Whether an internship pays depends on who benefits more from the arrangement — you or the employer. If the balance tips toward the employer, you’re legally an employee, and federal law entitles you to at least $7.25 per hour, with many states setting a higher floor.1Office of the Law Revision Counsel. 29 USC 206 Minimum Wage If the balance tips toward you, through structured training and educational value, the internship can lawfully be unpaid. The test that decides which side you’re on has seven parts, and no single one controls.
The Primary Beneficiary Test
The Fair Labor Standards Act requires employers to pay employees a minimum wage, but the statute doesn’t specifically mention interns. Courts filled the gap with the “primary beneficiary test,” which asks a direct question: who gets more out of the arrangement?2U.S. Department of Labor. Fact Sheet 71 Internship Programs Under the Fair Labor Standards Act If the employer captures more value from your work than you gain in training, you’re an employee and must be paid. If the internship primarily benefits you, it can remain unpaid.
The Second Circuit established this framework in Glatt v. Fox Searchlight Pictures, holding that no single factor is decisive and courts must weigh all the circumstances together.3Justia. Glatt v Fox Searchlight Pictures, No 13-4478 (2d Cir 2015) The Department of Labor adopted the same approach and applies it nationwide.
The Seven Factors
Courts and the DOL look at these seven questions when deciding whether an intern is really an employee entitled to pay:2U.S. Department of Labor. Fact Sheet 71 Internship Programs Under the Fair Labor Standards Act
- Do you and the employer both clearly understand the position is unpaid? Any promise of compensation, spoken or implied, points toward employee status.
- Does the internship provide hands-on training similar to what you’d get in a classroom or clinical setting?
- Is the internship tied to your formal education through integrated coursework or academic credit?
- Does it accommodate your academic calendar and class schedule?
- Is the duration limited to the period in which the internship provides you with meaningful learning?
- Does your work complement, rather than displace, the work of paid employees while giving you real educational benefits?
- Do you and the employer both understand there’s no entitlement to a paid job when the internship ends?
No single factor controls. An internship can fall short on one or two and still be lawfully unpaid if the overall balance points to the intern as the primary beneficiary.4U.S. Department of Labor. Field Assistance Bulletin No 2018-2
What You’re Owed If You’re an Employee
If the analysis makes you an employee, the federal floor is $7.25 per hour, but many states set a higher rate, and the higher rate wins. As of 2026, Washington sits at $17.13, Connecticut at $16.94, and California at $16.90. New York City and surrounding counties require $17.00 per hour.5U.S. Department of Labor. State Minimum Wage Laws
Some states also apply stricter versions of the primary beneficiary test, sometimes requiring employers to show they gain no immediate operational advantage from the intern’s work. Check the rules in the state where you’ll actually be working.
Employee status also brings overtime. Every hour beyond 40 in a workweek must be paid at time and a half your regular rate, whether you’re paid hourly or receive a fixed stipend.6Office of the Law Revision Counsel. 29 USC Chapter 8 Fair Labor Standards – Section 207 Maximum Hours An employer can’t dodge overtime by relabeling wages as a “stipend.” If, on the other hand, the seven-factor analysis confirms you’re a genuine trainee, you’re entitled to neither minimum wage nor overtime.2U.S. Department of Labor. Fact Sheet 71 Internship Programs Under the Fair Labor Standards Act
How Internship Pay Is Structured
Hourly Wages
The most common structure is a straightforward hourly wage. It makes minimum wage compliance easy to verify and produces a clean record if any dispute comes up later.1Office of the Law Revision Counsel. 29 USC 206 Minimum Wage
Stipends
Some employers pay a lump-sum stipend instead of an hourly wage, often framed as a living or travel allowance. A fixed payment doesn’t shield an employer from wage law. If you’re an employee, the stipend has to work out to at least the applicable minimum wage for every hour worked. A $2,000 monthly stipend can sound generous, but at 50 hours a week it may fall below the legal minimum on an hourly basis.
Academic Credit
Academic credit is common, and it factors into the primary beneficiary test, but credit alone does not permit an employer to skip paying you.2U.S. Department of Labor. Fact Sheet 71 Internship Programs Under the Fair Labor Standards Act Credit and wages aren’t mutually exclusive. If the overall picture shows you’re an employee, you’re owed pay whether or not you also earn credit toward your degree.
