The Basics Of Hiring Interns For Your Startup

Original post by  via FN Blog

Hiring interns is a great milestone for a young company and the use of interns is on the rise.  What is also on the rise, however, is the number of small businesses and startups getting audited for misclassifying interns as independent contractors or unpaid interns when they should have been classified as paid employees.

It doesn’t take a brain surgeon to figure out that businesses want to classify interns as independent contractors and unpaid employees because it is cheaper and easier than hiring full blown employees.  Hiring employees is expensive and time consuming.

The risk you run by improperly classify an intern as an independent contractor or unpaid intern, is that if you are audited then you will have to make up for all the unpaid wages, taxes, and insurance, and pay plus hefty fines.  This adds up to about double what you would have paid the intern had you hired them as a part-time employee.  Businesses can be randomly audited or turned in by a disgruntled intern (or parent of the intern).  Unfortunately, despite the numerous attorneys we talked to, no one could provide us with the probabilities of getting audited – only that audits are on the rise.

What are your options?

  1. Hiring Interns As An Independent Contractor

A number of companies hire interns as independent contractors because they can avoid the hassles that accompany employees (witholdings, employment taxes, etc.).  The major problem with this is that most intern relationships look nothing like an independent contracting relationship.

As we have explained before, in our Guide to Independent Contractors, the classic independent contractor is the HR or SEO consultant.  They are their own legal entity, provide their own tools (computer, transportation, etc.), set their own hours and have multiple clients.  They are independent contractors despite being on your company’s premises for an extended period of time.Interns are not typically their own legal entity and are not working for multiple employers, yet are most likely working on your company’s premises.  Most interns would fail the independent contractor test.