Calculating the Cost of an Internship Program
U.S. businesses lose nearly $1 trillion dollars each year to voluntary turnover alone. Replacing an employee after an exit isn’t easy. Nor is it cheap. A new hire can cost between one half to two-years full salary for an employee. The added stresses and loss of organization knowledge bring the complete business loss even higher. It’s not a secret that the best interest of any business is to retain the talent they have. That doesn’t mean it’s simple. Amid the hectic job landscape of the last few years and potential layoffs coming down the line, hiring could use some stability.
Start with a Strong Foundation — The Importance of Early Talent Recruiting
Your young professional workforce will become your future leaders. It’s critical that your business maintains a steady flow of early talent employees joining the organization to fill open roles after promotion, turnover, or job change. These new employees come in ready to learn the ropes from senior employees, bring fresh perspectives, and drive the success of the business through their individual contribution. Early employees also command a lower salary than senior employees who’ve changed jobs frequently or have tenure with the organization meaning their work creates a better ROI for your business. What’s your strongest pipeline for early talent? Interns!
Internships are the number one way leading companies fill their early talent pipeline. Internships are an obvious wins for students participating — they get experience building skills, get to test drive a career, and potentially find a homebase to start their career journey. According to the Wall Street Journal, starting salaries for those with internship experience is nearly $15,000 higher than those with no experience. Within the U.S. graduating college class of 2014, 52.1 percent of applicants with internship or co-op experience received at least one full-time position offer prior to graduation, compared to 38.6 percent for those without such experience (NACE 2014).
The Employer Side of Internships
Both sides of a system have to work for equally beneficial outcomes to be achieved. Considering US businesses converted only 55% of their interns to full-time employees between 2021 and 2017, it’s fair to point out the imbalance that exists. That means nearly half of all intern spending goes out the door when college students leave never to return. At over $21,000 per intern, that’s an awfully high price to consider losing half of. Let’s dig into what makes that cost so high and to make sure it’s spent wisely.
For a 12 week summer internship, we estimate the following:
Recruiting costs $6,100 when including personnel costs like hours at the career fair, travel, and lodging. Intern wages top out at $9,970 ($ 20.76/hr is the average rate in the US, full-time) and manager salary spent managing and training a single intern adds up $4,620 (10hours/wk to manage at a yearly salary of $80,000). That’s a total of over $21,000! This doesn’t even include lost team productivity, training, housing, events, and swag throughout the internship.
For a company with 50 interns, that’s over $1,000,000 and countless hours dedicated to the entire internship program. Low conversion from intern to full-time, quickly turns this investment into loss.
What This Means For Your Business
Yes, interns are less expensive than full-time employees at your organization. However, the idea of “cheap labor” is far from true. A commitment to an effective internship is a commitment to reducing unnecessary spend.
Give Interns Real Work
Interns get the opportunity to test drive the real job. This gives a real glimpse into the day-to-day problem solving of a future career. They can make informed career decisions, find whether the role is right for them, or if a career change is in the card. Even if work completed over a brief internship won’t be as valuable as work done by an experienced employee, it can be a great way to clean the slate and collect new perspectives with a fresh set of eyes and ideas.
Allow for Meaningful Cultural Engagement with Real Employees
A majority of job seekers now choose strong workplace culture as the most important consideration when accepting a new job — even greater than salary. It’s important that prospective team members (interns & co-ops) have the opportunity to engage with employees doing the jobs — whether that’s through their manager, a mentor, or informational interviews. Events like panels with executives, lunch and learns, or community speakers are engaging ways to show interns what makes your workplace special.
Build and Maintain a Path Back Into the Company
Interns are more likely to remain at your business at the 1 year and 5 year mark. 2019 date from NACE shows, at the one-year mark, hires with internal internship experience are 12% more likely to stick around than hires with external internship experience and 19% more likely than hires with no internship or co-op experience. The same holds at the 5 year mark. Those with internal internship or co-op experience stick around at 6.6% higher rates than those with external experience and 15% more likely than those with no internship or co-op experience.
Work with Internship on Demand to Improve Your Early Career Outcomes
The best part of helping an intern find their way into the perfect role? It’s a win for everyone — the employee and your business. Internship on Demand pre-internships are built with outcomes in mind. Our pre-internship curriculum is tailored to your open roles, hiring goals, and managed by Internship in Demand mentors to ensure follow through by each intern cohort. We deliver highly-qualified, highly-engaged candidates at a fraction of typical recruiting costs and when only the best candidates return for their full-time internship with your company, you can invest your time and capital with confidence. Converted interns arrive trained, with a strong network, and ready to produce from day one.
Internship on Demand bridges the gap between college and career through hands-on work experience at today’s most innovative companies. We design, build, and manage tailored pre-internships to reduce recruiting spend, cut training time, and improve intern conversion and employee retention.
Get in touch with our team to learn more today →
Our January 2023 pre-internship opportunities are a great way to engage talent heading into Summer 2023. See Active Programs now →