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the basics of unpaid interns

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go here A couple of weeks ago I posted about tax lingo when it comes to hiring and maintaining employees. If you have not reached the point where you feel like you need a paid employee, you might have “hired” an unpaid intern or at least thought about using one. This is very common in small businesses, especially in the creative community and I’ve received many questions over the past few months regarding unpaid interns so I thought I’d give you some basics about this topic.

The Fair Labor Standards Act has an entire section devoted to internships and they give the “test” below to determine whether they can be unpaid or not.

  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.

In short, the training would need to be in more of a classroom environment than actually being out in the field. You must not benefit from the skills they are “learning”. They must work right alongside current employees, not do work that you would otherwise hire employees for. You may not gain immediate advantage but rather the time spent training them needs to outweigh the benefit you receive from the work they do. The intern is not entitled to a job at the end of the internship. Both parties understand that no wages are involved for time spent.

So, if you can pass all of those questions and agree that is what you are offering, then go ahead and “hire” that unpaid intern. If not, you’ll want to set them up as an employee and offer them wages. Stipends are another form of payment that can be used for interns, but this is typically only used in non-profits. For profit companies can’t pay someone under minimum wage so you’d have to make sure that the stipend equals out to at least minimum wage for the hours they worked. If you issue them a 1099 for the stipend at the end of the year, you’re now classifying them as a contractor and not an intern so that could raise some red flags as well.

I hope this helps answer any questions you have about interns for your business. If you have any questions or comments, please feel free to leave them below or contact me anytime.

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1 Comment on the basics of unpaid interns

  1. Natalia Crawford
    September 3, 2014 at 3:35 pm (4 years ago)

    Thank you so much for this information! I am currently in the process of taking on an intern and was wondering if there are an legal or recommended paperwork that should be done when taking on an unpaid intern such as a contract?

    Reply

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