Navigating Internship Pay Rates: A Comprehensive Guide
Internships are a crucial stepping stone for students and graduates seeking to gain practical experience and launch their careers. While the experience itself is invaluable, understanding internship pay rates is essential for both interns and employers. This article provides a comprehensive overview of internship compensation, addressing key considerations for navigating this important aspect of professional development.
The Landscape of Internship Salaries
The notion of a "typical" summer internship salary is somewhat misleading. The reality is that compensation varies significantly depending on the employer, industry, location, and the intern's field of study. Some companies pay their interns wages that rival or even exceed the average annual salary for experienced workers.
High Pay for Interns: A Matter of Supply and Demand
The high salaries offered by some employers can be attributed to simple economics: supply and demand. Companies in competitive industries often need to attract top talent early on. Bloomberg L.P. are examples of employers known to offer very competitive compensation to their interns. These salaries are quite substantial, even when compared to entry-level positions and beyond.
Average vs. Actual Salaries
It's important to remember that salary data often reflects averages. The actual pay rate for a specific internship may be higher or lower depending on the specific discipline and the company's compensation policies.
Beyond the Paycheck: The True Value of an Internship
While compensation is undoubtedly a factor, it's important not to let it be the sole determinant when choosing an internship. The primary goal of an internship should be to gain valuable experience and develop skills that will benefit you in the long run.
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Long-Term Dividends
The dividends of a well-chosen internship will be paid out in the future. The right internship can lead to greater job satisfaction and higher long-term earnings.
Cost of Living Considerations
Salaries tend to be higher in areas with a high cost of living. This is an important factor to consider when evaluating internship offers. It’s not just about how much you earn, but also how much you keep after expenses. The same principle applies to jobs after graduation.
Salary Calculators: A Valuable Resource
If you want to know the going rate for both entry-level and experienced jobs in various fields and locations.
Trends in Internship Compensation
Data from the National Association of Colleges and Employers (NACE) indicates that the average hourly wage for bachelor's degree-level interns has increased over the past decade. According to NACE’s Guide to Compensation for Interns & Co-ops, the average hourly wage stands at $23.04.
Inflation Adjustment
It's important to consider the impact of inflation on internship wages. When adjusted for inflation, the average hourly wage for interns has decreased 1.1% from 2015 to 2024.
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Limited Benefits
In addition to wages, it's important to consider the benefits offered to interns. Typically, these benefits are limited. While many companies offer social activities and paid holidays, other benefits are less common. More than four out of five respondents provide social activities, and more than half offer paid holidays, but most don’t offer other benefits.
Navigating Paid Internships: Key Considerations for Employers
Many businesses are interested in offering paid internships, but this often raises questions about appropriate compensation, payment methods, and legal requirements.
Paid Interns as Employees
It's crucial to understand that paid interns are classified as employees. The term "paid intern" is simply a job title, not a separate employment class with different rules. Paid interns are W-2 employees, entitled to the same protections as other employees. This includes protections under the Fair Labor Standards Act (FLSA) and state wage and hour laws, such as meal and other breaks, and overtime wages, if applicable.
Affordable Care Act (ACA) Implications
Under the Affordable Care Act (ACA), applicable large employers (ALEs) are generally required to offer employees who work at least 30 hours/week the opportunity to enroll in employer-sponsored health group insurance coverage after 90 days of full-time employment.
Exceptions Under the ACA
There are two exceptions under the ACA to consider for paid interns:
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- Seasonal Employees: If interns are hired only during the summer season and work for less than six months, they may fall under the seasonal employee exception.
- Part-Time Employees: If paid interns work less than 30 hours per week, they may not be entitled to group health insurance coverage as part-time employees.
A paid intern who will work for your company for no more than 90 days may not be eligible for group health insurance coverage, depending on how the applicable plan documents define the initial waiting period.
Classifying Paid Interns: Non-Exempt Hourly Employees
Paid interns are typically classified as non-exempt hourly employees. This is because they are unlikely to be managing people or exercising "independent judgment with respect to matters of significance" in the workplace.
Stipends vs. Wages: Understanding the Difference
Most interns must be paid at least the applicable minimum wage for all hours worked. Under very limited circumstances, a company may participate in an unpaid educational internship program. It's essential to consult with legal counsel and understand applicable federal and state laws before implementing an unpaid internship program.
Employers sometimes consider offering stipends to interns instead of regular wages. This is generally only permissible in limited circumstances, such as when the company is participating in an unpaid educational internship program.
Stipends in Unpaid Educational Internships
If the unpaid educational internship program allows stipends, the program meets all the requirements under applicable federal and state law for the unpaid educational internships, and the stipend reimburses expenses (like food or travel) rather than pays for work performed, a stipend may be appropriate.
It’s important to know that a stipend generally cannot be paid in place of regular wages. As mentioned above, paid interns are W-2 employees and are entitled to be paid at least the applicable minimum wage for all hours worked. While you can reimburse a paid intern for food or travel expenses, provided they give you receipts, it's generally not a good idea to provide such reimbursement by way of an upfront flat stipend.
Determining Internship Pay Rates: A Balancing Act
Paid interns must be paid at least the applicable minimum wage for all hours worked and overtime wages, if applicable. However, employers can always choose to pay more.
Factors Influencing Pay Rates
The decision to pay an intern more than the minimum wage depends on various business factors:
- Market Conditions: Competitive industries may require higher pay rates to attract top talent.
- Affordability: The company's financial resources play a role in determining compensation.
- Value of Work: The complexity and importance of the intern's tasks should be considered.
Considering a Higher Minimum Wage
Moses Balian, an HR Consultant at Justworks, suggests employers might consider paying interns at least equivalent to the highest minimum wage in the country. This approach ensures compliance with minimum wage laws across different locations and helps interns cover living expenses in major cities.
Internship Eligibility for Benefits
An intern who continues to work for you full-time after 90 days may become eligible for benefits. In many cases, however, especially for college students who have less time to work after a paid summer internship is over and they have returned to a regular schedule of classes, a continued internship could likely involve less than 30 hours of work per week.
The Primary Beneficiary Test: Determining Employee Status
The Department of Labor Wage and Hour Division uses a set of seven factors, known as the primary beneficiary test, to determine whether an intern or student is actually an employee under the FLSA:
- Expectation of Compensation: The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, expressed or implied, suggests that the intern is an employee-and vice versa.
- Educational Training: The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- Academic Integration: The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- Academic Calendar Accommodation: The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- Beneficial Learning Period: The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- Complementary Work: The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- No Entitlement to a Paid Job: The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Paying Interns with Justworks
Once you’ve determined that you want to offer someone a paid internship, you actually have to set them up in your payroll system as a W-2 employee. Setting up wage payments as a Justworks customer is simple.
If you’re hiring a paid intern for a classic summer internship, lasting less than 90 days, onboard them as a paid intern. If you think you may want to keep the person on staff beyond that 90 day limit, onboard them as a part-time employee working 30+ hours/week.
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