Even entry-level jobs require work experience—and most of us get it during a string of internships. Part-time, full-time, or summer-only internships give you the ability to prove your mettle at the workplace. You get to experience different roles, learn about corporate cultures, and start building your professional network.
Not only that, but you can also earn a salary or receive an internship stipend. OK, but which one’s a better deal? Here’s a detailed take from our team.
What’s a Salary?
A salary is a fixed amount you receive from your employer every two weeks or once a month. Interns can get salaries, but it’s not a legal obligation in the US. Employers can avoid paying salaries as long as the relationship meets the criteria, outlined in the Fair Labor Standards Act.
However, many companies do offer hourly or fixed-rate compensation. The average hourly pay for internship positions sits at $ 15.54 per hour. Some companies may go higher and offer a weekly, monthly, or fixed salary for the internship duration. Some of the highest-paying internships come with a median base monthly salary of $ 6K-$ 10K.
Generally, an employer will provide you with a compensation range during the interview. You can try negotiating your salary as an intern, but you’ll need really good leverage to persuade the employer that you’re better than dozens of other applicants.
What is a Stipend?
A stipend is a set sum you get from an employer, usually monthly, to cover your living, travel, and food expenses during an internship.
Traditionally, a stipend is lower than the regular salary of an entry-level employee or even minimum wage. It can be also paid instead of a salary i.e., the employer only compensates for your travel and housing but doesn’t pay any extras for your work—an arrangement similar to volunteering.
That said, some companies offer interns a salary, plus a stipend to cover extra expenses. For example, software company ServiceNow paid its marketing interns $ 34/hr as a salary and an extra one-time $ 5,000 housing stipend in 2024.
Are Stipends Taxable?
If we’re talking about employer-issued stipends, those are considered taxable income by the IRS. Your employer will have to fill in a W-2 form and withhold applicable state and federal taxes. Your stipend will be also subject to Social Security and Medicare taxes unless it meets specific exceptions outlined in IRS Publication 15-B.
That said if you receive a low stipend pay during an internship, it may not be subject to personal income taxes, set in your state. For example, if you live in New York City, single filers must submit an income tax return if their gross annual income exceeds $ 8,000. Let’s say, you only did a 6-week summer internship, which paid $ 20/hour. That’s $ 800/week and $ 4800 in total. In this case, no income tax will be due.
On the other hand, if your summer internship pay was $ 3,000/month and you’ve stayed with the company for 3 months. That’s $ 9K in total, and income taxes will be due.
Internship Salary vs Stipend: What’s Better?
For most interns, the right answer is both! An internship that offers a salary and a stipend for extra expenses is the golden ticket. However, cushy internships with big-name companies are extremely hard to get.
Adobe, for example, has a below 1% acceptance rate for its summer internship program. The odds are as competitive with other big tech companies like Amazon, Google, and Facebook or Big Four accounting firms like EY or KPMG. Your internship resume will need to be immaculate, both in terms of formatting and content.
That said, there are plenty of internships with smaller businesses also offering decent pay and some bonus perks to compensate for your work. If you’re looking at several internship offers—one with a salary and one with an internship stipend—here are several pointers to help you decide.
Location
Do you need to move for your internship? If so, that might mean breaking an existing lease (unless you find a subletter) or moving back to your parent’s house for the summer—an option that not everyone might have either.
If an internship requires you to move to another place, definitely seek options with a housing stipend. Otherwise, you may end up spending more on the move and all travel arrangements that you’d earn from the position.
Not seeing any good local opportunities? Try to look for remote internships. Plenty of companies in the tech sector are now open to virtually “hosting” interns for the summer.
Duration
How long is the internship? If it’s just a couple of weeks, you may be able to take a lower-paid internship without any stipend, and then beef up your budget with a weekend or a part-time job to stay afloat when college resumes. Or perhaps another better-paid internship.
However, if the company expects you to come for a full six weeks or more, you shouldn’t skimp on compensation. The last thing you’d want is to accumulate extra debt or struggle to budget for necessities during the school year. Remember, just because employers are allowed to pay interns a minimal wage (or no salary at all), doesn’t mean you should accept such offers.
State of Your Financials
Finally, have an honest look at your current state of financials. Did you manage to accumulate some cash during the semester? Do you have an allowance from your parents? Or maybe you run a side hustle on the side to bring extra cash. If you can afford to take a stipend-only internship that sounds existing without breaking the bank, go for it! In fact, because some stipend allowances are tax-free, you may end up saving some dollars in personal income tax payments.
On the other hand, if you’re already almost broke, an unpaid or stipend-only internship may only get you deeper into the negative zone without bringing immediate benefits. When you are faced with such a situation, it’s best to focus on opportunities with fixed salaries to be able to budget for different expenses.
Making the Decision
Choose an internship with a salary if:
- You need a predictable, stable income
- You want access to employment benefits
- You want to earn a higher compensation
Choose an internship with a stipend if:
- You’re primarily focused on gaining work experience
- You’re in a short-term program with the flexibility to earn elsewhere
- You’re in a good financial position and afford unpaid work
Final advice: If you’re not sure what the internship compensation is, set your baseline expectations in your internship cover letter. You can politely state that you’re looking for paid opportunities that offer salary and/or housing, travel, etc stipend. This way, you immediately set your expectations and avoid wasting time with employers who are not a match for you.
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