Maximizing Your Intern Benefits Package: A Comprehensive Guide

Internships are a crucial component of career development, offering students invaluable real-world experience and a foot in the door to potential future employment. Companies, in turn, benefit from the fresh perspectives, innovative thinking, and potential talent pipeline that interns provide. To ensure a successful and mutually beneficial internship program, it is essential to understand and optimize the intern benefits package.

Understanding the Legal Landscape

The Department of Labor (DOL) is the federal agency that determines if an intern is an employee and subsequently whether they should be paid or unpaid. The Fair Labor Standards Act (FLSA) mandates that "for-profit" employers pay employees for their work. To determine whether an intern or student is, in fact, an employee under the FLSA, courts have used the “primary beneficiary test” to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. 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. It’s usually best practice to pay interns at least minimum wage to minimize risk of violating the Fair Labor Standards Act (FLSA). College credits are not an accepted form of compensation and cannot be offered in lieu of compensation. If based on the above factors, it is determined that the intern is an employee, then the intern would be entitled to minimum wage plus overtime. Keep in mind not all seven factors need to be met to qualify as a paid internship. Typically, if the internship benefits the intern, it is unpaid and if it benefits the employer, it would be paid. 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.

Compensation and Stipends

Wages

An increasing number of employers-nearly 61%-offer paid internships as opposed to unpaid positions. If offering a paid internship and looking to pay above minimum wage, local college career offices can be a great resource to provide market rate information.

Housing Stipends and Corporate Housing

Many internships, especially those in high-cost-of-living areas, offer housing stipends to help interns cover their living expenses. A stipend is a fixed amount of money that employers provide to interns to offset their living expenses. Tip: when evaluating an intern housing stipend, don’t just focus on the dollar amount. View it in terms of local housing costs, availability and how much assistance the employer will provide in helping you secure your living accommodations.

According to that NACE survey, about one-third of employers offer corporate housing in lieu of-and sometimes in addition to-an internship housing stipend. Corporate housing has a few benefits when compared to a housing stipend. For one thing, you won’t need to hunt for short-term housing-it’s prearranged. This is why working with an expert in intern management is important.

It is important to note that intern housing stipends and relocation benefits are taxable. For this reason, some employers “gross up” their benefits to cover the cost of these taxes.

Travel Costs

More than 46% of employers cover the cost of their interns’ round-trip travel costs-either as a lump sum or reimbursement.

Benefits Eligibility: Navigating the Requirements

Are interns eligible for employee benefits? The definitive answer is that it depends. Department of Labor (DOL) regulations specify that most interns must be paid - there are very few circumstances under which unpaid internships can be lawful. This means that most interns are, in fact, employees. There is not a separate set of employment rules for interns. As a result, employers may be required to offer certain benefits like health insurance to interns in some circumstances.

Businesses are required to comply with applicable employment laws and regulations for all of their employees, including interns. This means that employers are obligated to offer benefits to interns when the parameters of the internship correspond with the circumstances under which benefits are mandated under federal, state, or local law.

Health Insurance

If your company has 50 or more employees, the Patient Protection and Affordable Care Act (PPACA, also known as ACA) may require that you offer employee health benefits to interns. This is based on how long your internships are and how many hours interns work each week. Under the PPACA, employees who work an average of 30 hours per week must be allowed to enroll in health insurance no later than their 90th day of employment.

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What does this mean for your internship program? If your internships last 90+ days, you have interns who work 30+ hours per week, and the PPACA applies to your company, then you’ll need to make health coverage available to eligible interns. If your company would prefer not to offer health insurance to interns, then you’ll want to structure the internship program so that it lasts fewer than 90 days or that interns work less than 30 hours per week. If your company has fewer than 50 employees, then the PPACA may not apply to your business. In that case, your own policies determine the circumstances under which group health insurance benefits are offered to employees.

Year-round interns (excluding high school students) and eligible dependents may be eligible for basic medical coverage (but not dental or vision coverage).

Retirement Savings

If your company offers a qualified retirement plan, such as a 401(k), 403(b), or Simple IRA, then any employees who work at least 1,000 hours within a 12-month period must be allowed to participate in the plan via the same term and conditions of any other employees. This is necessary for Employee Retirement Income Security Act (ERISA) compliance purposes.

If you have any interns whose work with your company crosses over the 1,000-hour mark, then they must be allowed to enroll in your company’s retirement plan with the same employer match provided to all other employees. If the same intern works with your company for more than one semester within a one year period, they could easily cross the 1,000-hour mark that will make them eligible to participate in your retirement program. If your company isn’t prepared to allow interns to participate in its retirement plan, you’ll need to establish program parameters that prevent interns from reaching the 1,000-hour threshold. Your plan document will dictate whether there is any hours of service requirement on retirement plan eligibility and participation.

It’s not unusual for companies to hire former interns as part-time (or even full-time) team members after their internship. It’s important to be aware that all of the hours they worked for your company count toward their 1,000 hours.

