Internships are an excellent opportunity for students to get real-world work experience and for employers to get help with special projects and recruiting potential employees for the future. But what do you know about compensating interns? What are the laws around minimum wage and overtime? And do you need to issue them 1099s? Here’s what you should know before bringing a summer intern onboard.
What’s the law regarding compensation?
The Fair Labor Standards Act (FLSA) is the federal law covering minimum wage and overtime compensation for workers. According to the Department of Labor, anyone working “for the benefit of” your company and not receiving educational training from you is considered an employee and must be paid a wage plus overtime if they work more than 40 hours a week. However, someone working towards a degree or certification and using the internship experience as an “integral part” of their education does not have to be compensated financially.
Do you need to file Form 1099 for an intern?
The short answer is no. As long as your intern meets the criteria for an unpaid internship set by the U.S. Department of Labor, you are not required to pay them or provide any other type of compensation.
So, what are the criteria for an unpaid internship?
According to the Department of Labor, an unpaid intern must:
- Receive training that is similar to what would be given in an educational setting
- The experience must be for the benefit of the intern
- The intern cannot displace regular employees but work under close observation
- The employer cannot derive any immediate advantage from the intern’s work
- The intern is not entitled to a job at the end of the internship
- Both the intern and employer must understand that the internship is unpaid
So, what does this all mean for you if you’re thinking about hiring an intern? Make sure you’re in compliance with all six of these conditions. Otherwise, you could be looking at some hefty back pay and penalties down the road.
Still have questions? Contact Boris Benic and Associates today. We can provide you with more information about the FLSA and how it applies to interns.