Employing family on the farm - what is a fair wage?

When managing farm operations, deciding how much to pay family members engaged in farm work can be a challenge.

The hours are probably more flexible, but remuneration is often salaried and the hours long. Unfortunately, the family work schedule is more aligned to being self-employed, rather than a 40 - 50 hour week. Because they are family, there can be more of an expectation that you work until the job is done. Weekends and public holidays are worked, especially as family don’t typically get paid time and a half. This becomes difficult when working out how much to pay family. This becomes even more complicated when there are unspoken expectations regarding farm succession. Those working on the farm may accept below market remuneration on the implied basis that they will inherit the family farm.

Sometimes this works, but with high farm values relative to economic returns, non-farming siblings are less willing to accept a significantly reduced inheritance because another sibling worked on the farm at a reduced wage, or to make the succession stack up financially. It becomes difficult to bridge this chasm between the farming and non-farming siblings. Understandably, farming siblings may believe they should receive a greater entitlement to the farming business, but has this been discussed with the parents or their off-farm siblings? It may not be considered if the remuneration package is at fair value, and hours worked or leave taken are not recorded.

Farming profitability and debt can make it difficult to pay a fair market wage, and this is often encouraged by professional advisors who recommend that drawings and family wages are kept down for the ‘greater good’ of the family business.

Reduced wages and drawings means more money is available for debt servicing, maintenance, development and business expansion. There can also be challenges encouraging farmowners to pay a fair market wage to their adult children when this results in wages greater than the parents’ drawings. This becomes a good package when you include a house at a below market rent, home kill meat, the farm ute, power, telephone, insurance, farm clothing and access to the Farmsource or Farmlands card.

However the remuneration returned to IRD based on cash wages and accommodation will seem below the market average, and the additional perks of the job on the family farm can be taken for granted. Sometimes there is also pressure to keep wages low to ensure eligibility to WFFTC and other government support.

If lower wages are paid, the amount of family assistance received can be significant.

Federated Farmers publish an annual farming remuneration survey that is a great reference document for establishing what fair pay looks like. It looks at national and regional remuneration (cash and non-cash), hours worked and job roles.

It is also worth calculating and discussing the value of a total remuneration package. By the time the additional perks are added such as meat, utilities and vehicles, there could easily be an additional $30,000 of benefits received.

The remuneration process needs to become more transparent in the same way that it occurs with non-family employees. Siblings don’t want to discuss what they are paid, and it is difficult to compare wages between on farm and off farm employment.

Although these can sometimes be difficult topics to discuss and have a very personal element to them, the key is to make sure everyone is talking, and open discussions are being had by all involved.