One of the best ways to build a comfortable retirement nest egg is to start saving early. You may contribute between 2% to 75% of your eligible compensation to your 401(k) Plan account on a pretax, Roth and/or after-tax basis, up to the applicable IRS limits. If you worked for multiple employers during the year, you are responsible for monitoring the IRS annual limit for all plans in which you’ve made contributions. You can enroll and make changes to your plan anytime throughout the year beginningJanuary 1, 2023.

Paid Time Off (PTO) and Leave

While the federal government does not require employers to provide employees with paid time off from work, many states and municipalities do. A few states require paid vacation time. A few states require parental leave above and beyond what is required under the federal Family Medical Leave Act (FMLA).

For example:

New York State employers must provide employees with either 40 or 56 hours of paid sick leave per year, depending on company size. Employees are eligible to begin taking accrued leave immediately upon hire.
California employers must provide employees with 40 hours of sick leave per year. Employees must be eligible to take that leave by their 90th day of employment with the company.

It’s important to be aware of and comply with leave laws by state and municipality in any state where your company has employees (including interns) working. This is a particularly important consideration if your company has a remote internship program that could lead to hiring in a new state.

Intern employees are eligible for certain paid time off benefits under Student and Recurrent Paid Leave. Student interns may accrue paid leave at 1 hour for every 30 hours worked, up to a maximum of 80 hours. Accrued hours under the Student and Recurrent Paid Leave plan may be used for a variety of reasons (e.g.

We’re pleased to announce the expansion of Sandia’s Vacation Buy program to year-round student interns. During Sandia’s Open Enrollment period year-round student interns, can buy extra work hours for that big getaway you’re planning next year. Vacation Buy hours cannot be used for Winter Shutdown and must be used before Winter Shutdown.

Non-Mandated Benefits

Most companies offer a variety of employee benefits programs beyond what the law requires (such as vision, dental, or life insurance). For benefits like these, employers are free to set their own policies. Your company should have clear policies that specify which types of positions are benefits-eligible and which are not. These policies must, of course, be non-discriminatory.

A business that expects to bring in employees for a set period of time, as is the case with interns, may find it beneficial to classify some jobs as “regular” positions and some jobs as “temporary” positions in order to help clarify the distinction between benefits eligible and ineligible positions. This type of distinction allows an employer to develop a policy indicating that regular full-time and/or regular part-time positions are benefits eligible, but that positions classified as temporary are not. Your policy will need to clearly specify which types of jobs will be classified as temporary. This classification usually includes roles like interns, seasonal workers, and project-specific employees. It’s important to note that this type of policy does not impact eligibility for mandated benefits. PPACA requirements, ERISA requirements, and state/municipal leave requirements apply across the board, regardless of how the employer classifies the status of positions. Additionally, it is important to ensure that all internal policies are in line with applicable benefit plan documents.

All Sandia interns and their families are eligible for lifelong membership in Sunward. The credit union is located onsite, so you can easily open and maintain a checking and/or savings account.

Creating a Positive Intern Experience

Beyond the tangible benefits, fostering a positive and enriching experience is crucial for attracting and retaining top intern talent.

Mentorship and Networking

Set up a mentor for the intern. You will be matched with a full-time mentor in a related technical or business discipline. The mentor will work closely with you to make your internship a rewarding experience. The opportunity to connect and network can be a huge bonus as you navigate your next academic steps and prepare for your career.

Orientation and Training

During your first week, orientation meetings will set you on your course, and opportunities to attend seminars, info sessions, social activities, and other events will give you the opportunity to connect with Sandians throughout your internship.

Clear Guidelines and Expectations

Check the guidelines for reimbursement if the intern is working remotely. Set up a system for the intern to track all time worked, regardless of whether it is onsite or remote work. Be sure to explain the guidelines for tracking time to the intern, as this may be their first time doing so. Check your state and local laws for the requirements for unpaid internships.

Intern pay is structured in a specific way.

The Benefits for Companies

Internship and co-op programs inject fresh perspectives and innovative thinking into the company. Students bring a wealth of current knowledge and a willingness to explore new ideas, helping organizations stay at the forefront of industry trends.

Internships and co-op programs serve as effective talent channels, allowing companies to identify and nurture promising individuals early in their academic careers. By offering these students exposure to the company's culture, values, and work environment, businesses can better assess their potential for long-term success within the organization. Companies that invest in internships or co-op programs can significantly reduce recruitment costs. These programs serve as an extended interview process, allowing employers to evaluate candidates' skills, work ethic, and cultural fit before making full-time hiring decisions.

Internships and co-op programs contribute to the creation of a diverse and inclusive workplace. By attracting students from different backgrounds, experiences, and perspectives, companies can cultivate a dynamic and richly diverse workforce. Internship and co-op programs facilitate knowledge transfer within the organization. Experienced employees act as mentors, sharing their expertise and industry insights with interns. This mentorship not only helps interns develop professionally but also allows seasoned employees to refine their leadership and coaching skills. Participation in internships or co-op programs enhances a company's employer brand. Positive experiences shared by interns contribute to a favorable reputation, making the company more attractive to top-tier talent. Companies that engage with internships or co-op programs are better positioned to adapt to evolving industry landscapes. Interns bring the latest academic knowledge and technological skills, helping companies stay agile and responsive to emerging trends.

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