The dangers of offering unpaid internships at your startup

Nathan Parcells is co-founder and CMO of InternMatch, an online platform connecting the best intern candidates and employers. Connect with Nathan and InternMatch on Facebook, LinkedIn, and Twitter.

Startup cultures are one of a kind, and they make great, immersive learning environments for students and recent graduates. When it comes to internship programs, startups offer the chance to become a much-needed, valuable addition to a team of go-getters. But there are also several imminent dangers to be aware of if you’re thinking of establishing unpaid internships at your startup.

Internship compensation has taken a lot of heat recently, and rightfully so. While you may not be a multimillion-dollar corporation, record label, or fashion house, you could still land your company in hot water by forgoing intern pay altogether.

As a startup founder and intern manager, I know firsthand about the benefits and the shortcomings of a variety of internship programs. Even my company’s first interns were paid for their work, and it’s something we still believe is a fundamental part of not just our organization, but intern culture as a whole.

While unpaid internships may save you money in cash-strapped times, you may be surprised what else they can do to your startup. Besides the legalities, here are some things to consider before you let you interns go unpaid.

Pay is more attractive than you think

Whether you’re currently hosting unpaid internships or just considering it, you’ve no doubt put some thought into intern salaries.

While intern payment may seem like a stretch on a startup budget, there are plenty of benefits to offering interns at least the federal minimum wage. In fact, on InternMatch, paid positions receive an average of two and a half times as many clicks as unpaid positions.

Higher caliber interns mean greater ROI

With more intern candidates comes more talent. If you’re like most startups, every person in your organization has to do more than just pull their weight. By offering paid internships, you’re ensuring that top-tier students and recent graduates are going to be enticed to apply to your company.

As one old vestige goes, you’ve got to spend money to make money. Investing in intern talent will drastically improve your bottom line. Each semester, I’ve witnessed this at multiple startups and also firsthand at my company. Our first graphic design intern did wonders for our visual brand, and nearly every other intern we’ve brought on since has surpassed our expectations.

Today’s interns may be tomorrow’s CTOs

Great paid internship programs act as fluid talent pipelines. According to a survey by the National Association of Colleges and Employers, 60 percent of paid interns received full-time job offers. Unpaid interns, however, didn’t fare as well.

Putting your best foot forward with your internship program means doing your best to establish a situation in which your interns are given the opportunity to learn, thrive, be valued, and potentially convert to full-time hires if positions are available. I’ve worked with startups that have interns who have transitioned into prominent roles like managers and CTOs.

It could actually save money in the long run

Hiring isn’t cheap. One way to avoid running out of cash is to find your first employees via your internship program. It will save you thousands of dollars in recruiting and hiring fees, and it’s worth the little bit of payment to attract and retain a fantastic intern from the beginning.

Take Facebook for example. Its hiring team scoured the Stanford campus in the early days looking for the best CS talent. They were able to pay them money up front because they were stealing them right out from under other top companies in the area.

It’s all about respect

Let’s face it: Everyone wants to be respected. While you may not be willing to pay your interns a rate similar to that of Facebook or Google, you’re still willing to offer them a unique, challenging culture and fair pay. This means building an internship game plan that lays out exactly what your interns are doing every week, including setting goals, offering mentoring, and going over technical training.

Placing value on your interns and giving them the total package for an internship experience will win you greater respect in the long term. Expect word to spread quickly about your willingness to pay and give your interns a great experience.

Yes, pay is possible

All expert reasoning aside, it’s time to break away from the notion that paying interns just isn’t in your budget. Interns aren’t just a chance at free labor, they should fit into your broad strategy.

At my company, we made the decision to bring on talented interns from Berkeley to write our content marketing materials. They fit into our SEO strategy perfectly, and the price for hiring and training them has been minimal compared to getting equivalent writers from other resources.

Online learning platform Udemy used its interns extensively when building out its successful customer service and business development program. Aside from being paid additions to the team, the interns went through a crash course in entrepreneurship and the sales process. Needless to say, Udemy’s commitment paid off because a number of interns came back to the team as as full-time hires.

And as a final rule, always focus on “closing” the interns just like you would do with investor deals. Once you’ve ensured they’re a fit for your company and you have the budget for them, work hard to “close” the best students because you want and need the top one percent of talent.

When it comes to your startup’s internship program, think before you forego pay.

Does your startup offer paid internships?

Image credit: Goodluz/Shutterstock