Mary Cooper – a Hawke’s Bay-based human resources consultant and farm owner – said employers needed to be realistic.
“You can’t have what is effectively a farm manager and pay them as a dairy farm assistant – you’ve got to be realistic about what your expectations are.”
A job analysis would identify what skill-set was required, but hand-in-hand with that was figuring out what the business’ budget could handle.
There were also geographic differences in the employment market that would affect remuneration levels. Cooper said that in areas where farm employees were in scarce supply, remuneration would likely reflect the greater competition for skilled staff.
Cooper also encouraged her clients to work out the maximum fortnightly hours likely to be worked at the busiest time of year to ensure minimum wage requirements were met.
Remuneration surveys like the one carried out by Federated Farmers could offer some guidance, Cooper said.
Incentives and-or bonuses were another remuneration strategy sometimes adopted in the industry. There was a difference between the two. Incentives were structured payments built into the employment agreement while bonuses were one-off “out-of-the-blue” cash or non-cash rewards, although if cash, they would need to be taxed through PAYE.
‘You can’t have what is effectively a farm manager and pay them as a dairy farm assistant – you’ve got to be realistic about what your expectations are.’
Cooper cautioned that in the case of incentives, it was important they were transparent and relevant for the role for which they were being offered. Linking incentive payments with profitability could be difficult, even for farm managers, as they might have little control over the cost side of the profit equation. Cooper said production targets could be more easily captured through incentives but needed to be carefully managed.
The criteria needed to be explicit. Cooper used the example of offering an incentive for a grade-free month.
“Is that grade-free, demerit point free, or a grade with a financial penalty, or what is that?”
She advised a horses-for courses-approach, as not everyone would be motivated by incentives.
“Some people work really well with that and some people don’t – you’ve got to figure out where people’s motivation is.”
Calculating total package value
Calculating remuneration in the dairy industry can be tricky when cash and non-cash rewards are included. Being transparent is crucial, so both employers and employees must understand exactly what goes into making up the total package value (TPV) and how it will be treated – cash or non-cash.
Cash rewards will be taxed through PAYE while non-cash rewards will incur fringe benefit tax if not incorporated into remuneration.
Salaries – where the annual TPV is paid in even amounts at regular intervals throughout the year – has been the most common remuneration strategy in dairy farming, although wages – payments based on an hourly rate and hours worked – were becoming increasingly common. Wages could be more transparent but required monitoring because employees might choose to work more hours than they safely should to earn more money or could game the system by deliberately taking longer to complete tasks than should be needed.
Example of TPV
Cash salary: $40,000
House value ($200 a week): $10,400
Wet weather gear (one set a year): $500
Meat (1 cattle beast a year): $1000
TOTAL PACKAGE VALUE: $51,500
Source: DairyNZ
