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How you compensate your employees can help to determine how successful your employees are, how motivated they are and if they are willing to stay in your employment.
Compensation is more than just the bottom line on a pay stub. It includes tangibles such as vacation days, benefits, and non-cash items such as housing or farm products.
Compensation is also how flexible you are in creating work schedules, incentive pay, bonuses, and assisting your employees to solve problems, such as daycare, which affect their work.
Part of your farm reputation as a good place to work rests solidly on your approach to compensation.
A number of Federal and State websites provide information on minimum wage in general, agricultural exemptions and the employment of youth under the age of eighteen.
Minimum Wage
The U.S. Department of Labor, Employment Standards Administration Wage and Hour Division [link] is a portal for information/questions, including
agricultural employees.
Fact Sheet #12: Agricultural Employers Under the Fair Labor Standards Act (FLSA) [link]
Fact Sheet #49: The Migrant and Seasonal Agricultural Worker Protection Act [link]
Specific information on the Federal minimum wage can be found here, with links to state's minimum wages.
The Vermont minimum wage rate is at the Vermont Department of Labor & Industry: Wage & Hour Program and is the higher of the two minimum wages. (Note: Effective since July 1, 1989, "if the minimum wage rate established by the U.S. Government is greater than the rate established for Vermont for any year, the Vermont minimum wage rate shall be the rate established by the U.S. Government".)
Many states have laws setting standards for child labor in agriculture. When both state and federal child labor laws apply, the law setting the most stringent standard must be observed. Please refer to your state's requirements. Go to the U.S. Department of Labor for the "Table of State Child Labor Laws for Agricultural Employment." [link] Information on Vermont Child Labor applys to any minor under the age of 18. Vermont adopted comprehensive child labor rules in 2003 that largely coincide with federal rules. In some instances, Vermont and federal requirements may differ; when applicable, the more stringent of the two requirements applies.
Child labor laws are explicit as to restrictions, including hazardous activities which are not allowed. Vermont Child Labor Rules specifics can be found here (pdf).
As farms continue to become larger and more complex, and farm family demographics change, the need to effectively manage hired employees is likely to increase.
What Is Compensation?
Webster's dictionary defines wages as the money paid to an employee for work done, and compensation as what one receives for labor. Wages are only a portion of the cost of labor on a farm.
Indirect costs or fringes, are sizeable, usually from 15 to 40 percent of the cash wages or salary. Research conducted on farms in New York found fringes to cost 40 percent of the wages paid. These costs include such things as incentives, bonuses, benefits (health insurance, life insurance, the use of farm assets, etc.), time off, and perquisites such as room and board.
Additionally, mandated items such as workers compensation, unemployment insurance and social security taxes will add to the total cost of the compensation package.
Wages/salary The wage or salary will usually make up the largest portion of the compensation package. Will you pay an hourly wage or a yearly salary? Will the work week consist of 40 hours or 80 hours? When does work time begin and end? How will you handle overtime? These are difficult wage/salary items to decide, especially in a business as variable as farming, but they must be decided upon and understood by the employer and employee at the time of hiring. One note about wages--many farm employers say that they simply can't afford to pay competitive wages, but research from New York dairy farms has shown that farm employers who pay higher wages tend to have higher productivity and higher returns.
Time Off Too many farm employers fail to recognize the value of giving employees adequate time off for personal and family activities, vacation, and illness. Paid vacation and sick leave are commonplace in our society. Is there any reason why farm employees shouldn't receive these benefits? Labor-intensive operations such as dairies routinely fail to adequately plan for time off for their employees.
Time off is clearly one type of compensation which a farm employer must address if he or she expects to be competitive with other employers and retain valuable employees. Employees and their families have the same economic and social needs as nonfarm employees, and they expect time off for personal and family activities.
Benefits There is probably no other form of compensation which varies as much from one employer to the next as does benefits. The value of benefits is sometimes subtle and overlooked, yet benefits are often the reason why valued employees move on to other types of work.
Benefits include items such as health insurance, retirement contributions, life insurance, the use of farm assets, and other items.
Since individuals have differing needs and desires, employers should attempt to tailor benefits packages to the specific needs of individual employees as much as possible. Innovative employers will work with individual employees to determine how their needs for certain benefits might best be met as those needs change over a period of time.
Providing creative benefits, such as the use of certain farm assets like pasture or shop tools, may provide a valuable benefit to the employee at little or no cost to the employer.
Compensating farm employees with certain benefits can also have potential tax advantages for the employer and the employee since social security taxes are not required to be paid on certain noncash wages.
To determine if a certain benefit provides a tax advantage, consult your tax consultant or The Farmers Tax Guide issued yearly by the Internal Revenue Service.
Bonuses A bonus is a payment beyond the regular wage or salary, usually paid to reward employees for their contribution to a successful year for the farm business, or to reward length of service. One pitfall with bonuses is that they often become routine practice by employers, and expected by employees. When the bonus becomes expected, or tradition, it in effect becomes regular compensation, and probably does little to reward or reinforce positive or desired behavior by the employee.
