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Compensating farm employees is more than a pay check

By Heather Thorstensen

Date Modified: 04/22/2012 1:53 PM

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NORTHFIELD, Minn.— Farmers at a recent employee management workshop in Northfield were reminded that wages are only a part of the way they can compensate their staff.

Indirect compensation — such as incentives, bonuses, benefits and time off— usually represent 15 percent to 40 percent of cash wages or salary, said Chuck Schwartau, Extension regional educator.

"Benefits really vary widely from farm to farm," said Schwartau on March 22 during the meeting in Northfield. It was hosted by Extension in Dakota, Rice and Scott County with support from AgStar Financial Services.

Compensation needs to be fair to the farmer and the employee and it can play an important role in employee satisfaction and retention.

To learn the local labor market, Schwartau suggests that farmers talk to other business owners and managers in their local community, including those at the gas station, restaurant or manufacturing plant, to find out what's offered for a workforce with similar skills to prospective farm employees.

Occupational employment statistics in Minnesota show the average wage in the second quarter of 2011 was $13.80 per hour for the farming, fishing and forestry sectors. The national average was $11.87 per hour.

An Iowa State University Extension survey from 2011 describes 251 farm employees who were not related to the farm operator. The average cash wage they received was $33,320 per year before tax deductions but, after factoring in benefits and bonuses, the average value of all compensation paid rose to $38,929.

Schwartau said that many cases of non-cash benefits aren't subject to Social Security tax deductions. Farmers can ask their tax consultant or check "The Farmers Tax Guide," which is published each year by the Internal Revenue Service, for details.

It's important to provide employees with information during their annual review that explains the value of non-cash benefits so they are aware it is part of their compensation package, said Schwartau.

He also cautioned farmers to check with their employees about what benefits hold the most value for them. He heard of one farm that regularly gave each employee hamburger as a benefit, but one employee's family didn't eat hamburger so the meat went to waste.

In the ISU survey, non-cash benefits were given to 88 percent of the employees.

Nearly half of employees were given meals at their employer's expense. An average of four meals were provided each week, a $1,302 value per year.

Sixteen percent of employees had personal use of a business vehicle, 17 percent received contributions to their retirement plan, and 35 percent received an insurance plan, usually for health care.

Other benefits can include uniforms, housing— including some with paid utilities —the use of machinery and receiving produce or other items produced at the farm.

A bonus payment beyond the regular salary should only be provided for going above and beyond normal expectations, said Schwartau.These can be used at the employer's discretion and don't have to be given to all employees, but an employer should be prepared to explain their decisions if questioned by employees.

In the ISU survey, 65 percent of employees worked on farms that used incentives or bonuses.

Schwartau cautioned farmers from compensating family members less than any other farm employee.

"Some people see labor as a cost," he said. "I look at it as investments."