Do You Have to Pay Summer Interns? What Employers Need to Know

Generally, yes, you do have to pay summer interns, though it depends on who benefits most from their work.

The U.S. Department of Labor (DOL) has adopted the “primary beneficiary test” to determine whether a worker is an employee (who must be paid per federal wage and hour law) or can be classified as an unpaid intern (a non-employee who is exempt from federal wage and hour law). If the worker is the primary beneficiary of the arrangement — as opposed to the employer —  they can be classified as an unpaid intern. If the employer is the primary beneficiary, the worker must be classified as an employee and must be paid minimum wage and overtime under the Fair Labor Standards Act.

To determine who the primary beneficiary is, consider the extent to which:

• The internship provides training that would be similar to what would be given in an educational environment, including clinical and other hands-on training provided by educational institutions.
• The internship is tied to the intern’s formal education program through integrated coursework or the receipt of academic credit.
• The internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
• The internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
• The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
• The intern and the employer understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee.
• The intern and the employer understand that the internship is conducted without entitlement to a paid job at the end of the internship.

According to the DOL, the test is flexible, and no single factor will necessarily tip the scales. But as a practical matter, if having summer interns saves your company money or the interns aren’t receiving academic credit, you should think very hard about classifying them as non-employees.

If you’re unsure whether the worker should be classified as an unpaid intern or a paid employee, the safer option would be to classify them as an employee. Misclassification can be costly. And as is always the case, you should check state law for any additional requirements.

What Should You Pay a Summer Intern?

If you determine that your summer interns are employees entitled to compensation, the next question is whether the intern is exempt or nonexempt according to the FLSA. Typically, interns will not be exempt, either because they do not meet the duties test for white-collar exemptions, because they are paid less than the statutory minimum salary, or both. Employers must comply with federal labor laws and the more restrictive state and local laws, so apply wage-hour requirements to the intern as you would for any other employee. Assuming your interns are nonexempt, they must be paid at least the minimum wage (federal, state, or local, whichever is higher), receive overtime when applicable, and be subject to your state’s meal and rest break rules.

If you are unsure how much to pay interns, consult with your local high school or college placement center. Their counselors may be able to give you some direction on what other employers in your area are paying. Pay levels for internships are typically determined by a student’s year in school and field of work. The National Association of Colleges and Employers (NACE) 2022 Internship & Co-op Survey Report found that companies expect to pay bachelor’s degree-level interns an average of $20.82 per hour. Pay for high school teens is typically minimum wage.

Offering Health Insurance to Summer Interns

Whether you need to offer benefits depends on your health plan eligibility terms. However, offering benefits to interns can enhance your employment brand and reputation in college placement offices and within the labor marketplace overall.

Summer interns by nature are “temporary” employees, as their duration of employment is expected to last not more than the summer (e.g., 90-120 days). While you can classify these employees as temporary, their eligibility for benefits will be determined by the terms of your group health insurance plan and the terms of any other company-provided benefits policies.

Concerning healthcare benefits, temporary or seasonal workers don’t qualify under many plans. Employees who work less than six months are often excluded from the plan and not offered coverage per the plan’s guidelines. However, if the temporary work period exceeds six months, they would usually be treated as a regular employee, even if they are classified as ”temporary” in the employer’s internal systems. We recommend you check with your insurance broker to see if there is specific wording that would make temporary or seasonal workers eligible under your plan.

If your summer interns are eligible, you should provide them with access to this benefit per your usual waiting periods. We recommend you confirm your plan’s exact rules with your carrier or benefits broker to ensure you’re following your plan’s expectations.

Note: Applicable large employers (ALEs) may be required to offer group health insurance benefits to avoid potential penalties under the Affordable Care Act (ACA). ALEs are employers that had an average of 50 or more full-time equivalent employees in the prior calendar year. Under the ACA rules, interns can be defined as seasonal employees when hired into positions for which the customary annual employment is six months or less. The ACA requirement to offer health insurance may be triggered for seasonal employees (interns), depending upon a complex set of rules. Employers with fewer than 50 full-time equivalent employees are exempt from the ACA requirement to offer health insurance to avoid potential tax penalties.

Protected Class for Interns in New York

Effective August 23, 2023, the New York Human Rights Law (NYHRL) protections for interns expanded to protect them from discrimination and harassment based on their gender identity or expression. Under the NYHRL, interns are defined as workers who perform work for an employer for training purposes, are not required to be hired when they’re done with training, and are unpaid. Importantly, interns and employees who work only during the summer are not the same type of worker. Employees—regardless of the time of year they’re hired—must be paid by their employer for the work they perform.

Tips for Hiring Summer Interns

Manage interns as closely as employees, if not more so. Your company can be held responsible for the actions of any workers, including unpaid interns, while they are performing work for you. Courts will view interns like employees.

To ensure interns are paid correctly, they must maintain time records. To avoid the possibility of FLSA violations, companies that find themselves in the position of “employer” should ensure their interns accurately capture and are paid for all their hours of work.

Check benefits eligibility requirements to comply with the ACA and your benefit plan rules (if applicable).

Apply your company’s workplace policies to interns, for both consistency and good positive employee relations reasons. Interns who are considered employees have the same legal protections as your regular employees, and even unpaid interns may be able to pursue claims under Title IX, which bans sex discrimination in any education program, or pursue common-law job-bias claims, such as infliction of emotional distress.

Hiring summer students is a great way to help youth learn what it takes to be successful in business while helping employers get special projects completed. Plan ahead and structure your program so that your summer internship program is a great experience for everyone.

HR Guidance for How to Pay Summer Interns and More

If you’re hiring summer interns and want to ensure you are doing it the right way, you need an HR expert on your team. If you’re a small business without the HR resources to do so, outsourcing to the professionals at GTM is a good solution. We’ll have an HR consultant work directly with you — even on-site if you like — to review your HR practices and ensure you are compliant with labor laws. Whether you need full-time help or just occasional assistance, we’ll customize a plan that fits your business. Fill out the brief form below to learn more.