Bonuses should depend upon how well the business has performed and how well the individual has performed. It makes little sense to award the highly-productive employee the same size bonus as the average performing employee. This is another reason why bonuses given to all employees at a certain time of the year (like a turkey or a side of beef) do not work.
Incentives An incentive plan differs from a bonus in that it is tied to specific measures of performance. Incentive plans can be developed for any type of farm enterprise or type of employee, although they are most often used to reward skilled or managerial employees.
Incentives should not be used as a substitute for fair wages/benefits or good labor relations. These items should be satisfied first, then supplemented with incentives.
Other Compensation Farm employers may also wish to compensate farm employees with other non-cash items such as housing, utilities, fuel, or farm commodities. These forms of compensation should be clearly defined, preferably in writing, to avoid misunderstandings.
Providing housing for an employee should only be considered if both the employer and the employee desire such compensation. Providing an employee with housing simply because the employer owns a vacant home should not be used to reduce the cost of compensation for the employer.
Compensation Required by Law Federal and state laws require that certain fringe benefits be paid by employers. These include workers' compensation, unemployment insurance, and social security taxes.
Compensating Family Members
The question of how to compensate family employees routinely arises in the farm business. There are probably very few instances when the compensation concepts presented in this fact sheet should not apply to family employees.
It might be useful for farm employers to ask themselves whether or not they would compensate a family employee differently if the employee were not a family member. If the answer is yes, then the employer should reexamine the employee's compensation package.
Excerpt from Ohio State University Fact Sheet, Compensating Farm Employees [link]
"What do you do to 'add value' for your employees?" asked Dave Grusenmeyer, Pro-Dairy specialist from Cornell, at a recent Large Herd Conference in Vermont. "Everyone is selling something and as an employer you are 'selling' your business as a better place to work than any other business in the community."
Wow! Employers in the room began thinking of how to package whatever their "added value' was. Those of us in the ag business/education world began thinking of ways to present this concept to our clientele. It requires you to 'look outside of the box.'
Here are some examples of what farmers in New York and Vermont are doing.
Farmer Ray Dykman in NY believes in investing for the future so much that he shares this enthusiasm with his employees. He offers training and tips on personal financial management and investing to his employees who are interested. With his advice, individuals are able to get started in financial planning and investing. He even helps them get involved with investment clubs.
Quite a few employers send their workers to conferences and seminars. There is no question that professional development is an important aspect of the job. But just bringing along an employee to a production management meeting isn't a lot of 'added value'.
Do you send employees to training for both personal and professional development? As an "added value' Kent Miller, of New York not only sends his middle managers and their spouse to Franklin-Covey "What Matters Most" time management training, he provides the couple with hotel reservation for the night prior to the meeting. Not only are they there to represent the farm and increase their knowledge, they do not have to rush getting to the event and have time for a "night out" before. It's a special perk, balancing both work and family.
The employer members of the Vermont large herd discussion group the Concrete Grazers know the value of getting together and sharing positive examples of work, ideas, and support for each other. With a little different twist, they have worked with Extension and agri-business to establish an employee discussion group. This group not only offers top notch guests to lead discussions on topics such as bio-security, mastitis control, stress management, dealing with common everyday herd health occurrences; but also the importance of peers coming together.
Quoting Ted Foster of Foster Brothers Farm in Middlebury, Vermont, one of the founding organizers of the Concrete Grazers, "Employees come back excited about what they've learned and what others are doing. It's a positive experience for them. We (the employers) encourage them to go and even cover for them on their work so they can get away."
Working on farms carries many preconceived images by the non-farming community. Long hours, low pay and (assumed) dirty facilities. Many farmers are going to great lengths to change the exterior visual image including landscaping and attractive signage.
Ray Dykman believes that the behind the scenes environment needs to be attractive too. He employs the local high school janitor to clean the employees break room, showers and restroom weekly. Not only are they clean and comfortable areas, those using them do not have to worry about their upkeep nor take time during their work day (or after hours!) to tidy up. When facilities are clean and neat employees have more pride in where they work and take better care of the facilities.
Often employees have ideas to expedite a particular job, or provide for additional animal care and comfort. Sometimes employers are leery of change and question the efficiency or the cost of a proposal. Others, like Onan Whitcomb of the Williston Cattle Co. in VT, look at these suggestions as opportunities to show trust in employees and send a message to present (and future) employees that he values his people having an interest in the operation. "The ideas may not always save dollars but the morale boost is worth more than any dollars spent trying something new."
As Grusenmeyer states, "In order to add value you must first know what is of value to your employees. This may be different for each employee. And it may be different from year to year as employee situations change."
These are a few examples of farm employers adding extra value that makes their place special to go to work. What's special about working for you?
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What to offer.
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Last modified January 26 2006 10:26 AM
