Summer internships can be a valuable way for students to gain experience and for employers to build a future talent pipeline. However, internship programs also come with wage and payroll considerations that should be reviewed before the intern’s first day.

A common question employers ask is do summer internships have to be paid. The answer depends on the structure of the internship, the type of organization, and whether the intern is considered an employee under federal and state wage and hour rules.

Paid & Unpaid Internships: The General Rule

Under the Fair Labor Standards Act (FLSA), for-profit employers generally must pay employees for their work. However, interns and students may not be considered employees in certain circumstances, which means the FLSA may not require compensation for their work. The U.S. Department of Labor (DOL) uses the “primary beneficiary test” to help determine whether the intern or the employer is the primary beneficiary of the relationship.

If the employer is the primary beneficiary, the intern is more likely to be treated as an employee who is entitled to minimum wage and overtime pay. If the intern is the primary beneficiary, the internship may be unpaid under federal law, depending on the specific facts and circumstances.

What Is The Primary Beneficiary Test?

The primary beneficiary test looks at the economic reality of the intern-employer relationship. No single factor controls the outcome, and the analysis depends on the details of each internship. According to the DOL, factors include whether:

• Both parties clearly understand there is no expectation of compensation
• The internship provides training similar to an educational environment
• The internship is tied to the intern’s formal education program or academic credit
• The internship accommodates the intern’s academic commitments
• The internship lasts only as long as it provides beneficial learning
• The intern’s work complements, rather than displaces, paid employees’ work
• Both parties understand the internship does not entitle the intern to a paid job afterward

 
For employers, the key takeaway is that an unpaid internship should be structured primarily as an educational experience. If an intern is performing productive work that would otherwise be handled by paid employees, the arrangement may need to be paid.

What About Non-Profits & Government Organizations?

The rules may differ for public sector and non-profit charitable organizations. The DOL states that unpaid internships for public sector and non-profit charitable organizations are generally permissible when the intern volunteers freely and without expectation of compensation.

Even so, organizations should document the purpose of the internship, the expected learning outcomes, and the understanding that the role is unpaid when applicable.

Missouri Payroll Considerations

Employers should also review state wage rules. For 2026, the Missouri minimum wage is $15.00 per hour. Missouri also states that employers subject to both state and federal minimum wage laws must pay the applicable wage required by law, and paying only the lower federal rate may violate Missouri law.

For paid interns in Missouri, employers should consider:

• Minimum wage requirements
• Overtime rules for hours worked over 40 in a workweek
• Timekeeping procedures
• Payroll tax withholding
• Workers’ compensation considerations
• Required workplace postings
• Child labor rules, if the intern is under 18

Payroll Risks To Watch

Internship misclassification can create payroll exposure. If an unpaid intern should have been classified as an employee, the employer may need to address unpaid wages, overtime, payroll taxes, and related penalties.

Before hiring summer interns, employers should review whether the internship:

• Has a clear educational purpose
• Includes training, mentorship, or job shadowing
• Is connected to coursework or academic credit, when possible
• Has a defined start and end date
• Does not replace regular employees
• Includes a written internship agreement
• Tracks hours if the intern is paid, nonexempt, or potentially subject to wage requirements

Practical Steps Before Your Internship Program Begins

Employers can support a stronger internship program by addressing payroll and compliance details early.

1. Decide Whether The Internship Should Be Paid

If the intern will perform work that benefits the business, paying the intern is often the more straightforward approach. Paid interns should generally be treated like other nonexempt employees for timekeeping, minimum wage, overtime, and payroll tax purposes.

2. Put The Internship Terms In Writing

A written agreement should outline the internship’s purpose, duration, schedule, compensation status, learning objectives, supervision, and whether academic credit is involved.

3. Coordinate HR, Payroll, & Supervisors

Supervisors should understand that interns are not simply extra summer labor. Clear communication among HR, payroll, and department leaders can help align job duties, hours, pay practices, and documentation.

4. Track Hours Carefully

For paid interns, accurate timekeeping is important. The FLSA establishes minimum wage, overtime, recordkeeping, and youth employment standards, and covered nonexempt employees are generally entitled to overtime pay after 40 hours in a workweek.

5. Review State-Specific Requirements

Employers operating in multiple states should review each state’s wage and hour rules. Minimum wage rates, posting requirements, final pay rules, and minor employment restrictions can vary.

Bottom Line

Summer internships can be an excellent way to introduce students to your organization and build meaningful professional experience. However, employers should not assume an internship can be unpaid simply because it is temporary, educational, or seasonal.

For-profit employers should review the primary beneficiary test before offering unpaid internships. When an intern performs work that primarily benefits the employer, treating the intern as a paid employee may be the appropriate payroll approach.

KPM CPAs & Advisors can help businesses evaluate their payroll processes, timekeeping practices, and related reporting needs. Our payroll, retirement, and wealth services are designed to support organizations with payroll and benefits in one coordinated approach, and our outsourced accounting services include payroll processing support.

Schedule a Consultation with KPM CPAs & Advisors to review your payroll process before summer interns join your

Frequently Asked Questions

Are unpaid internships legal?

They can be, but only under specific circumstances. For-profit employers should review the DOL’s primary beneficiary test to determine whether the intern or employer receives the primary benefit of the arrangement.

Do paid interns need to be on payroll?

In most cases, yes. If an intern is treated as an employee, the employer should generally process pay through payroll, with applicable tax withholding, wage reporting, and timekeeping.

Do interns qualify for overtime?

If a paid intern is a covered nonexempt employee, overtime may apply after 40 hours worked in a workweek under the FLSA.

What is Missouri’s minimum wage for interns?

For 2026, Missouri’s minimum wage is $15.00 per hour. Covered employers should review state and federal rules and pay the higher applicable rate when both laws apply.