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Summer Interns: To Pay or Not to Pay?

Summer Interns: To Pay or Not to Pay?

Answered by HR Experts

Hiring summer interns can be an excellent opportunity for both businesses and students. However, a common question arises: Do we need to pay summer interns? Let's dive into the answer provided by HR experts.

Understanding the Primary Beneficiary Test

The U.S. Department of Labor (DOL) utilizes the "primary beneficiary test" to determine whether a worker should be classified as an employee (entitled to minimum wage and overtime) or an unpaid intern. The primary beneficiary test evaluates who benefits most from the arrangement—either the employer or the intern.

Key Considerations for Intern Classification

Several factors are considered when determining the primary beneficiary:

  1. Educational Environment: Does the internship provide training similar to that of an educational environment?
  2. Integration with Education: Is the internship tied to the intern's formal education program, such as receiving academic credit?
  3. Academic Commitments: Does the internship accommodate the intern's academic calendar?
  4. Beneficial Learning: Is the duration of the internship limited to when it provides beneficial learning?
  5. Complementing Work: Does the intern's work complement, rather than displace, the work of paid employees?
  6. Expectation of Compensation: Is there an understanding between the intern and the employer that the internship is unpaid?
  7. Job Entitlement: Is there an understanding that the internship does not guarantee a paid job at the end?

Flexible Application of the Test

The DOL emphasizes the flexibility of the primary beneficiary test, noting that no single factor determines the outcome. However, if having summer interns saves the company money or the interns aren't receiving academic credit, careful consideration should be given to classifying them as non-employees.

Erring on the Side of Caution

When in doubt about whether to classify a worker as an unpaid intern or a paid employee, it's safer to classify them as an employee. Misclassification can have costly consequences. Additionally, it's essential to check state laws for any additional requirements.

Final Thoughts

Summer internships can provide valuable learning experiences for students while offering businesses extra support during busy periods. By understanding the primary beneficiary test and considering the factors involved, employers can make informed decisions about compensating summer interns. Remember, when in doubt, it's best to err on the side of caution and classify interns as paid employees.

Please note that this Q&A does not constitute legal advice and may not address state or local laws.

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