Factors to ponder when determining employee compensation – by Katelyn Duncan

A common theme among farmers is the collective industry-wide struggle to hire good employees.

The struggle often focuses on the question of how much to pay them.

Three considerations when negotiating employee wages are:

  • quantity (market supply and demand)
  • quality
  • employee preferences

In many ways, wage negotiations can be more art than science. To better understand the quantity of farm labourers, consider the current supply and demand situation.

Before COVID, 20 percent of farm labourers in Canada were brought into the country through the Temporary Foreign Worker program. Agriculture ranked as the highest user of this program among other Canadian industries. About 50,000-60,000 foreign agricultural workers came to Canada to work each year.

COVID changed that. Pandemic restrictions reduced the number of TFWs allowed into the country and although recent policy changes were enacted to make hiring easier, the market is far from recovering, even less so when one considers that many workers typically came to Canada from Ukraine.

As well, it appears the existing Canadian workforce shows little interest in farm labourer positions. With unemployment at 5.3 percent in March of 2022, the lowest since the mid-1970s, there are far more available jobs than workers.

Unfortunately for farmers, there are ample employment opportunities for Canadians that offer competitive salaries without the need to travel or relocate to rural areas.

So, the labour supply is very low due to COVID, the war, and record low unemployment rates. This is compounded by inflation and significant cost-of-living increases. At the same time, demand for workers is high.

The second factor, the quality of the potential employee including experience and skillset, is also important to consider when determining employee compensation.

Although value is challenging to measure, understanding your value as a farm manager will help with establishing a break-even price.

Management involves spending time working “on” the business versus “in” the business. Jobs like spraying, cleaning bins and picking up chemicals are better suited for farm labourers. Relying on a manager to perform these duties usually results in less time available for management activities, such as negotiating chemical prices, inventory management, or analyzing the business’s financial performance.

The perceived quality of a new employee, years of experience, and ultimately the cost of not having an experienced and reliable employee are important aspects that factor into wage negotiations.

Gaining a better understanding of the time value of both a manager and an employee will determine whether a farm can afford to pay a potential candidate what they are worth.

From this, a more formalized framework for hiring can be developed where past failures and successes are accounted for.

The third factor is employee preferences. If you are curious as to what a farm labourer is expecting for a wage, ask him or her.

Knowing your break-even price beforehand and keeping the dialogue co-operative rather than competitive will help to achieve a deal suitable for all.

Some potential employees may request perks in the place of higher wages. Additional holiday time for full-time employees is a good option given the seasonal nature of many farms, assuming provisions around when holidays can be taken are in place.

Once a potential candidate is selected, understanding these three factors can help guide you through successful wage negotiations.

If you would like to speak to one of our consultants about this topic contact us.

Let us help you take your operation to a higher level.

Register now for The Next Chapter of Your Farming Journey – November 12th and 13th 2024 in Regina, Saskatchewan
Register now for The Next Chapter of Your Farming Journey – Nov. 12th & 13th 2024 in Regina, SK