As you get ready to engage eager college students to work for you this summer, don’t run afoul of the Fair Labor Standards Act (FLSA).
Many companies view summer interns as free labor to fill in when regular employees are on vacation.
Be sure to understand whether you can treat these interns as unpaid or must pay them at least the minimum wage in your location.
Unpaid internships
These are permissible only if you meet all of the following 6 conditions listed by the U.S. Department of Labor:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern, and, on occasion, its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Setting payment for interns
If you aren’t eligible to offer an unpaid internship, should you merely pay minimum wage? Should you pay more? It depends on your situation. Some businesses pay only the minimum wage. Others pay considerably more. Glassdoor lists what some large employers are paying this summer. For example, Mastercard is paying summer interns nearly $25 per hour this year. Enterprise Rent-a-Car is paying a little more than $11 per hour.
Find more information about what to pay from PayScale.
Tax credit for certain summer workers
The work opportunity tax credit applies to summer youth that you hire in your business. The credit, which is figured on Form 5884, is up to $1,200 (40% of the first $3,000 of wages if the youth worked at least 400 hours).
To claim the credit, you must:
- Hire someone age 16 or 17 years old who lives in a federally-designated empowerment zone. This youth must not be your relative and did not work for you last year.
- Employ the worker between May 1 and September 1. Wages paid before or after these dates do not count toward the credit.
- You and the worker must sign IRS Form 8850 and submit it to your state workforce agency within 28 days of the first day of employment so that the agency can certify your eligibility for the credit.
Bottom line
The clock is ticking on your window of opportunity to hire summer interns. Determine your needs and whether these workers can help you.
