Agriculture Labor Compensation and Retention
Farm Business Management Update, February/March 2006
By Bill Whittle (firstname.lastname@example.org), Extension Agent, Farm Business Management, Page County
In the previous article, steps to hiring employees for your agriculture operation were discussed. These steps included developing a job description, locating a source of quality labor, and developing a total compensation package that fits the job description and is competitive with your competition for labor. An oversimplification of the entire employee management situation is that as owner/manager you will be happy if you get a good day's work for wages paid, and the employee is happy if he earns good wages for the work provided. Hiring and retaining really comes down to making both sides reasonably happy. It is a process that begins when you meet the prospective employee and continues through hiring, training, and hopefully many years of a sound personnel relationship.
The most visible component of the employee compensation package is salary or wages. Farmers often know the going rate for agriculture employees but are hesitant to hire someone at the "maximum "rate only to see the employee not work out after time and energy have been invested in training. An interesting approach to this dilemma is to use a "Staggered-Reach-Back" wage approach. Once you determine the job description and wage you are willing to pay, a wage program that provides the employee an incentive to learn the job and stay with you through that critical probationary/training period can be developed. The program works like this. A new employee is hired and begins at a lower probationary pay rate and knows that after satisfactorily completing the probationary period he or she will receive a higher predetermined rate. The probationary and the base rate are both negotiated when the employee is offered the position. The explanation is very important! This is not the time for secrecy. An employee needs to understand what is in it for them from the get go.
An example of this "Staggered-Reach-Back" wage approach follows. An employee is hired with a six month probationary period. The final post-probationary wage is set at $9.00/hour. At hiring, the new employee receives $7.50/ hour ($1.50 below the final rate) and designated increases are "Staggered" throughout the probationary period. At the end of one month if both parties are satisfied, wages will be increased $0.25 to $7.75/hour. The wrinkle and the "Reach-Back" portion of the plan is that the employee receives $0.25 for all hours worked during the first month making the effective wage $7.75 for that first month. At the end of month two, if both parties are still satisfied, the hourly wage is increased to $8.00/ hour and $0.25 is added to all hours worked from the date hired making the effective wage now $8.00/ hour. The next four months are handled the same way. If both parties are satisfied, $0.25/hour is added to the wage each month and also to the hours worked from beginning employment date. At the end of the six month probationary/training period the rate becomes $9.00 and $0.25 is paid on all hours worked to that point. If the employee satisfactorily completes the probationary period, he will have realized a wage-rate of $9.00/ hour from his beginning employment date. After this any wage increase would be based on accepted performance evaluations. A program such as this can be modified in several ways to meet your needs. It may not be necessary to "reach-back" to the beginning each time to increase the wage rate or you can make the period longer between any "reach-back" increase. The advantage of this type of program is it defines compensation. If the employee "fits" into the farming operation, he will be compensated for working hard during the probationary/training period. For the employer, it is a hedge against making a bad employment decision. If at any point during the probationary period either the employer or employee is not satisfied, they part ways. Of course the employer is out wages paid if the "fit" is not good or if the employee decides to leave, but he is not out as much.
A compensation plan such as this may help alleviate the rapid turnover that is seen on some farms, but cash wages are not everything. It is vital to realize that personnel management is an ongoing effort. Just as important are the other components of the compensation plan, the job description, and how you, as manager, are able to interact with employees. Very few managers are born knowing how to manage people successfully. It is a learned skill and one that must be continually practiced and updated.
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