Rethinking Intern Compensation: The Case for Lump Sum Payments Over Short Term Housing Benefits

Corporate interest in internship programs is growing. In fact, internship hirings rose by more than 9% last year –and that number is expected to grow to more than 22% this year. As competition for up-and-coming talent intensifies, employers are reconsidering the way that they compensate interns.

In the past, providing short term housing benefits was sufficient. Now, paid internships are on the rise—and with good reason.  

Is it time to rethink intern compensation (or lack thereof)? Let’s take a closer look.

The Growing Value of Internships 

Obviously, internships benefit both employers and college students. For students, they provide real, resume-enhancing work experience. They’re a terrific way to make professional contacts, see the world and test-drive potential employers.

For employers, internship programs are an effective means of increasing manpower for below-market cost, while generating good will and enhancing company culture. Best of all, they’re powerful recruiting tools—and that matters more than ever.

After all, studies show that 70% of interns are subsequently offered jobs by their employers, and 80% accept them. Those are terrific odds for employers.

In fact, in one survey of recruiting methods, employers overwhelmingly found that internship programs deliver the best ROI for attracting entry-level employees.

So, how do you ensure that your internship program is compelling?

Show ‘em the Money

Not surprisingly, paid internships are far more popular with students than the unpaid variety. Everyone wants—and deserves—to be paid for their work. 

According to NACE (the National Association of Colleges and Employers), half of the 2023 graduating class held internships, and 59% of those were paid. In addition, paid interns received more job offers—and at higher starting salaries—than their unpaid counterparts.

Paid internships benefit employers, too. Studies show that paid internship programs not only lead to more successful recruiting, but yield higher retention rates as well.

Unpaid Internships Are Risky Business 

While unpaid internships are not outright illegal, it’s a thin line. Under the Fair Labor Standards Act (FLSA), unpaid internships are subject to a seven-factor compliance test that distinguishes interns from employees. When employers run afoul of these standards, they may be subject to fines and penalties—not to mention, take a hit to their brand.

In addition, unpaid internships have sparked a number of million-dollar, class-action lawsuits—just ask Viacom, Conde Nast and NBCUniversal. 

Employers should ask themselves: Is it worth the risk?

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How Short-term Housing Benefits Fall Short

Okay, but what if you provide interns with short-term housing instead of lump-sum stipends? After all, most out-of-town students can use help securing safe, conveniently-located housing.

That’s a nice idea in theory, but the market has drastically changed. It’s an extremely competitive and turbulent housing market - even in the rental space, additionally, there is also the risk of liability here.

For another, if there’s one thing Gen Z likes, it’s autonomy. Lump-sum stipends give interns the flexibility to make their own housing decisions.

Finally, managing short-term housing is a massive headache for many employers, who are tasked with finding and maintaining these housing arrangements…managing the logistics…and dealing with ever-present repair issues like leaky faucets and spotty Wi-Fi.

Chances are, your people have better things to do than pinch-hit as real-estate agents and landlords—especially since there’s a better, easier solution.

The Best of Both Worlds

Many business dilemmas are “either/or” situations. Fortunately, intern compensation isn’t one of them. That’s why savvy employers are now providing their interns with both lump-sum stipends and housing guidance/resources.

This way, interns are not only paid, but receive support arranging their housing, too. It’s a win/win.

While some employers have the resources to manage all this inhouse, many find it beneficial to outsource it all to a third-party expert—and often, that’s the right move.

For example, with Intern by UrbanBound, employers can:

  • Automate lump-sum disbursements—no need to set-up payroll
  • Provide vetted housing recommendations (and at preferred rates, too—a huge plus since housing costs have increased 18% in the last five years)
  • Arm interns with neighborhood and transportation guides, plus advice from former interns 
  • Give interns the company information they’ll need to hit the ground running 

Plus, Intern by UrbanBound is accessible through a sophisticated but user-friendly online portal that satisfies tech-savvy interns.

For more internship solutions, we invite you to read our infographic to learn more about Intern by UrbanBound. 

Human Resources Today