Housing and Relocation
Larger employers, especially in tech and finance, sometimes add housing allowances, corporate apartments, or relocation stipends on top of regular pay. These benefits are generally taxable as income unless narrow exceptions apply. Some employers “gross up” the amount to offset the tax hit. Ask upfront whether taxes will be withheld or whether you’ll owe them when you file.
Taxes on Internship Pay
If your employer treats you as an employee, your internship wages face the same federal income tax withholding, Social Security tax, and Medicare tax as any other job. You’ll get a W-2 at year’s end.7Internal Revenue Service. Independent Contractor (Self-Employed) or Employee
A stipend that compensates you for teaching, research, or other services is taxable income, even if the school labels it a fellowship or scholarship. Only amounts used for qualified education expenses like tuition and required fees can be excluded, and only when the payment isn’t conditioned on performing services.8Internal Revenue Service. Publication 970 Tax Benefits for Education
One narrow tax break: if you’re enrolled at least half-time and your internship is with the same school where you’re taking classes, your wages may be exempt from Social Security and Medicare taxes under the student FICA exception.9Office of the Law Revision Counsel. 26 USC 3121 Definitions It doesn’t apply to internships at outside companies, even if your school arranged the placement, and it doesn’t apply if you get professional employee benefits like retirement plan access, paid vacation, or employer insurance.10Internal Revenue Service. Student FICA Exception
Pay by Industry
Compensation varies widely by field. Software engineering, investment banking, data science, and mechanical engineering sit at the top. Major technology companies frequently pay interns between $5,000 and $10,000 per month, and some layer on housing allowances or signing bonuses. These employers use pay as a recruiting tool.
Nonprofits, government agencies, and arts organizations are far more likely to offer unpaid positions or small stipends, often emphasizing the public-service or educational value of the work. Some government agencies have moved toward paid models to broaden access, but many roles in these sectors still pay little or nothing.
Extra Rules If You’re Under 18
Federal child labor rules apply whether the internship is paid or unpaid, and they limit both hours and tasks.11U.S. Department of Labor. Fact Sheet 43 Child Labor Provisions of the Fair Labor Standards Act for Nonagricultural Occupations At ages 14 and 15, you can work only outside school hours: no more than 3 hours on a school day, 8 hours on a nonschool day, and 18 hours in a school week, rising to 40 hours per week during breaks. Work is allowed only between 7 a.m. and 7 p.m., extended to 9 p.m. from June 1 through Labor Day. At 16 and 17, federal hours limits go away, but hazardous occupations remain off-limits. Seventeen categories of hazardous work — including operating forklifts, using power-driven meat-processing equipment, roofing, and driving motor vehicles — are barred to all minors. Many states add restrictions on top of the federal minimums.
If You’re an International Student
F-1 students generally need Curricular Practical Training authorization before starting any U.S. internship, paid or unpaid. Your school’s designated official has to authorize CPT in SEVIS before you begin, and the training must relate directly to your major.12Study in the States. F-1 Curricular Practical Training (CPT) You typically need to have been enrolled full-time for at least one academic year, though graduate programs that require earlier training can qualify sooner.
Watch the CPT clock. Using 12 months or more of full-time CPT wipes out your eligibility for Optional Practical Training after graduation. Part-time CPT of 20 hours per week or less does not affect OPT.13U.S. Immigration and Customs Enforcement. Practical Training Think that trade-off through before committing to a full-time summer internship on CPT.
J-1 exchange visitors may also intern in the U.S. but must show sufficient funding to cover living expenses for the stay. Program sponsors set the specific minimums.
If You Think You Should Have Been Paid
You can file a complaint with the Department of Labor’s Wage and Hour Division at 1-866-487-9243. The call routes you to the nearest regional office, which evaluates whether an investigation is warranted.14U.S. Department of Labor. How to File a Complaint
Deadlines are strict. You have two years from the date of the violation to file a claim for unpaid wages, and three years if the violation was willful — meaning the employer knew or should have known it was breaking the law.15GovInfo. 29 USC 255 Statute of Limitations Miss those windows and the claim is barred.
A successful claim recovers the full amount of unpaid wages. The FLSA also provides for an equal amount in liquidated damages, effectively doubling the recovery, and courts can order the employer to pay your attorney’s fees and costs.16Office of the Law Revision Counsel. 29 USC 216 Penalties Many states add their own penalty multipliers or remedies, so the total exposure for an employer that misclassifies interns can run well past the raw unpaid wages.