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International Internship Fail

Unhappy Intern

When I read this article about Unpaid Internships back in May I got a feeling that I should try to do something about this injustice. In fact I know of several companies here in Austria who are also receiving cheap labor from college students who just need a place to do some “research” for a paper or degree.

This article summarizes what I learned about Internships and some of the pitfalls when trying to do International Internships from the point of view of an Austrian company. Most of this probably applies to companies globally.

I possess an engineering degree, though mine is from a time before there where bachelor studies. In my case it was the Austrian government who awarded me the job title “Ingenieur” (engineer) after working for 3 years in IT following a diploma I had finished at IT college Spengergasse, Vienna. I too had to do two internships over the summer, dubbed “Voluntariat” (voluntary work). Those were at Siemens IT and those were the first money I earned.

Yes, indeed I did receive a small salary, but I never felt that it was little. Going from zero income to a little was a big jump for me. So I was happy. And lucky to have had relatives working at Siemens who probably played a bigger part than realized. They call this Vitamin B here in Austria, “Beziehungen” (relationships, connections).

Unpaid Internships

Apparently it is the international norm to not pay for internships because generally they are mostly for the benefit of the interns. The goal of an internship is to gain practical job experience working in a larger team. Rarely is an intern at a skill level right out of school that he/she can offset the cost they are causing with sufficient benefit for the company.

Some larger “traditional” companies do pay a small salary for internships, but the modern “lean” smaller IT companies typically don’t. I think the reason has to have to do with size. Every new addition – even a temporary one – incurs a certain overhead. The intern needs to be trained, fed, supervised, provided with work, corrected etc. All kinds of distractions that take time. Time that could otherwise be spent earning ridiculous imaginary or real hourly rates.

Having said that, there might still be scenarios where an Intern can be very valuable to the company he goes interning for. If he has a specific skill or experience that is of commercial value. And of course there are the larger companies where the “joining overhead” is much smaller relatively because the intern joins a corporation with many people. Finally there is luck involved: just like WWDC tickets are limited in supply, so are internship positions.

And probably “knowing somebody at this company” should help also outside of Austria.

Intern Economics

From an economic point of view anybody running a business knows that there is money coming in and money going out. If the income is greater than the expenses then the company is going to survive. If not, it might be held afloat for a while by venture funding, but is destined to to belly up if the balance cannot be reversed.

The greater the number of employees, the greater the wiggle room for experiments. At the basic level, each employee produces a certain value, part of which he receives in salary. The difference between what the company is making from his share of the collective efforts and what he receives in compensation is called the margin.

A company might create an intern position if the sum total of these per-employee margins is sufficient to bear the overhead of having an intern. By this rule, the larger a company in size, the more likely they will have interns and the more likely it will be that they can also incur the additional cost of paying the intern.

My company has grown to basically have 3 people working on our projects. Myself, one long term contractor and one employee. Feeling adventurous I felt that maybe it would be an exciting possibility to have an intern help out over the summer months. Though admittedly the economics would not really be able to support that if I had to pay somebody a salary, even for a single month.

But that’s how I am. I often jump head first into something new that has potential, my belief is that active people will win the world, not people complaining about their situation.

International Interning

It came to pass that there was a candidate with lots of potential and it was a young woman. One of my goals in life is to do what is in my power to get more female engineers working in iOS development. So that seemed like a “kill two birds with one stone” to me. I would be able to see how it is to have an intern, and I could help this female engineer to gather practical experience of how it is to work with us.

But I was being too naive and reality finally caught up with me.

I found that you can be self-employed anywhere on earth and worth with (or for) anybody else internationally via the Internet. You invoice them and you get sent your payment. Say you are in the US, I am in Austria. You work on something I tasked you with, upon conclusion you send me an invoice and I send you payment via bank transfer. Everybody pays the taxes owed in the country of residence. Everybody takes care of insurance as desired. Everybody is happy.

Working Migration, Not

You may not however execute this work in the same country as the person paying you, because then you are seen as a foreign worker who needs a permit. Worse yet, you are treated as if you are stealing away work for somebody local. Being inside a conglomerate of states has its benefits. In the United States of America you can move to any state and settle there and live there. Same is true for citizens of the European Union.

The problem appears if a US citizen wants to work in Austria or vice versa. Following much complaining from Austrian companies who couldn’t find enough skilled workers, our Austrian government has done some reforms on the relevant laws which allow immigration of qualified workers on a Red-White-Red Card. USA still has this antiquated work visa scheme with a quota that they run out within hours of releasing a new one annually.

Austria has no quota, just requirements. If you speak English and working in a so-called “shortage occupation” (which includes software development) then you have little problem getting this permit. You can still see a certain fear between the lines that they need to battle immigration by unskilled unemployed scum. But at least you know exactly what you have to do to receive such a permit.

Problem is, this sort of immigration is permanent. You only get this if you plan to migrate to Austria.

Labor Law Logic

The Austrian law governing labor of foreigners has two exceptions where no permit is required:

  • §2 (3) a “Voluntariat” (Voluntary Work) foreigners with completed education working without pay and without fixed hours
  • §2 (3) b “Berufs- oder Ferial-Praktikum” – (Practical Work for Job or during holidays) foreign students attending an Austrian public school

Oh, and there are also wide-ranging exceptions for artists. But even though I firmly believe that making apps is a form of art, this argumentation would never fly.

