Unpaid internships used to be rather common in the United States. That's no longer the case, thanks to federal regulations that have tightened control over how people are compensated for the work they provide. Unpaid internships still exist, but they are quickly becoming a thing of the past. Companies should tread very carefully with any plans to offer an unpaid internship.
Rules set forth by the Fair Labor Standards Act (FLSA) stipulate that employees meeting minimum requirements must be financially compensated for the work they perform. The rules are rigid enough that it is very difficult to establish an unpaid internship that actually qualifies for no salary arrangement between employer and employee. Numerous court cases over the years have demonstrated as such.
In order for an unpaid internship to be legitimate, it must pass the scrutiny of a six-point test established by federal rules:
• Both employee and employer must agree that no wages will be paid for the internship.
• Both employee and employer agree there is no guarantee of employment at the conclusion of the internship.
• The experience received through the internship must be similar to the training the employee would receive in an educational setting.
• The experience of the internship is solely for the benefit of the intern, not for the employer.
• The intern cannot displace a paid employee.
• The employer cannot derive any direct or immediate advantage from employing the intern.
BenefitMall.com a payroll and benefits administration company says that the stipulations for unpaid internships are clear. If a position cannot pass all six points of the federal test, interns must be paid at least minimum wage.
Minimum Wage Determined by the States
Companies and their payroll departments also need to be aware that the individual states set their own minimum wage requirements. Such requirements are often higher than the federal minimum wage mandated among companies seeking federal contracts. That means that even though the FLSA regulates how interns must be paid, the actual rate of pay is most often set by the state.
Offering paid internships in multiple states means paying those interns based on individual state minimum wage requirements rather than a uniform wage established company-wide. There are some variations in these rules, especially when a company might be based in one state but sending workers to another on temporary assignments.
BenefitMall says that most payroll processing companies are very familiar with the laws surrounding paid internships and state minimum wage requirements. They are in a unique position to handle these sorts of things on behalf of their clients because they already possess the knowledge required to make sure interns are paid properly. However, it is ultimately the employer's responsibility to maintain compliance.
Internships Can Be Beneficial
In closing, internships can be beneficial to both parties whether they are paid or unpaid. Benefits for the intern include on-the-job training, real-life experience, an open door to future employment, networking opportunities, and even opportunities to earn class credits through internship training programs.
Employers benefit from internships as well. They are able to offer educational opportunities to workers who may return in the future with that experience under their belts. They have an opportunity to contribute to the education of the next generation of workers who will support their industry. They can also use paid internships as a form of supplemental labor when creating full-time, salaried positions is impractical.
Unpaid internships are quickly fading away in favor of the paid alternative. If your company is planning on establishing internships, make sure it's done according to the law.
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