08/01/2011 12:57 pm ET | Updated Aug 09, 2011

Hiring Unpaid Interns: 5 Things You Need To Know

Interns can be a great resource for a small company -- they're cheap, they're motivated and they bring a young perspective. And sometimes they even work for free. But employers also have to be very careful with unpaid interns. "There has been a tremendous amount of attention given to this topic, because the U.S. Department of Labor and some state counterparts are beginning to crack down on wage abuse," says Matthew Zinman, founder of The Internship Institute, a nonprofit in Newtown, Pa., that has helped hundreds of businesses with their internship programs. "Certain states like Oregon, California, and New York are more proactive with enforcement."

So what's the best way to ensure your internship program -- paid or unpaid -- complies with labor laws? Here are five things you need to know.

1. Know the Department of Labor's six legal criteria.
Many employers don't realize this, but all six criteria must be met for the intern to be considered a "trainee" and not an actual employee under the Fair Labor Standards Act. For instance, the training should directly benefit the intern (even to the company's detriment), the intern must not displace actual employees, and the employer should see no immediate benefit from the intern's work. "The core guiding principle is to maintain an emphasis on providing relevant hands-on experience, which is to everyone's benefit," Zinman says. "Keep non-learning tasks to a minimum. For 'borderline' tasks, make an effort to provide a context about the relevance of what they're doing and its benefits in the big picture."

2. Determine whether the internship should be paid or unpaid.
Once you know and understand the criteria, it's time to take a closer look at the internship and evaluate the legalities of it. Even if you come to the conclusion that the internship should continue as unpaid, Zinman recommends businesses compensate for the work. "The old adage 'You get what you pay for' applies appropriately, especially when it comes to recruiting," he says. "The best candidates are the same go-getters who start early and secure paid opportunities. Not paying also cuts off the increasing population of students who simply cannot afford to work for free. The socioeconomic divide this creates begins to call morality into question."

3. Weigh the pros and cons.
For obvious reasons, unpaid internships are financially attractive to smaller, growing companies -- but they also run the risk of noncompliance with the law. That aside, compensating your interns can actually affect your company in positive ways. "Paying students motivates them to do good work," Zinman says. He adds that managers tend to underutilize or devalue unpaid interns. "Are those who work with an intern as likely to utilize one who is unpaid as well as one who is? According to the laws of human nature, probably not. Will an unpaid intern remain motivated enough to do their best work? Probably not."

4. Focus on the training aspect.
Remember that the goal of an internship is training a promising, hard-working student, not getting free labor. "It is in everyone's best interest to pay students for performing 'real work,'" Zinman says. "Either way, employers have an obligation to train." While offering compensation might make it easier to comply with the law, you don't necessarily have to if you meet the six criteria. But, Zinman adds, "If unpaid, the employer has that much more of an obligation to incorporate training efforts.

5. When in doubt, consult a lawyer.
Improper classification of an intern can be a costly mistake for a small business. If you have questions or you're not completely sure, check out the Department of Labor website or consult with an experienced labor and employment attorney.

The original version of this article appeared on AOL Small Business on 4/19/11.