.webp?width=1200&height=800&name=summer-intern-pay%20(1).webp)
Internships can help small businesses introduce students to their industries, complete meaningful projects and develop potential future employees. But before bringing an intern into the workplace, employers must answer an important question: Does the intern have to be paid?
The answer depends on the nature of the relationship, not the job title, the intern’s age or whether the student receives academic credit.
For-profit employers generally must pay interns who qualify as employees under the Fair Labor Standards Act. In limited circumstances, an internship may be unpaid when the intern is the primary beneficiary of the arrangement.
Here is what employers should consider when determining whether and how to pay interns.
The U.S. Department of Labor uses the “primary beneficiary” test to determine whether an intern or student working for a for-profit employer is entitled to minimum wage and overtime under the Fair Labor Standards Act.
The test examines the economic reality of the relationship and asks which party receives the primary benefit. When the employer is the primary beneficiary, the intern generally is considered an employee who must be paid. When the intern is the primary beneficiary, the internship may qualify as unpaid.
The primary-beneficiary test is flexible. No single factor determines the outcome, and an employer does not have to satisfy every factor. Instead, employers must consider the complete circumstances of the internship.
RELATED: FLSA Basics: A Toolkit for Employers >>
The Department of Labor identifies seven factors courts commonly consider.
The intern and employer clearly understand whether compensation will be provided.
An express or implied promise of compensation suggests the intern may be an employee. Employers should communicate the compensation arrangement clearly before the internship begins.
The internship provides training similar to what the intern might receive in an educational environment, including hands-on or clinical training.
An unpaid internship should be designed primarily as a learning experience rather than as a way for the employer to obtain free labor.
The internship is tied to the student’s education through integrated coursework, academic requirements or the receipt of course credit.
However, a for-credit internship is not automatically an unpaid internship. Academic credit is one consideration in the overall analysis and does not replace wages when the intern otherwise qualifies as an employee.
The schedule accommodates the intern’s classes, exams and other academic obligations, including the academic calendar.
This factor may include offering flexible hours or limiting the internship to a summer, semester or other defined academic period.
The internship lasts only as long as it continues to provide meaningful educational benefits.
An internship that continues indefinitely or primarily meets an ongoing staffing need may be more likely to resemble regular employment.
The intern’s work complements the work of paid employees while providing significant educational value to the intern.
An intern should not simply replace an employee, fill a vacant position or perform routine work that the employer otherwise would need to assign to paid staff.
The intern and employer understand that completing the internship does not automatically entitle the intern to a paid position.
Employers may still hire successful interns, but they should not promise future employment as part of an unpaid arrangement.
These factors must be evaluated together. Contrary to the previous version of this article, employers do not have to meet all seven factors before an internship may be unpaid.
No. Academic credit is only one factor in the primary-beneficiary analysis.
The college or university decides whether an internship qualifies for credit. The school may require learning objectives, a minimum number of hours, supervisor evaluations or other documentation.
But receiving academic credit does not determine whether the student is an employee under the FLSA. An intern may receive course credit and still be entitled to wages.
Similarly, an employer should not present academic credit, mentoring, networking or résumé experience as substitutes for legally required compensation.
RELATED: 5 Best Practices for Building a Successful Internship Program >>
Potentially.
The primary-beneficiary guidance in the Department of Labor’s internship fact sheet specifically addresses interns working for for-profit employers.
Individuals may sometimes volunteer for public agencies or charitable nonprofit organizations without becoming employees when they freely offer their services for public-service, religious or humanitarian purposes without expecting compensation. Different requirements apply, and the arrangement must be genuinely voluntary.
Nonprofit status alone does not automatically make every unpaid internship lawful. Organizations should evaluate the specific arrangement and seek guidance when the classification is uncertain.
RELATED: Hiring Summer Interns? Ready This First >>
When the facts show that an intern is functioning as an employee, the employer must follow applicable wage-and-hour requirements.
Depending on the circumstances, that may include:
Calling a worker an intern does not create an exemption from minimum wage, overtime or recordkeeping requirements. The FLSA establishes these standards for covered full-time and part-time employees.
Employers also should review applicable state and local requirements before finalizing an unpaid internship arrangement.
