As hard as it may be for some to believe, summer is right around the corner. And while we plan our beach trips and vacations, thousands of American college students are preparing for their first foray into the working world as interns.

Recent lawsuits have brought to light concerns over unpaid internships, and rulings on these cases can change the face of student-work programs as we know it. Internships can be taxing and expensive for both the intern and the employer, so before you dive into the world of internships, it’s important to see exactly what value they provide.

Whether you’re a student or an employer, follow along to see the benefits and pitfalls of internships from both perspectives. 

Internships at a Glance 

While they’re now a commonly accepted first step for professional career paths, internships weren’t always the norm. In the 1980s, for example, InternMatch found that only about 3% of college students completed an internship before graduation. In 2013, however, according to Internships.com, 2/3 of the graduating class had completed at least one internship, and 3/5 of college students attend schools that mandate them.

On the other side of the spectrum, the number of companies that offer internships has steadily increased throughout the years. In 2013, about 46% of employers had structured internship programs, and that number is expected to increase in 2014, as 56% of companies plan to hire more interns and 62% plan to implement a more structured program. 

Clearly, the market is out there for internships, and there’s definitely a pool of candidates eager to jump at an opportunity. But the question remains: Are they really worth it? 

Pros and Cons for Student Interns 

Depending on their majors, students can enjoy either a relatively lucrative or an extremely taxing internship experience. For example, the National Association of Colleges and Employers (NACE) found that the highest paid interns are engineering students, who, on average, garner a cool $20.36 per hour. These are the very lucky ones, however, as another InternMatch study found that 47.8% of internships taken by the class of 2013 were unpaid, totaling approximately 1 million students.

As InternMatch reports, for both paid and unpaid interns, juggling other commitments as well as school can make interning a difficult task to undertake. 41% of paid interns say their salary is insufficient to cover day-to-day expenses, and 61% of unpaid interns also need to work a second job. In total, 65% of all interns rely on financial assistance from their parents during their internships. And while this struggle may pay dividends for paid interns, who have an average yearly salary of $51,930 in their first jobs after graduation, it doesn’t translate as well for unpaid interns, who garner only $37,087 per year to start. But as 72% of interns will tell you, pay is the least of their concerns

What interns are really looking for is a rewarding experience that prepares them for their careers. But unfortunately, not all internship programs provide this kind of value. InternMatch’s study shows that paid interns spend most of their time on professional tasks, whereas unpaid interns undertake more clerical work. And Internships.com found that large companies (i.e. those with 100+ employees) are 30% more likely to make full-time offers to interns than smaller companies. As such, when considering an unpaid internship or one at a smaller organization, be sure to ask about your specific duties and your chances of getting a full-time offer. Remember that a job interview goes both ways, and it’s up to you to ask the right questions to ensure the internship is a good fit. 

With all that being said, the true value of an internship is measured by the career it leads to. And all interns, regardless of pay, are 70% more likely to land a full-time job out of college than non-interns. In fact, in 2012, companies with internship programs offered 56.5% of their interns full-time positions. Broken down further, 41% of unpaid interns and 63% of paid interns received job offers in 2012. But even for those who were not offered full-time positions by their employers, internships have been shown to expedite the transition from college to career, as HowStuffWorks found this transition to be 6.3 months for non-interns and only 2.5 months for interns.

On top of all this, interns are able to get a glimpse of their perspective industries, which is an invaluable reward that can help determine their career paths. 86% of interns also say that they had a positive experience, and beyond that, interns say the most rewarding aspects of their internships are work experience that boosts resumes, the potential for employment and networking. 

Pros and Cons for Employers 

There are many benefits of an internship program for companies. The first is also the most obvious: cheap labor. Unpaid interns can provide quality work for no monetary costs, and paid ones can be had for much cheaper than an experienced or even an entry-level hire. That being said, cheap labor does not equate to free labor. The law requires that employers provide some form of value to interns, whether that be a stipend, college credit, real work experience, company perks and benefits, etc. Interns are not there simply to do meaningless labor for free, and as addressed below, exploiting an intern can bring a number of damaging repercussions. 

(As an aside, when deciding whether or not to pay your interns, note that InternMatch reports that advertisements for paid internships get about 2.5 times as many clicks as those for non-paid internships, and this can greatly affect the quality of your candidate pool.)

In addition to inexpensive labor, a well-structured internship program can provide a never-ending funnel of potential full-time employees. This will help you better evaluate your candidate pool and will allow you to spot the top performers and get rid of trouble workers before they’re even onboarded. To put this in perspective, as another Internships.com report found, 35.3% of employers’ full-time, entry-level college hires came directly from their internship programs, and 81% say they have better experiences with new hires that have interned compared to those that haven’t

But while they’re a testing ground for employers, internships also allow workers to evaluate their career goals and your particular business to see if they fit into the industry and company culture. As such, students who successfully complete internship programs simply make better hires because they make a better fit, and as a result, their retention rates are higher than non-interns. In fact, NACE ran a survey in 2012 and found that, of the respondents who hired interns or co-ops directly from their programs, 88.9% of these hires were retained after a year, compared to 80% for non-interns. This trend continues with time, as after five years, 72.9% of intern hires were retained, compared to 66.4% of non-interns. This may not seem significant for some, but for those who understand the true costs of hiring troublesome employees and finding their replacements, this boost in retention is almost invaluable.  

But while the benefits are evident, there are also some pitfalls for businesses with internship programs. The main pitfall is that it may deplete the quality and efficiency of your work. Although interns are eager to prove themselves, the truth is that some just aren’t quite cut out for the profession they chose. Unfortunately, it may take weeks or even months before both you and the intern realize the fit just isn’t right, and the time in which the intern was on the job will probably hurt revenue in addition to other issues. On top of that, the time it takes to train interns will cost a significant amount of cash, and if this training is the job of one of your higher-level employees, you also pay for him or her to supervise the intern, instead of paying them to drive revenue.

Perhaps the most significant pitfalls of internships, however, are the aforementioned legal ramifications for employers who wrongfully (or even unknowingly) exploit their interns. While hiring unpaid interns is the norm for many industries, this practice has come under fire in recent years. Many labor groups and individual interns have successfully sued for back wages, while companies have been fined for violating labor laws and failing to pay taxes on those who were wrongly classified as interns. This is bad from both a PR perspective as well as an economic perspective. As such, it’s vital that employers adhere to the Fair Labor Standards Act and Department of Labor’s rules for intern compensation

Conclusion 

The truth is that, for many employers and students, internships can be a great experience that truly pays dividends. But like anything else, they aren’t made for everyone.

For students, do your research and see if internships are the norm in your industry; know that they can be a great boon for your resume and job prospects, but they can also be a monetary burden that causes you to lose focus on your education.

For employers, weigh the pros and cons of offering paid internships, and know that they can be a way to build a great team but that they may also hurt your profit margin. And if you absolutely have to implement an unpaid internship program, do your homework or (even better) consult a lawyer to make sure your program is completely compliant with labor laws. Doing so will ensure a positive and beneficial experience for both your company and the intern.