Understanding Intern Compensation

by Salary.com Staff - April 26, 2018
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The signs of spring and summer are all around us. The days are getting longer, the grass is getting greener, the trees are starting to bloom, and before long many organizations will see summer interns starting to filter in their doors.

Internship programs have many positive outcomes for students. They get exposure to what they can expect if they were to enter a similar job in the future, a realistic expectation of what it is like to work for your organization, and gain useful skills and knowledge that will make their transition to a full-time employee more seamless. These are great benefits, but one takeaway we hope interns gain is an understanding of how your organization approaches total rewards; specifically compensation.

Intern Pay: Consider Future Roles

Intern pay is often set by what was done last year or a quick internet search on intern pay. Sometimes organizations will go a step further and actually buy a compensation survey on intern pay.  Although these methods might work for hiring interns, we recommend determining intern pay by basing it off a job they could be expected to enter when they are ready to become a full-time employee. There are real benefits to this:

  • Provides a systematic way to set intern pay instead of hoping you are in the ballpark
  • Ties compensation to a current job that you are paying competitively
  • Establishes a career path
  • Helps interns understand what they can expect from the compensation program if they become full-time employees

We recommend setting intern pay much like we would for other employees in the organization, as a percentage of the range midpoint. For a new employee, in an entry-level professional role with little or no experience, we recommend setting the base pay around 80% of the range midpoint. For an intern, between their sophomore and junior year, we might recommend setting the pay around 60% of the midpoint.  If they come back between their junior and senior year, we might recommend setting pay around 70% of the range midpoint.  Then, when you want to hire them as a full-time employee, based on the experience they have gained at your organization, start them around 85% of the midpoint.  At 85% of a market competitive midpoint, your offer should be more attractive than your competitors'.

In a highly competitive recruiting environment, we know compensation will be a key factor in the final decision for many job candidates.  You do not want to lose an intern, whom you have invested a significant amount of time and resources in developing, because you only paid the going internet rate or what you paid last year with no real link to a market competitive compensation strategy.

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