Intern Vs. Summer Temp: 6 Steps to Define the Relationship

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In many college internship programs, a student receives school credit for time spent with an employer. Many of these internships can be unpaid, and an employer often thinks this can be a low-cost method to getting some work done and also introducing the student to the financial planning industry. Although it may appear to benefit both the student and the employer, these arrangements are coming under more scrutiny.

According to the November 2010 article by Steve Taylor for the Society for Human Resource Management, “The Lowdown on Unpaid Internship Programs”:

“If a court or government agency decides that interns’ work qualifies them as employees, the company could face penalties that include owing back pay; taxes not withheld; Social Security; unemployment benefits; interest; attorneys’ fees; plus liquidated damages, defined by federal law as double the unpaid wages.”

This can be confusing for the employer—do I follow what the college says is an unpaid internship, or do I pay the intern?

If you are thinking of bringing on interns for the summer or have already brought on interns, here are some steps to better define the relationship.

1. What is the company’s purpose or goal for bringing on interns?
If you have specific tasks, project or work that would be done by an employee so the company derives benefits, or does not give the intern training in skills and abilities, or training similar to what you receive in classes or vocational schools, then you most likely have an employee relationship and you would have to pay the intern.

2. Does the unpaid internship program offer academic credit and is it supervised by the college or professor?
Even if the student is gaining academic credit, performing work usually done by an employee and that benefits the company, can negate the unpaid internship relationship.

3. Do you have written documentation?
Outline what the intern will learn, that the position is unpaid, and have the intern sign this document, acknowledging the terms.

4. What training programs will the intern follow?
Develop a training program that has the intern shadowing or observing company employees and operations. The unpaid internship program should be designed for students to learn about the industry and acquire skills and abilities they can use in similar industries.

5. Who will be working with the intern, and who does the intern report to?
The individual the student reports to is seen more as a mentor if it is an unpaid internship.

The company does not derive benefit from the intern’s work in an unpaid internship, and you should be able to demonstrate that the work of employees to mentor or teach the intern actually impeded your regular business.

6. Does the intern expect to get a job with your company after this training period?
In an unpaid internship program, the intern is not necessarily guaranteed or entitled to a job.

If you mention in writing or verbally that the intern will have a paid position after the internship, you will have muddied the nature of the unpaid internship.

For the specific U.S. Department of Labor guidelines visit http://www.dol.gov/whd/regs/compliance/whdfs71.pdf. Also, be mindful of individual state laws that could place more restrictions on what is an unpaid internship.

If you decide to bring the intern on as an employee, check or adjust your policies to define how or if  the student would qualify as a full-time employee and be eligible for benefits, such as time-off, insurance, paid holidays, etc. Your benefits policies should state who is eligible and when.

You may also rethink your needs and decide to outsource projects that student interns may have done to reduce the complication of hiring someone for a short period of time.

It may appear to be a lot of work to introduce students to the planning profession. But if you work on a program in advance, you can create a training program for students to learn about our industry and give to the future. It’s a noble gesture, but not every employer is at the point to be able to offer this.

This is just an overview for informative purposes only and is not to be construed as legal advice. Consult experts, such as human resource consultants and attorneys to be aware of federal, local and state regulations and exceptions.

Mary DunlapMary Dunlap, CFP®
Mary Dunlap Consulting
mary.mdunlapconsult@verizon.net
Pottstown, Pa.

2 thoughts on “Intern Vs. Summer Temp: 6 Steps to Define the Relationship

  1. My children attended Texas A & M. The policy was if the internship was required for graduation, it was NOT paid, the student received credits. If it was optional, you COULD be paid, it was up to the employer.

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  2. Hello Kris;

    Thanks for the comment and pointing out what happens in colleges and universities. There will always be these “grey areas” – how do I handle this situation?

    If the university or college program says the internship is not for pay, then the employer would need to follow the federal or state department of labor guidelines to make sure work qualifies as an internship. Otherwise, I think the employer runs the risks of penalties from a state or federal dept of labor audit. Right now, this area does not get as much attention of federal or state labor departments, but as agencies seek money, it may get more attention.

    Mary Dunlap

    Like

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