Many employers choose to pay interns even when an unpaid arrangement might satisfy the federal primary-beneficiary test.
There are several business reasons to consider compensation.
Many students cannot afford to work for several weeks or months without income. An unpaid position may exclude qualified candidates who need to earn money for tuition, housing, transportation and other expenses.
Paying interns makes the opportunity accessible to more students and can expand the employer’s applicant pool.
Students may compare several internship opportunities when deciding where to work. Competitive compensation can help a small business attract candidates who otherwise might choose a larger or more recognizable employer.
Paid interns may contribute to real projects, support customers, analyze information, develop content or assist with other work that has value to the business.
Compensation communicates that the employer recognizes the intern’s time and contributions.
Internships allow employers to evaluate prospective employees while the students learn the company’s processes, expectations and culture.
Paid internship experience also has been associated with stronger employment outcomes for students. The National Association of Colleges and Employers advocates for paid internships and reports that paid interns have historically received more job offers and higher starting salaries than unpaid interns.
Paying an intern does not eliminate every compliance concern, but it can reduce the risk associated with improperly classifying an employee as an unpaid intern.
When the classification is uncertain, paying the intern is generally the more cautious approach.
RELATED: How Onboarding Sets Interns Up for Success >>
Employers sometimes use the word “stipend” to describe a fixed payment made during or after an internship. But the label placed on the payment does not determine whether wage laws apply.
If the intern legally qualifies as an employee, the total compensation must satisfy applicable minimum wage and overtime requirements. An employer cannot avoid those obligations simply by calling the payment a stipend.
For example, an employer should not offer a flat $1,000 stipend for an internship without determining:
Some colleges, workforce organizations or community programs may offer grants, scholarships or other funding that helps support paid internship opportunities. Employers still should confirm how the funding arrangement affects payroll and wage compliance.
Employers do not have to create full-time internship positions to offer valuable paid experiences.
Small businesses may be able to manage costs by:
Reducing the number of hours can lower the program’s overall cost, but employers still must pay interns for all hours worked and comply with applicable wage requirements.
Intern pay varies based on the position, industry, location, required education and complexity of the work.
According to the National Association of Colleges and Employers’ 2026 compensation data, the average hourly wage for bachelor’s-degree-level interns was $23.35. The figure reflects compensation reported for summer 2025 and should be treated as a national benchmark rather than a required or universally appropriate rate.
When setting an intern’s pay rate, employers should consider:
Employers can research comparable positions, consult school career centers and use market compensation data. A reputable professional employer organization also can help employers evaluate compensation benchmarks and establish an appropriate pay range.
Employers should explain compensation before the student accepts the internship.
The job posting, offer letter or internship agreement should address:
Clear communication helps prevent misunderstandings and ensures the intern and employer begin the relationship with the same expectations.
Unpaid internships require careful planning. The arrangement must be designed primarily to provide educational benefits to the intern—not to supply the employer with uncompensated labor.
Employers should be especially cautious when interns:
Misclassification can expose an employer to claims for unpaid wages and overtime, along with other potential costs.
When the facts do not clearly support an unpaid internship, compensating the student is generally the safer choice.
Internships can benefit students and small businesses, but employers should not base compensation decisions solely on budgets, job titles or academic-credit arrangements.
Through Axcet HR Solutions’ comprehensive HR services, clients have access to experienced HR professionals who can help them evaluate internship positions, understand applicable wage-and-hour requirements, establish appropriate pay and build structured programs that benefit both the employer and the intern.
Looking for broader HR support as you hire and manage employees? Learn how Axcet’s comprehensive PEO services give small and mid-sized businesses access to the HR expertise they need. Reach out to an experienced Axcet HR consultant today >>
Written by
Kellie Rondón, SPHR, is a Human Resources Consultant at Axcet HR Solutions with over ten years of progressive HR experience and a Senior Certification in Professional Human Resources. Kellie enjoys providing clients with professional employee relations guidance, training and development, and compliance expertise catered specifically to small business. She has a passion for helping business owners and leaders strengthen their culture and business trajectory through strategic HR consulting. Her commitment to delivering peace of mind and fostering long-term client relationships is evident in her work and contributions to our team.
.png){kind=logo}
.webp)
Let us know what you think...