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Internship Compensation Issues

Please note: This is Not Legal Advice

The information on this page is not legal advice – it is provided for informational purposes only. Please consult with your legal counsel regarding wage issues for your specific internship positions.

Offer a paid or unpaid internship?

We recommend you visit the following web page for detailed information from the Department of Labor on standards related to paid versus unpaid internships:

Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act
It is always desirable to compensate interns

The average student at WSU graduates with $20,544 in debt, according to Kiplinger’s February 2011 edition. Students participating in paid internships can alleviate some of their student debt. Employers also benefit by attracting the best applicants and maintaining a stronger sense of accountability with their interns.

Federal Wage and Labor Laws

Whether or not an employer must pay an intern depends on the on-the-job experience that the individual will have in relation to the standard set forth under the Fair Labor Standards Act (FLSA), a federal law which establishes the minimum wages for work performed.
Pursuant to the FLSA, the U.S. Department of Labor (DOL) has developed six criteria for differentiating between an employee (entitled to minimum wage or above) and a learner/trainee (may be unpaid). The criteria for learner/trainee are:

  • The training is similar to that which would be given in a vocational school.
  • The training is for the benefit of the students.
  • The students do not displace regular employees.
  • The employer derives no immediate advantage from the activities of students.
  • The students are not entitled to a job at the end of the training period.
  • The employer and the student understand that the student is not entitled to wages.

A stipend is typically a lump sum, is not related to work performed, and usually covers costs associated with the internship like lodging, clothing, transportation, child care, and tuition; whereas salary/wages are received regularly and are related to work performed. Wage and hour law does not use the term “stipend.” If a person is entitled to be paid, then the stipend must equate to at least minimum wage.

The federal and state work-study programs will support students who are doing internships at qualifying organizations. Students must also be eligible for work-study financial aid.

How much should we pay an intern?

We recommend identifying a fair entry-level starting salary for a similar position at your organization and multiplying it by a percentage to determine the intern’s salary. The percentage will vary depending on the intern’s education level and experience. For example, a senior may earn 85-90%, a junior 80-85%, a sophomore 75-80%, and a freshman may earn 70-75% of a typical starting salary for a similar position. If you follow this rule of thumb, you can offer increases each year to returning interns and stay within your current salary structure.

Washington State University