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:
It is always desirable to compensate interns
The average WSU student undergrad debt is $27,094 FY 2018. 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 upon 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 criteria from a 2015 2nd Court of Appeals decision for a 7 Prong Test regarding for-profit unpaid internships differentiating between an employee (entitled to minimum wage or above) and a learner/trainee (may be unpaid).
For-profit companies are able to offer unpaid internships if the following conditions are met:
- The intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, expressed or implied, suggests that the intern is an employee–and visa-versa
- The internship provider must provide training that is similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions
- The internship must be tied to the intern’s formal education program by integrating coursework or receipt of academic credit
- The internship must accommodate the intern’s academic commitments by corresponding to the academic calendar at their university
- The intern’s work must complement, rather than displace, the work of paid employees while also providing significant educational benefits to the intern
- The internship’s duration needs to be limited to the period in which the internship provides the intern with beneficial learning.
- The intern and the employer must both understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
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.
Stipends, may be provided in the form of a scholarship. These payments may be set up through “Accounts Payable” after determining the total amount with the number of credits Please see our WSU Student Financial Services partner assistance.
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.