Unpaid Interns

Six Steps to Having an Unpaid Intern
Guest Blog
by Mike Haberman on October 1, 2012

Interns, also known as Co-op students, have long been used by companies as a method of getting some inexpensive labor while providing a student with valuable work experience. In a tight candidate labor market it is an efficient way for a company to “test out” a prospective recruit and to pre-recruit them. In a tight job market, such as we have today, it is often suggested that the way you may be able to get a job is to offer your services to a company as an intern in order to let a company see the quality of your work. Many companies developed extensive college and university internship programs to test out these prospective recruits.  Having worked at a company where we used interns I know the value of the work experience in enhancing a student’s education. However, before you start down the road of using an unpaid intern there are six steps you must follow to obey the rules.

Unpaid Internships Are Problematic

The U.S. Department of Labor has specific rules on using interns, especially if you are not planning on paying them. There are a six specific steps that must be taken to insure that the unpaid internship meets the requirements of the USDOL. These steps, taken from the USDOL Fact Sheet #71 are:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Pay particular attention to #4 on that list. The employer can derive NO IMMEDIATE advantage from the activities of the intern. That is a pretty tough standard to meet and often is counter to the intent of the employer.

Paid internships

As an employer if you are interested in using an intern for both your benefit and theirs you are better off making the position a paid one. Doing so allows the hiring company more freedom in using the intern to fill in positions where needed. There are many advantages to using interns. The intern gets an opportunity to experience the work and the culture of the company. The company gets an opportunity to experience the work ethic of the intern and to judge the quality of their work and the fit to the company culture. If the company ends up hiring them they then get an employee who more quickly comes up to speed in their new job because they have already had the “newness” rubbed off of them. They are incorporated into the normal work at a faster pace and thus become more productive quickly. Therefore they have a quicker ROI than the typical newly minted student. It also has the advantage of taking them off the market before a competitor can hire them.

However, as with the unpaid intern, there are steps that must be followed to insure you are following the USDOL regulations. You must remember these interns become regular non-exempt employees. All of the FLSA rules on minimum wage, paperwork, recording hours worked, paying overtime, proper deduction of taxes, immigration documentation and more apply. Essentially they are paid part-time employees.

Keep in Mind the Educational Intent of Internship Programs

Even though you are getting an intern as a less expensive employee never lose sight of the educational intent of the position. They are working for the company in order to learn. They want to learn about the company, they want to learn about the profession, they want to learn about the world of work. It will take effort and guidance to make that experience a valuable one for the student and the company. As a company if you are not prepared to provide that learning experience you are just better off hiring a part-time employee who is just interested in the job.

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