When To Pay Candidates for Interviews

Hiring, HR Compliance, Pay / By / candidate, compensation, compliance, Hiring, pay, Recruiting, talent acquisition
when to pay candidates for interviews

When Do I Pay Candidates For Interviews?

Are there special situations where it is highly advised or legally required?

In today’s competitive job market, businesses are looking for ways to attract and retain top talent. One way to do this is to pay candidates for interviews. In some cases, the employer is legally bound to compensate candidates. In others, it’s simply a good idea and a courtesy that is popular with candidates.

First, don’t be misled by out of date or false information online regarding paying candidates for working interviews.

  • No, it’s not inherently illegal to conduct working interviews without going through a temp agency.
  • Yes, you should collect W4 information and withhold payroll tax from candidate working interview payments.
  • Yes, candidates performing for economic benefit of the company during working interviews are considered employees do qualify for overtime.
  • No, you don’t have to pay them market rate for the role. You are only required to pay minimum wage for the state or federal government, whichever is higher.
  • No, you should not be provisioning access to sensitive materials for candidates, but if you must, protect yourself legally.
  • No, workers compensation and general liability insurance isn’t automatically extending coverage to candidates.

When Is Paying Candidates for Interviews Legally Required?

The Fair Labor Standards Act (FLSA) requires interviews to be paid when they are “working interviews.” An interview becomes a working interview when the candidate is asked to perform work that not only simulates actual work, but is being or can be used by the organization for economic benefit. The rule is clear, even without directly mentioning working interviews:

“The FLSA requires payment of at least the minimum wage for all hours worked in a workweek and time and one-half an employee’s regular rate for time worked over 40 hours in a workweek.“

Questions and Answers About the Fair Labor Standards Act (FLSA)

But then, if this applies to employees, is a candidate an employee?

Definition of “Employ”

“By statutory definition the term “employ” includes “to suffer or permit to work.” The workweek ordinarily includes all time during which an employee is necessarily required to be on the employer’s premises, on duty or at a prescribed work place.“

Fact Sheet #22: Hours Worked Under the Fair Labor Standards Act (FLSA)

Based on this Department of Labor interpretation of what it means to be employed, if the candidate is required to complete work for the organization, then they are “employed.” This can be further supported by using the FLSA economic reality tests, weighing factors to determine status and candidate treatment in the interview. Thus, the candidate should be compensated for that time, must be paid at least minimum wage, and are overtime-eligible. In case you’re wondering, can they instead be:

  • An independent contractor? Not if they fail to meet the tests for independence from IRS or the federal and state Departments of Labor.
  • A Volunteer? Not if the candidate is performing the same type of work an employee would.

Note:

Because you’re paying candidates for work that benefits the business, they are considered employees at the time of the interview, and you are legally required to withhold payroll taxes and pay them for their time. This involves collecting W4 tax information and performing appropriate payroll calculations prior to issuing payment.

Because it’s law, you can’t just have candidates complete a waiver, or sign a contract stating that they’re not an employee.

Note:

“Job shadowing” is not required to be paid unless the candidate is actually performing work for the company. If the candidate has already been extended an offer, or the purpose of the shadowing is on-the-job training, this is most likely employee work and therefore paid. Consult your legal counsel.

Why Would I Choose To Pay Candidates for Interviews If When It’s Not Legally Required?

The benefits to paying candidates for interviews, working or not, include:

  1. Attracting top talent: Paying candidates for interviews can attract top talent by showing them that your company values their time and effort.
  2. Improving the candidate experience: Paying candidates for interviews can improve the candidate experience by making them feel valued and respected.
  3. Reducing no-shows and cancellations: Paying candidates for interviews can reduce no-shows and cancellations by making it more difficult for candidates to back out of interviews at the last minute.
  4. Improving the quality of interviews: Paying candidates for interviews can improve the quality of interviews by giving candidates more incentive to prepare and come prepared.

Note:

If you are paying candidates for their presence for interviews which do not involve work, they are not necessarily considered employees and cash payments without payroll taxes is generally allowed. Consult your legal counsel to be certain how to classify your candidates.

Paying candidates for interviews can be a great way to improve the candidate experience and attract top talent. If you are considering this option, check the labor laws in your state. Then factor in the cost of paying candidates for interviews into your recruitment project.

Note:

Check the acts, statutes, or labor codes in your state regularly to make sure that you are in compliance for any given recruitment project. If you want to know more about each state’s laws on paying candidates for interviews, check out their state department of labor websites. In general, these laws assume employment status based on the definition of “work” and “employ” and apply wage law to this specific scenario, implicitly.

This whole process adds administrative load and may actually have a negligible impact on your recruitment projects. Because of this, the best plan of attack is to seek alternatives to having employees perform useful work, such as conducting supervised skills assessments or talking through case studies. Ensure that any form of interview is set up to achieve the desired result. Which is to say, that these interviews/assessments have validity and reliability.

If you still choose to continue with the working interview, be clear about your expectations in the job posting. Commit your plan to pay candidates for interviews in company policy and your recruitment standard operating procedures. During the process, let candidates know that they’ll be paid for their time and how much they will be paid. Have a system in place for tracking interviews and payments. This will ensure you are paying candidates on time and accurately.

You and the organization are being evaluated by the candidate, just as much as the candidate is being evaluated by you.

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Cody Bess
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