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.
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.
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?
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.
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?