Should You Pay Your Student Intern?

It's a thorny issue, particularly for small employers. But understanding the law and the shifting policies at colleges can aid the decision

by Alison Damast

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Lisa Nickerson, owner of Nickerson PME, a 10-person marketing and public relations firm in the Boston area, runs a year-round internship program, calling participants "associates" to make sure they don't feel, as she puts it, like "lowly interns." The students, mostly from local colleges, get college credit and work experience, performing tasks like pitching press releases to clients, while Nickerson gets valuable help around the office—without giving them a paycheck.

"From my standpoint, if you take the time to put together a good program, you don't have to pay the student," Nickerson says. "There are an abundance of students who want that type of hands-on client experience."

Nickerson is one of a growing number of small business owners who feel comfortable offering students an internship experience without financial compensation. It's a model that is becoming increasingly controversial within the higher education community, where career-services professionals say students should be paid at least minimum wage. Complicating matters, some employers ask that the student receive college credit for their work in order to avoid having to pay them, a demand that puts students from low- or middle-income backgrounds at a disadvantage. It means students have to pay their college for that course credit, a cost that can add up to several thousand dollars.

"Increasingly, there are concerns from not just an ethical standpoint, but also potentially a legal standpoint [since] these people are doing work for you and not being compensated for that work," said Manny Contomanolis, director of the career-services office at Rochester Institute of Technology and president-elect of the board of the National Association of Colleges & Employers (NACE). "What are the implications of that, and what kind of message does it send to your own employees and community?"

Legal Definitions

An intern, by definition, is a professional in training, and employers using their services are required to adhere to strict standards set forth by the Labor Dept. under the federal Fair Labor Standards Act.

Business owners struggling to decide whether or not to pay their interns should review these six requirements to help them determine the thin line between an intern and an unpaid employee. To start, the law requires that the intern "receive training equivalent to a vocational school," which means that the intern could pay to receive the training somewhere else. An employer also must inform interns that the internship does not come with the "absolute guarantee of a future job," and tell them at the start that it is unpaid, according to the law.

Another requirement states that the intern "cannot take the place of a regular employee." It "is a big problematic spot" for small employers because they often use interns on a part-time basis to fill in for someone who is on maternity leave or on short-term disability, says Richard Bottner, president of InternBridge, a recruiting and consulting firm in Acton, Mass. The act also mandates that the employer "cannot get immediate benefit from the intern's work." Employers have trouble with this because "with internships in general, a company receives a benefit," Bottner says. "If you are doing hands-on work, you are benefiting the organization."

The employer should offer an unpaid internship program only if they can meet all six criteria. "It is probably hard to stay on the right side of the line," says Jane Lewis Volk, an employment lawyer at Pittsburgh law firm Meyer, Unkovic & Scott. "You just have to remember that, unless you are interested in really offering training to somebody in the field, you are not going to get cheap labor."