Navigating the World of Internships: Understanding Stipends and Unpaid Opportunities
Internships serve as a crucial bridge between academic life and professional careers, offering invaluable experience and networking opportunities. The question of whether these internships should be paid, and what role stipends play, is a complex one with legal, ethical, and economic dimensions. While many internships are paid, unpaid internships remain prevalent, raising concerns about equity and access. This article delves into the nuances of unpaid internships, exploring the legal framework, the arguments for and against them, and the potential role of stipends in mitigating the challenges they pose.
The Legal Landscape of Unpaid Internships
In the United States, the Fair Labor Standards Act (FLSA) governs minimum wage and overtime pay. The FLSA requires “for-profit” employers to pay employees for their work. However, the application of the FLSA to internships is not always straightforward. The Department of Labor (DOL) considers several factors in determining whether an intern is the "primary beneficiary" of the intern-employer relationship or is, in fact, an employee and should be paid.
To determine whether an intern or student is, in fact, an employee under the FLSA, courts have used the “primary beneficiary test.” In short, this test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. If analysis of these circumstances reveals that an intern or student is actually an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA.
The extent to which the intern and the employer clearly understand that there is no expectation of compensation. If the internship is primarily for the benefit of the company, rather than the intern's educational benefit, the intern is more likely to be considered an employee.
It is important to note that the FLSA exempts certain people who volunteer to perform services for a state or local government agency or who volunteer for humanitarian purposes for non-profit food banks. WHD also recognizes an exception for individuals who volunteer their time, freely and without anticipation of compensation, for religious, charitable, civic, or humanitarian purposes to non-profit organizations.
Read also: Understanding Unpaid Internship Laws
The Debate Around Unpaid Internships
The prevalence of unpaid internships sparks considerable debate. Many argue that they provide valuable experience and networking opportunities, especially in competitive fields. Some consider it a rite of passage, as one study found that 46% of college-student internships are unpaid. However, others contend that unpaid internships are exploitative and perpetuate inequality.
There are several good reasons for a shift away from the unpaid intern model. The most obvious one is federal law. According to the US Department of Labor, all employees at for-profit businesses must be paid-and many interns may fit the Department’s definition of an employee. Although every case must be assessed individually, in general the Department of Labor suggests that interns are employees if they do work that is primarily for the company’s benefit, rather than for their own educational benefit.
The Benefits of Paying Interns
There are compelling reasons to pay interns. Pay is a way to attract top talent: Just like candidates for permanent employment, internship candidates are more interested in positions that pay a fair market rate. That means you’ll have more applicants to choose from-and more high-quality applicants-if you choose to pay your interns. And once you hire your paid interns, studies have shown that they are more likely to be happy in their positions than their peers working in unpaid intern roles. In fact, your paid intern’s work might prove to be so good that you decide to hire him or her. One survey found that over 72 percent of paid interns at for-profit companies received job offers after the conclusion of their internships-compared to only 43 percent of their unpaid peers.
Paying your interns can also improve your company reputation. With unemployment approaching record lows, employers need to find ways to stand out in order to recruit top-tier talent. After all, 75% of job seekers consider a company’s reputation before deciding to apply for a job.
There’s also an equity argument for paying your interns. Some students from underprivileged backgrounds cannot afford to take an unpaid internship. First-generation college students and students of color are especially likely to struggle to afford an unpaid internship. Also, statistics show that more women than men work unpaid internships in college-meaning the gender pay gap starts before students have even graduated.
Read also: Accounting Internship Benefits: Paid vs. Unpaid
The Role of Stipends
Stipends can offer a middle ground in the debate over unpaid internships. A stipend is a fixed sum of money paid to an intern to help cover living expenses during the internship period. While not equivalent to a wage, a stipend can make an unpaid internship more accessible to students who might otherwise be unable to afford it.
However, it's important to understand the implications of receiving any type of compensation. If you are receiving any type of compensation, or the prospective position does not meet the unpaid internship criteria, you must obtain work permission (CPT, OPT, AT) if eligible.
