Internships

There’s no question that internships benefit both interns and employers.

Employers can use internships to recruit and screen potential future employees – evaluating the quality of their work, first-hand. Interns can infuse the workplace with enthusiasm, energy and fresh ideas, with the side benefit of motivating current employees to follow suit!

On the flip side, interns gain valuable skills and experience, receive mentoring and training, and get to peek behind the curtain of an industry, which can inform future career decisions.

The dilemma for many employers is whether to pay interns. On one hand, employers have to create and staff an internship program and invest significant time and effort to train and monitor interns. But as Deborah Sweeney, CEO of MyCorporation.com asks, “since when did it become okay not to pay people for their work?”

Interns still have to pay for temporary student housing and in a market like New York City where the average one-bedroom apartment rents for $2495, that’s a living cost they can barely afford — even with a paid internship! And don’t get us started on what utilities, food and transportation cost in the City of Dreams!

Legal and Moral Dilemma?

The Department of Labor relaxed its intern compensation standards last year making it easier for employers to offer unpaid internships. Legal experts, however, still advocate paying interns, primarily to avoid wage and hour lawsuits. Because even if your interns agree to work for free, that doesn’t mean you won’t get slapped with a lawsuit — as NBCUniversal, Condé Nast, Fox Searchlight Pictures, and Coach have found out.

Deborah Sweeney says it’s not just a matter of avoiding litigation. “Paying your interns is, morally, the right thing to do,” Sweeney says. “I’ve heard and read different analysts moan about the privilege and entitlement of interns pushing for pay (but) the minute an intern shows how helpful and proactive they can be to helping grow the business, they deserve a wage.”

Opera Solutions, the Jersey City-based software company and Jane Street, the NYC quantitative training firm, go above and beyond, offering the added perk of intern housing and they are beckoning industry peers to mirror their lead.

Impact Beyond the Internship

Statistics suggest that students who accept unpaid internships may be getting shorted, and not just during the internship.

The Class of 2019 Student Survey from the National Association of Colleges and Employers (NACE), reports that the pay status of internships plays a substantial role when it comes to job offers and salaries. Among the Class of 2019 graduates who had an internship, nearly two-thirds of paid interns (66.4 percent) received a job offer, while just 43.7 percent of unpaid interns were offered a job.

Furthermore, a previous (Class of 2014) NACE report suggests that graduates who came from a paid internship, and received a full-time job offer generally commanded a higher starting salary than did graduates from an unpaid internship who received job offers.

Why You Should Pay Your Interns

If paying interns still seems like the wisest route for financial reasons, consider what Nathan Parcells, co-founder of Intern Match (now Wayup.com) said in an interview for Inc.com.

  • Paid internships (at least a minimum wage) will attract three times the number of applicants. That increase translates into more quality interns, a better culture fit, and everything else that goes into making an effective hire.
  • Paid interns are more likely to become full-time hires and are more likely to stay with the company long-term.
  • Offering paid internships increases the likelihood of attracting African-American and Hispanic candidates and cultivating diversity.
  • Beyond getting sued, if you pay your interns, there’s less risk to your brand in bad publicity.

Paid interns are happy interns. They’re excited to come to work, eager to contribute to company goals, and ready to put forth their best effort. Plus, they tend to say nice things about the company as unofficial brand ambassadors!

Be Smart, Be Prepared, Be Informed

LinkedIn has pages of unpaid internship posts, and not just for non-profit companies. A variety of industries, from public relations and TV production to digital editorial and fashion offer non-paying internships. Eager students line up to work for free in exchange for that all-important hands-on experience. They expect and need real-world skills that will eventually elicit a job offer, whether from you or another potential employer.

So, if you’re bringing on interns this year or next, know the law and your industry standards, and be prepared to provide what your interns expect and need. Way Up has an extensive Q&A page of legal guidelines to help you navigate the minefield of paid and unpaid internships, and objective counsel for fence-sitters.

Here’s the bottom line: If you can, pay your interns – at least minimum wage plus overtime. And if you can’t, at least make it mutually beneficial so everybody wins!

A Housing Incentive for Interns!

When it comes to New York summer intern housing for 2020, BK33 and KH1 beat all challengers! BK33 sits in Lower Manhattan and the famed financial district with panoramic views of the Brooklyn Bridge, turnkey accommodations, 24-hour security, plus an on-site laundromat and fitness center. KH1 is located in the Union Square area, with great views of the city, fully-furnished suites, with a full bath and kitchen. You’ll find a gym, laundry room and lots of amenities, like music practice spaces and an art room. Check out ALL the conveniences at both locations, and book now for the summer of 2020.

SIDEBAR

Last January 5, the DOL replaced the rigid six-part test to determine whether interns went unpaid with a “primary-beneficiary test” to see if interns met the litmus test for employee status:

  • Both parties clearly understand that the intern will not be compensated.
  • The internship provides training similar to that given in an educational environment.
  • The intern’s completion of the program entitles him or her to academic credit.
  • The internship corresponds with the academic calendar.
  • The internship’s duration is limited to the period when the internship educates the intern.
  • The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits.
  • The intern and the employer understand that the internship does not entitle the intern to a paid job at the end of the internship.

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