Rules must be followed when companies hire an unpaid intern

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“I’m part of a great team working on a startup company with interesting technology. We would like to bring in an intern (unpaid) this summer to help us with a variety of projects, but we don’t know where to begin in terms of putting a job description together and figuring out priorities. There is so much to do. And how do we begin to find someone who will be enthusiastic and motivated even though they aren’t getting paid?”

It’s very difficult to know where to begin, when there’s so much. Even the most seasoned entrepreneurs struggle with finding financing, gaining and retaining customers, managing research and marketing, not to mention setting priorities, and figuring out responsibilities for interns.

“As a startup founder, I found it very difficult to scale up with full-time staff when I wasn’t even paying myself at the time,” recalled Ana Caracaleanu, founder of Luevo (www.luevo.com), a hub for emerging fashion designers in New York. “So we started working closely with colleges and even high schools that provided placement opportunities for their students.”

The result of some deliberate effort, she says, was the creation of a work environment that the interns really enjoyed. “Some even extended their stay with us until they found a paid opportunity.”

Before you get going on hiring, screening and figuring out responsibilities, be sure that your company really wants to go with unpaid internships since the practice has faced increasing scrutiny in recent years. And make sure the program follows the following federal guidelines:

 The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment;

•  the internship experience is for the benefit of the intern;
•  the intern does not displace regular employees and 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.

There are New York guidelines as well, which, among other things, stipulate that students should not receive employee benefits. The company should provide general training that would qualify the students to work in any similar business and is not designed specifically for a job with the employer that offers the program. Use a screening process for the internship that is not the same as for employment, and use ads or postings that clearly discuss education or training rather than employment, though employers may indicate that qualified graduates may be considered for employment.

Concerns about potential violations of federal or state guidelines and potential lawsuits have forced some companies to stop having interns entirely. “To be honest, you will get much better applicants if you at least offer minimum wage,” says Heather Huhman, founder of Come Recommended, a content marketing and digital public relations firm, who has written extensively on the internship issue.

But that’s not an option for many startups. Despite the lack of pay, many companies say that they have been able to offer terrific enriching experiences to interns who were motivated by the chance to do work that would enhance their resumes, and that is your goal, Huhman says.

“While it’s important to frame the position around your company’s priorities, think about how the intern will benefit from the role,” Huhman says. “What specific skills will they learn that can be applied to their future career? If they do an amazing job, what quantifiable accomplishments will they walk away with upon completion that can be included on their resume? What else, besides compensation, can you offer in terms of perks and benefits?”

When you post the position, be sure it is focused enough to attract a specific type of candidate, she says. “If it’s too broad, you will actually attract fewer qualified candidates.”

If you need help, reach out to professors at local colleges and ask for help designing the position. There might be an opportunity to offer course credit, she says.

Once on board, think about what kind of environment you will be offering the intern. Caracaleanu says her startup implemented several initiatives that helped encourage the development of a “learning environment” in her company. Here are a few:

•  Interns work closely with experienced staff and shadow a mentor throughout their assignment;
• they have clear responsibilities;
•  no question is too small to ask;
•  the company provides feedback that is encouraging but allows for the intern to improve; and
•  interns are involved in marketing and operational meetings, and company professionals listen and consider the intern’s ideas.

Mark Prosser, co-founder and managing partner of Fit Small Business (fitsmallbusiness.com), says peer pressure can go a long way toward creating the right environment. “If a candidate sees their peers working hard, then they will do the same,” he says. “You need to create an environment where people are focused on being productive, and your interns, by default, will follow.”

In addition, he says, you can make it clear that this unpaid internship can potentially lead to a new hire. “If it’s well known that by doing well in the internship they may be hired, then they will be motivated to work hard.”

When it comes to alternative forms of payment, think about intangibles like mentoring. “This is especially valuable if you have industry experts on staff that will give interns some face-time over meetings or lunches,” says Joey Price, chief executive officer of Jumpstart: HR LLC, a small business consulting firm for U.S. based companies and startups.

Beyond payments, college credits and intangible rewards, unpaid interns can be compensated with some other things. “We’ve tried offering a LinkedIn recommendation (if the job is well done), or other perks like stipends for lunch or out-of-the-box compensation,” says Benjamin Zeidler, vice president of Customer Intelligence at Tenthwave Digital. “One intern had a significant other in Boston so we bought her Amtrak tickets.”

Above all, the startup companies say, make sure the work is meaningful to the interns and their future careers. “Promise them something interesting to work on that they can actually do,” Prosser says. “Most companies view interns as a free resource to work on small time-consuming or administrative work that they don’t want to do themselves. However, if you give them something that’s limited in scope, possible to accomplish and that they would be interested in working on, then they will gladly do it.”

Managers at Work is a monthly column exploring the issues and challenges facing managers. Contact Kathleen Driscoll with questions or comments by phone at (585)249-9295 or by e-mail at [email protected].