Paid vs. Unpaid Internships | H&R Block

May 23, 2017 : H&R Block Dollars & Sense

As students race toward the finish line of another academic year, the excitement of a well-deserved break shouldn’t overshadow the importance of a productive summer. But that begs the question: What does a productive summer mean to you? For many, it’s earning as much money as possible. For others, it translates into a summer internship that pays in experience rather than cash.

What if we told you it doesn’t have to be one or the other? Traditionally, summer internships have been thought of as unpaid learning experiences, but many internships qualify as paid positions. We understand it can be hard to have upfront conversations about what the internship entails and what is proper compensation for your work, so here are some tips to help determine what you want from your internship and the professional way to convey that to a new employer.

Determine what internship option is right for you.

A National Association of Colleges and Employers (NACE) study found 65.4 percent of students who completed paid internships had a job offer by graduation. In comparison, only 39.5 percent of students with unpaid internships and 38.6 percent of students with no internships had job offers by graduation. Ask yourself what’s more valuable—an unpaid internship that offers a valuable learning opportunity or a steppingstone into a career with a paid internship.

Ask for an official job description with detailed responsibilities.

Since there are real differences between paid and unpaid internships, you have the right to know what type of work you’ll be asked to do. Whereas an unpaid intern is seen more as a trainee who is there to learn from the existing staff and not brought in to displace any regular employees, a paid intern’s role involves more than educational training and has direct impact on a business’ bottom line. For simplicity’s sake, most internships in the “for-profit” sector will be viewed as true employment. (For a deeper understanding of what defines a paid internship vs. an unpaid internship, refer to the Fair Labor Standards Act.) After you’ve had time to review your responsibilities and compensation package, be sure you and your employer are on the same page.

Fill out tax forms and keep records.

If you and your employer have established that your internship is to be paid, be sure to fill out a W-4 Form (the Employee’s Withholding Allowance Certificate). Employers use it to determine the amount of tax that will be withheld from your paycheck, but for you it means that you’ll be added to the payroll. (For tips on how to fill out a W-4 Form, read this guide to tax withholding allowances.) As your summer progresses, be sure to file away all your important documents like recent pay statements in a safe place so you have records of your employment for other purchases, like applying for a loan.

It might be tempting to do nothing but sit by the pool and relax during the summer months, but remember that a little money in your pocket and some newfound real-world skills can take you a lot farther in life than a great tan.

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