Not being a public school (even though I should count as that with the education work my blog achieves) my first try was to use the §2 (3) a exemption. I figured I won’t pay my intern any money, but pay for the plane tickets, let her stay in our guest room and pay for her food as well.

BUT … apparently other smart entrepreneurs did have the same idea before me. The current jurisprudence interprets any form of compensation as equivalent to cold hard cash. Hell, you even have to pay around 30% income tax on the plane tickets as well as on a certain amount of monetary value that is going to be assumed my cost for each day the intern lives with us.

The tickets cost €1600 and 30 days in August would be valued at around €900. So i would have had to pay tax as if I paid €2500, by my estimate around €1000 Euros. Funny thing, this rapidly approaches the level of expense that a normal full time employed developer is costing me.

You might even have to prove that you are not compensating the intern in any way, the intern needs to prove that he is paying for food, accommodation and other traveling expenses out of his own pocket.

Long story short, even IF you want to compensate your international interns law prevents you from doing so. If there is any form of compensation (monetary or otherwise) then it is paid work and then you need a work visa. And those require that you immigrate to Austria, permanently. Catch 22.

Concrete Failure

I am a person with a “can do” attitude. I go through life generally assuming that if people can agree everything is possible. And that laws are there to serve me, not to prevent me from running my business. I grant you permission to call me “naive”. As in: he didn’t know that he couldn’t do it. So he did.

For the longest time I was optimistic, purchased the plane ticket for her, always assumed that it would work out. But then I spoke on the telephone with a big wig of the regional job office who is in charge of foreigner policy. He flat out told me that I wouldn’t get any permit for this internship. From him I got the information I summarized above. He suggested that I ask if there is some sort of exchange program between schools, those seem to have ample exceptions as well. But when discussing my options it came to a single way out.

Nobody can prohibit you from inviting a guest into your home, providing sustenance, and letting this guest watch you at work. Take pictures, record video ask questions like tourists are known to do. You are allowed to pay for other people’s plane tickets. As long as they don’t work and are free to leave as they please.

Based on this info I hatched a last ditch effort plan to work around the limitations:

  • plane tickets already paid from my personal credit card and sent to my CFO as expenses
  • intern invoices me for an amount of hours equivalent to the price of the plane tickets, as a resource to be used at my discretion in the future
  • my tax accountant would have booked the expense for the plane tickets as payment for this invoice
  • intern would have come to Austria for a month free of charge, lived with us and would have observed the practical aspects of iOS development work
  • I would have taken time to explain and train and demonstrate tasks that she could have done from at home in exchange for the invoiced hours
  • back home in the US she would have executed those tasks
  • the reporting for this work would have doubled as the confirmation for her school

For one afternoon it seemed that this would be the working plan and I went to bed satisfied with my ingenuity.

I woke up with a cold sweat at 4 am, checked my mail and saw my wonderful plan falling apart in two stages. While I was sleeping my mail server received one email at 11 pm expressing doubt as to my true intentions. Reading this in the wee hours made me feel quite sad. Not only did I see my plan crumble before my very eyes, I also got the feeling that this person must fear me as being a secret abuser of female interns. I am not! How can she think that?!

Then the second email arrived 4 hours later while I still was sleeping and before I got any chance to respond. It expressed in many words that her doubts have won over her initial excitement and she decided to reject my offer.

Now this is not the first time somebody changes his/her mind on me. This seems to be a constant possibility when dealing with other people. On several occasions people reconsidered being adventurous and decided that they’d rather stay at home. With how my personality is structured I am having a hard time when somebody rejects my helping hand, but I have learned to accept it. We have a saying in Austria: you cannot force anybody into happiness.

Walking Away

This episode also proved another pet hypothesis of mine: if people don’t have “buy in” into a project then they can easily walk away.

The more time, effort and money you invest into something, the more you will identify with it. If the other party foots all the bills then you can easily flee and leave their plans in shambles. Put differently, if you didn’t invest anything you have nothing to lose. People with nothing to loose are the worst partners in any endeavor.

Thankfully it literally cost me 3 mouse clicks to cancel the plane tickets for August. There might be an administrative fee subtracted from the refund, but this is a large weight taken off my shoulders. My credit card is breathing a big sigh of relief as well.

The main cost that remains now is my bruised EGO. But I’ll survive.

Would I consider having interns in the future?

Why not? I learned about what legal hurdles there are and knowledge is power. Interns from outside the EU will be welcome, as long as they are unpaid. Sorry, but it’s the law. The politics of transcontinental paid internships are not my fight.

If economics permit me I’d also love to be able to recruit interns from Austria or the EU and also pay them a decent salary. It might be take another year or two of growth of my business, but one may dream …

I Love Austria

If you ever feel like moving to a different country  I can wholeheartedly recommend Austria. We pay well, have a shortage in skilled programmers and if you speak English natively and have a finished college degree then it is extremely easy to obtain a red-white-red card. Being an Austrian citizen for almost 40 years now I can tell you from experience that besides some outmoded bureaucracy this is the country with the best quality of living on Earth.

Update July 11th: Turns out that the ticket I had bought did not allow for cancellation. We could have rebooked it, but for canceling Lufthansa only refunded “unused taxes”. So the adventure not just hurt my feelings, it also caused a loss of $1900 that I can never get back. I hope that this pain will turn into wisdom some day.

Categories: Business

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