The Impact of Paid vs. Unpaid Internships
NACE research has found that students who take part in paid internships receive more job offers and garner higher starting salaries than those who participate in unpaid internships (NACE 2022 Student Survey, 2022). of four-year college students, paid interns averaged 1.61 job offers, while unpaid interns averaged 0.94 offers, and students with no internship experience just 0.77 offers. also offered higher starting pay. According to the same 2022 Student Survey, paid interns earned a median starting salary of $62,500 compared to unpaid interns who reported earning a median starting salary of $42,500.
Particularly troubling, NACE research has also found that all college students are not equitably represented in internships (Inequity in Internships, NACE, 2021). in paid internships. In 2022, NACE followed up on that initial analysis and the internship data from 187 employers demonstrated nearly identical inequities. of paid interns. Taken together, the research shows that white, male, and continuing generation students are disproportionally overrepresented in paid internships. access, opportunity, and success for participating students; help fill critical roles throughout the employment landscape; and lead to needed diversification of the workforce.
Unpaid internships are a barrier to achieving equity and opportunity for all college students:Participating in an unpaid internship is much harder, and often impossible, for students who cannot forgo a paycheck for a significant period. pay. As such, these students can access work experience, skill development, and networks that less privileged students cannot.
Read also: Are Unpaid Internships Legal?
The bifurcation of paid and unpaid internship opportunities causes a disparate impact on student outcomes and furthers systemic inequities. continuing generation students. These students then go on to receive more job offers and higher starting salaries, which perpetuates and exacerbates the disparate impact over time.
Not compensating interns communicates to them and their organizational colleagues that their contributions are somehow less valuable than the work of paid interns. to which unpaid internships directly contribute.To provide all participating internship students with equitable access to opportunities and career success, we advocate that all internships should be paid.
Steps Toward Equitable Internships
Given the challenges associated with unpaid internships, several steps can be taken to promote equity and opportunity:
- Legislation: Congress should pass legislation requiring internships to be paid. paid employees. Modern legislation is needed to resolve this inconsistency. Until legislation exists requiring internships be paid, Congress should immediately pass the Federal Intern Protection Act to extend legal protections to unpaid interns in the federal government. Congress should also pass legislation to prohibit discrimination against unpaid interns in the private sector as well.
- Increased Financial Support: In addition to legislation, policy makers should provide increased financial and other support to smaller, for-profit, and nonprofit organizations for them to provide paid internships. reside largely with smaller for-profit companies and nonprofit organizations. This support could take the form, for example, of increased funding support for existing workforce and education legislation programs.
- Utilizing Existing Funding Streams: The community should use other funding available to financially support low-paid and unpaid internships. local chamber of commerce funding are available options for the funding needed to eliminate unpaid internships. NACE not only recommends increased usage of these funds, but also encourages the government agencies that oversee these funding streams to provide detailed guidance to help facilitate this usage along with increased investments to support paid internships. If an employer cannot afford to pay an intern, they could access these various funding streams.
Navigating Unpaid Internships: A Guide for Students
For students considering unpaid internships, it's crucial to be informed and proactive. Here are some steps to take:
- Understand the Legalities: Familiarize yourself with the FLSA and the "primary beneficiary test." If you believe your internship should be paid under the law, seek legal advice.
- Assess Your Needs: Honestly evaluate your financial situation. Can you afford to work without pay? Are there resources available to help you cover your expenses?
- Explore Stipend Opportunities: Research internships that offer stipends or other forms of financial assistance.
- Evaluate the Learning Experience: Consider the potential educational value of the internship. Will you gain valuable skills and knowledge that will benefit your future career?
- Seek Guidance: Describe your career interest and how you selected this potential career? Describe the type of internship/student teaching/service learning you are applying for/have secured. How does it support your career goals? Describe your financial need/situation: how will receiving the money benefit you? How do you currently support yourself? Are you part of any program that provides a stipend for internships? Visit your career center and the Learning Center for help.
- Ask Questions: Ask in advance what paperwork the organization requires from you to start your unpaid internship. If they want you to complete an I-9 Employment Authorization Verification form, it means they consider it to be an employment relationship requiring authorization even if you are not being paid.
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