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Are You Recouping Your Costs from Summer Interns?

Internships can be surprisingly expensive for employers.

“An internship can, and hopefully will, benefit the company that uses such a program. For example, internships may provide a pool of potential new hires for the company, serve as a source of inexpensive labor, foster a positive public image, and build beneficial relationships with local communities and educational institutions.”

1: Classify your interns properly, especially if they’re unpaid.

Unpaid internships can be valuable for everyone involved; young workers can gain valuable experience, while employers can reap the rewards of effectively free labor. However, employment laws like the federal Fair Labor Standards Act (FLSA) may apply even to interns. Agencies like the U.S. Department of Labor will apply a test to determine the primary beneficiary of the relationship. This test includes questions about how relevant the work is to the intern’s education, and whether the intern’s work complements or displaces the work of paid employees. If the government decides that the employer has misclassified the worker – he or she is actually an employee, not an intern – the company might find itself on the hook for back pay, any unpaid overtime, and damages. Make sure you know the legal implications of the work arrangement, because this can have tangible consequences for companies. Condé Nast actually ended its internship program after two former interns sued. “A lot of times startups are trying to save money and cut corners,” lawyer Tricia Meyer of Meyer Law Ltd. explained to American Express’ OPEN Forum. “But internships don’t equal free labor. More often than not, interns actually do need to be paid.”

The Small Business Administration provides a great example: “For example, a bakery may allow an apprentice/intern to decorate a tray of cookies that will not be sold to customers. Because the task was only a training exercise for the apprentice/intern and the bakery did not receive any benefit from that work, the bakery would not have to pay that student worker for that time.”

Remember that other workplace laws – such as those that prohibit discrimination and harassment – also apply to interns, paid or unpaid.

2: Ensure the internship program benefits the intern.

Employers are far less likely to run into problems if they specifically design the internship program to provide value to the interns. To start, ensure that the work is educational to them. It helps when the internship is tied to an academic or degree program, so that the employer can help connect the dots between coursework and business work. Interns are very often used for busywork or tedious tasks; that’s fine to a point. But especially if the position is unpaid, the interns must benefit in some way – otherwise you’ll start to risk unhappy people who are more prone to taking their complaints to the Department of Labor.

3: Communicate with the intern.

Ensure that the intern has one or more internal staff members with whom they can communicate regularly – mentors, ideally – to enrich their work experience. At minimum, they should have weekly or biweekly reviews with their direct supervisors and even higher-ups in the organization. But don’t just talk at the intern; listen as well. The intern likely has specific goals for what they want to learn or experience. Tracking these goals over the course of the internship program provides a great way for everyone to determine progress and the successfulness of the program. Interns should also be exposed to realistic working conditions, which means regular performance management that provides feedback that can help them to improve, grow, and learn.


CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.