“Everything I asked for in the pre-audit was immediately handed over by the farm’s accountant, and more, so before I had visited the farm I had all the records. It was different from the word go.”
After seven years with the Labour Inspectorate and the past year inspecting dairy farms as part of an ongoing audit of farm employment throughout the country, McLean’s optimism proved to be well founded.
“This was the first farm audit I had done that’s been 100% compliant and I pretty much knew before the visit when I arrived to interview the employer and two of his employees for a well-rounded view.”
In the latest Labour Inspectorate audit, during the past summer only seven farms out of the 29 visited throughout the country were fully compliant with employment legislation. Among the four Waikato farms in the audit only the Pendergrast farm was compliant.
The most common breach was for inadequate time records for employees (15 of the farms visited) followed by holiday and leave records (13) and wage records (10). A quarter of the farms visited had breach all three of those requirements.
The flat 195 hectare farm 8km north of Te Aroha on the west side of the Waihou River, owned by Charles Pendergrast and his mother Lyn, employs five full-time equivalent (FTE) employees and 1.5 FTE contract employees.
It’s a high-input farm where there’s little down time except during May to July when autumn calving is finished and the spring cows are drying off.
The herd is split-calved for spring and winter milk and one of the team is employed solely to mix and dispense supplement on the feedpad that makes up to 75% of the total diet for 850 large-framed Jerseys producing at a rate of 570kg milksolids (MS) a cow in a season.
The Pendergrast farm was included in the labour audit because it employed migrant labour, currently Dutch and Filipino workers, and had recently requested mediation in regard to a former employee’s termination of contract.
Pendergrast said he was reassured by having all employment records readily available through Abacus Administration, which is part of Te Aroha and Morrinsville accounting firm Diprose Miller that’s engaged by the farm.
If there was a question raised about an aspect of employment, he said, Abacus could produce a report with all the answers.
“We bought the herd two years ago when our former sharemilker moved back home to the Netherlands to farm and we took on board a lot of the responsibilities, including the payroll that Angela (at Abacus) offered to take over.
“The cost to me is part of administration, and it’s about $230 a month to run the payroll and I don’t have to worry. It’s an insignificant cost, at the same level as sundry costs each month, and it’s just something we can’t afford not to do.
“As a company, if you are in breach of a labour law you can be fined at the level of major companies, which is far higher than for individuals.”
He said their overtime agreements and higher wage rates to retain staff were within a payroll budget of 80c/kg MS that was discussed with his bank manager and accountant and considered a standard amount to pay.
It was less than half the farm’s biggest cost, the feed for cows, which totalled about $1.80/kg MS.
McLean’s farm audits revealed that despite farm employers using computer software with a payroll component to calculate PAYE tax, it often fell short when addressing holiday pay and other employee entitlements.
“When I ask about holiday pay the employer will say a staff member did have a week off back awhile and out comes a notebook and it all just falls away.
“They might start with a manual payroll system but you have to maintain it.”
In stark contrast is the payroll module run by Angela Millward, who is the human resources adviser for Abacus.
“An employer may have a mini version of payroll software at home but you would need a pretty good level of knowledge to make it work and get the right results and be compliant,” Millward said.
After 10 years using the commercial scale MYOB EXO software to process pay, track holiday and accrued leave, sick pay and any other entitlements for various companies, Millward said more farm employers were becoming interested in light of their increased awareness of employment law obligations.
The software could process up to 1000 staff pays a session, generates real-time tracking or trend reports and is automatically updated with tax and legislation changes, but for clients the appeal was in its simplicity because all most had to do was provide timesheets at the end of a pay period.
“So the job for Charles is to give me the timesheets and I work it out. Charles receives an email later that afternoon and makes direct credits into each employee’s bank account and then
he prints out their payslips showing how the pay was made up. The job’s done.”
Millward also helped Pendergrast with employment agreements when new workers were hired and any changes to their employment terms that were incentivised to attract and retain the right people.
“Charles is paying them above a minimum wage level because this is a high-input farm and he wants to keep the team together.”
The Labour Inspectorate’s dairy spokeswoman Natalie Gardiner, who was also the inspectorate’s Central region manager based in Hamilton, said the focus on dairy farms as a regulator was creating the demand for more up-to-date payroll services.
But there had to be a clear understanding between the accountant and the farmer about who did what with the payroll information, Gardiner said.
“What we are finding from the audits is that a farmer might have an accountant involved and even an automated payroll system but they have not had a conversation around what’s to be done and who does what.
“If employees don’t know how their pay is made up or their leave entitlement then that can create real uncertainty. But when it’s all spelled out they feel they’re not being ripped off and can focus on the job.”
She said the need for a safe and fair workplace was the focus of the Quality Workplace Accord launched in May and the combined involvement of DairyNZ, Federated Farmers, Dairy Women’s Network, NZ Young Farmers and DCANZ was to help farmers achieve that goal.
