Employee or Intern: The Pros and Cons of a Nonprofit Paying Interns a Stipend

by Danielle Bloom

3 min read

Hiring interns has a number of benefits. Interns bring fresh ideas to the table, spread word of your business to their peers, increase productivity, and often become excellent employees. The law and your form of business organization may determine whether you must pay them at least a minimum wage. Each province and territory has a law regarding interns and their payments. In most cases, interns must be paid at least a minimum wage unless they meet certain criteria, or can be considered trainees or volunteers for a nonprofit organization. As such, it is important to establish and document the status of an intern. The Employment Standards Act, 2000, specifies the criteria for determining whether an individual is an employee or an intern. Among them is the requirement that the internship primarily benefit the intern and not the organization. Because the ESA does not apply to individuals who perform work under a program approved by a college or university, these individuals may be classified as interns and not employees.

Reasons for Paying an Intern a Stipend

There are many reasons why you may want to pay an intern a stipend. Paid interns are more likely to be excited about working with you and may contribute more. They tend to say more positive things about the company and may not have to work an outside job to support themselves, so they are more refreshed and more likely to be able to devote all of their energy to you. An intern incurs significant expenses associated with an internship. For instance, students must generally pay tuition to receive credit for an internship. They may also have to pay for off-campus housing and food, or dorm space and a meal plan at their school. You may want to pay an intern a stipend because you want to help defray these costs.

Potential Problems With Paying an Intern a Stipend

There are also valid reasons for not paying an intern a stipend. Trainees and volunteers at nonprofit organizations do not receive compensation so paying an intern a stipend may create an ambiguity and send the wrong message to tax or labour officials. If the government looks closely at your organization and determines there is an employment relationship, you may be liable for back wages, benefits, and vacation pay, as well as applicable pension contributions and taxes. You want to carefully document the nature of the internship and clarify any potential misinterpretations that can affect your organization adversely. You may also want to carefully document a decision to classify an intern as a trainee or as a volunteer. The training must primarily benefit the intern to classify him or her as a trainee. There is no such requirement with volunteers, as they are expected to provide a benefit to the organization. Trainees may receive a stipend without any change in their classification until the amount of remuneration reaches the minimum wage level. At this point they are treated as employees. Deciding whether to pay an intern a stipend requires careful consideration. The Employment Standards Act and various Employment or Labour Standards codes at the provincial level distinguish interns from employees by setting forth conditions that must exist for an internship. There are valid reasons for and against paying a stipend to an intern at a nonprofit organization. Paying a stipend to a trainee or volunteer at a nonprofit organization may cause the Ministry of Labour to find that an employment relationship exists and subject the nonprofit to pay back wages and taxes. You want to thoroughly document the circumstances of the situation to avoid ambiguities if they arise.

References & Resources

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