Take special care to ensure your organization is following the law regarding internships.
When your organization employs interns, navigating compensation, classification and internship laws can quickly become a challenge. According to the Department of Labor, interns are governed by the Fair Labor Standards Act (FLSA). The FLSA requires for-profit, not-for-profit and public sector employers to pay employees at least minimum wage compensation and any applicable overtime for their work.
That said, "interns" may not always be considered "employees" under the FLSA. Under certain conditions — for nonprofits and governmental entities, for instance — interns may instead be considered "volunteers." Under significantly more restrictive conditions that include an assessment of six factors, interns at for-profit organizations may be unpaid. Internship laws define when students must be paid and thus serve to protect them from being exploited.
In order to stay on the safe side of the law and get the most out of your interns, paying your interns is usually considered a safe bet. Here's why. Either way, before implementing an internship program, it's a good idea to speak to an attorney to evaluate your specific program.
The Recruiting Perspective
According to Western Michigan University, the benefits to employers who pay their interns a competitive wage are myriad. First, doing so increases the pool of interested candidates, often significantly. It also promotes good will, which is crucial if you want to use interns as a cost-effective means of vetting new-hire candidates. In other words, if your organization intends to use interns as an opportunity to "test drive" a new employee and determine if there's a good fit, a competitive wage is a must.
Typically, intern pay should be higher the closer the student is to graduation or the higher the degree program the student is enrolled in. Seniors, for example, generally make more than college sophomores, while master's degree candidates are typically paid more than college seniors. Many organizations also offer benefits to further entice interns, including relocation assistance, housing stipends, intern-specific social activities and holiday pay.
According to Ward and Smith, attorneys at law, the FLSA's definition of "employ" includes "to suffer or permit to work," which in some cases encompasses the definition of an intern. The FLSA allows for unpaid or improperly paid employees to be awarded back pay for unpaid or underpaid wages, including overtime pay. The guilty employer could also pay penalties or fines for every intern who is determined to have been an unpaid or underpaid employee.
Based on the above, one of the biggest concerns for firms with paid interns is to ensure that they either work no more than a 40-hour week or are fully compensated for overtime when they do. In other words, for every hour your intern works over 40 hours, you must provide overtime pay of 1.5 times the regular wage. Many organizations pay interns a set rate, based upon standard work hours, for example 8 a.m. to 4:30 p.m. with a 30-minute unpaid lunch. Although salaried workers are often exempt and thus do not qualify for overtime pay, as clearly specified by the Department of Labor, nonexempt workers must be paid overtime.
This is why the most effective way to ensure that you're paying your interns properly is to establish an intern onboarding process in which the HR department enters all interns into the payroll system as either hourly or nonexempt employees. In addition, if your organization does not have employees clock in or sign in to a time capture app, ensure that your HR personnel provides time sheets for the interns to complete and submit each week.
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