William Edwards                                       Revised April 2008                         Iowa State Extension economist        515-294-6161 wedwards@iastate.edu

Hours Worked
The average number of hours worked per year for full-time employees was estimated to be 2,575, or about 50 hours per week. However, farmlabor needs tend to be seasonal. During spring and fall, employees worked an average of 56 hours per week, but during the summer months they averaged only 48 hours per week, and in winter they worked just 42 hours per week (Figure 2). Only 14 percent of the employers increased the hourly wages of their employees after a minimum number of hours per day or week. In most cases overtime pay began after 40 hours of work per week, and amounted to a 50 percent higher hourly wage, that is, “time-and-a-half” pay.

Wages per hour.
The average cash wage paid per hour worked was $11.12. However, when bonuses and the value of fringe benefits were added, the average total compensation was $13.59 per hour. There was a considerable range for both of these, however, as summarized in Table 2.


Table 2. Distribution of average wages and total compensation per hour

Vacation               10.0 days
Holidays                 4.4 days
Sick days               4.1 days
Personal days         2.2 days
Total days             20.7 days

Benefits

Most of the employers (89 percent) preferred to provide some noncash benefits to their employees. Such benefits can substitute for cash wages, but in many cases are not subject to Social Security taxation. The value and type of nonwage benefits extended to farm employees varied widely. Table 3 shows the proportion of employees who received various types of benefits, the average annual cost for those who received each one and the average cost of the benefit for all employees in the survey sample. The average total cost per employee for all benefits received was $5,374 per year, or 15 percent of their total compensation. This does not include the employer’s share of Social Security or other payroll taxes.


Table 3. Benefits provided to employees.

Forty-two percent of the employees received some type of insurance plan, usually for health expenses, at an average annual cost of $4,132 per worker covered. Health coverage plans were mostly individual plans, although some covered family members, as well. Some employees also received life insurance and disability insurance coverage.

Housing is often available as part of the existing farm property. Many employers prefer to provide housing to an employee rather than rent it to a third party. Housing also may be located near livestock or grain storage facilities that the employee oversees. Twenty percent of the employees received housing as part of their compensation, at an average annual value of nearly $3,459, based on typical rental rates for rural houses. In many cases the employer paid part of the utility costs as well.

Nearly half of the employees received some meals at the expense of the employer. This is often done for convenience, when the employment site is not close to where the employee lives. Employees who were provided meals received an average of 5 meals per week, with an annual value of $1,273.

Personal use of a business vehicle was a benefit for one employee in five. Those who enjoyed this privilege drove the business vehicle an average of 3,700 miles per year for personal use. This benefit was valued at $.44 per mile. Many employees also received farm produce to consume, usually meat, and clothing needed for work duties.

One-seventh of the employees received some form of continuing education at their employer’s expense, usually in the form of workshops and seminars, or vocational courses from community colleges. These opportunities can improve employees’ abilities to carry out their assigned duties as well as improve their own self-image and confidence.

Some employers rewarded employees with paid recreational opportunities, such as a weekend at a resort or tickets to entertainment events. Since employees might not spend their cash wages for such perquisites, such gifts are often highly appreciated by them as well as by their families.

Only 4 percent of the employees received farm commodities as part of their compensation. These usually consisted of several hundred bushels of grain, which the employee could market. If the employee clearly has control over the disposition over the commodities, they are not included in taxable income for computation of Social Security tax. However, their value on the date they are transferred must be included in the employee’s wages for calculating ordinary income tax.

Finally, 27 percent of the employees received contributions from their employers toward a retirement plan. The provision of this benefit has become more common in recent years.

Bonuses

Many farm employers like to tie part of an employee’s compensation to production efficiency or some other criterion as a means to motivate and reward superior performance. More than 55 percent of the employees received some type of incentive or bonus plan. The average bonus for the employees who re ceived one was $1,748. Many bonuses consisted simply of a cash payment made at the end of the year, not closely tied to performance. In some cases the bonus was tied to the profitability of the farm each year. ISU Extension publication FM 1840, “Bonus Plans for Farm Employees,” shows examples of specific bonus plans that were being used and discusses some of their advantages and disadvantages.

In addition to the types of compensation described above, 27 percent of the employees received free use of the employer’s crop machinery, shop and tools, snow removal equipment, feed grinder, tractor or livestock facilities. The value of these privileges was not included in the estimates of total compensation. However, in addition to being a convenience the use of such resources can provide a source of extra income to the employee, at little or no additional cost to the employer.

Factors Affecting Compensation

Not all employees received the same compensation - differences were quite large, in fact. Factors such as farm size, education, employee duties, years of farm experience and supervisory responsibilities all had a major influence on how much an employee was paid.

Gross Sales
Farm size was measured by annual gross sales. Larger farms generally paid higher compensation, as shown in Table 4. In particular, farms with gross sales of more than $500,000 paid significantly more than smaller farms did. On the larger farms some employees were probably supervising other employees or carrying out more specialized duties and thus merited a higher level of pay. The number of full-time workers employed per farm also increased with gross sales, from 1.8 to 9.5 employees.


Table 4. Full-time employees and total compensation by gross sales per year

Table 5. Compensation by duties of employee.