Wages and Benefits
for Farm Employees
Results of an Iowa Survey
FM 1862 September 1999
More than 20,000 people make their living each year as full-time employees on
Iowa farms. The level and type of wages and benefits they receive vary widely.
Both farmers and employees need to be better informed about how farm labor is
compensated. To assist them, Iowa State University and the Leopold Center for
Sustainable Agriculture conducted a survey of Iowa farmers who employ one or
more persons full-time.
The following results describe 197 farm employees who worked at least 1,600
hours on the same farm in 1997, and were not related to the farm operator. The
average employee was 37 years old, and had 15 years of experience working on a
farm, 10 of which were with the present employer. Only 4 percent of the employees sampled were female, and only 5 percent were non-Caucasian.
Cash wages
79%
Bonuses
3%
Figure 1. Sources of
compensation
Compensation of Employees
Benefits
18%
Many employers and employees think first about cash wages or salary. Based
on the information obtained in the survey, the average cash wage paid to all
employees was $21,194 per year, before deductions for taxes. However, this
amount made up only 79 percent of their total compensation (Figure 1). Besides
wages, employees also received compensation in the form of fringe benefits and
bonuses. The average value of all benefits received was $4,852 per employee. In
addition, an average of $868 was paid to each employee as a cash bonus or
incentive payment. The average total value of all forms of compensation was
$26,914, and varied from a low of $10,970 to a high of $63,163. This last salary
was for a manager of a large cattle feedlot who worked almost 3,000 hours per
year and received 2,800 bushels of soybeans as a bonus.
In a similar survey conducted in 1990 the average farm employee received
$20,594 in total compensation. The increase of $6,320 over 7 years represents an
average annual increase of 4.0 percent. By comparison, the average annual pay,
including benefits, of all salaried workers in Iowa was $19,224 in 1990 and
$23,679 in 1996 (the last year for which data was available). The annual rate of
increase was 3.5 percent.
Wages
Wages were paid either on an hourly basis or as a fixed amount per week,
month, or year. Hourly
Table 1. Compensation and characteristics of employees.
wages were received by 38
percent of the employees.
All full-time
As shown in Table 1,
employees
Hourly wage
Fixed wage
employees who were paid
Percent of employees
100%
38%
62%
by the hour received lower
Value of cash wages
$21,194
$20,875
$21,386
annual wages, benefits,
Value of benefits
4,852
2,177
6,461
Value of bonuses
868
500
1,090
and total compensation,
Value of total compensation
$26,914
$23,552
$28,937
on average.
Employees who reAge of employee
36
34
38
ceived a fixed wage
Years of tenure on farm
9.7
7.1
11.2
tended to be older and
Hours worked per year
2,594
2,528
2,633
have longer tenure on the
Average wage per hour
$ 8.21
$ 8.20
$ 8.21
same farm, and received
Total compensation per hour
$ 10.42
$ 9.31
$ 11.09
more of their pay in the
form of benefits. Possibly a longer employment history makes it easier to predict
the number of hours that will be worked, and to set a fair wage in advance. Fixed
wage employees also worked slightly more hours per year than employees
who were paid hourly. Fixed and hourly wage workers earned essentially the
same cash wage per hour, but fixed wage employees received more in benefits
and bonuses.
60
Hours worked
30
40
20
10
Dec.-March
Sept.-Nov.
June-Aug.
0
April-May
The average number of hours worked per year for full-time employees was
estimated to be 2,594, or about 50 hours per week. However, farm labor needs
tend to be seasonal. During spring and fall, employees worked an average of 57
hours per week, but during the summer months they averaged only 50 hours per
week, and in winter they worked just 41 hours per week (Figure 2). Only ten
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 to 50 hours of work per week.
50
Figure 2. Hours worked per
week
Days worked.
The length of the work week for farm employees varied according to the type
of farm and the season. The majority (63 percent) of the employees worked 6
days per week, normally. However, 24 percent worked only 5 days per week, and
11 percent were on the job 7 days per week.
The number of days off granted to employees also varied widely. The average
number of days not worked that would normally have been work days was
reported as follows:
Vacation
Holidays
Sick days
Personal days
Total days off
Wages per hour.
The average cash wage
paid per hour worked was
$8.21. However, when
bonuses and the value of
fringe benefits were added,
the average total compensation was $10.42 per hour.
There was a considerable
range for both of these,
however, as summarized in
Table 2.
8.3 days
3.7 days
2.9 days
2.3 days
17.2 days
Table 2. Distribution of average wages and total compensation per hour.
Range, $ per hour
$
.00 – 5.99
6.00 – 6.99
7.00 – 7.99
8.00 – 8.99
9.00 – 9.99
10.00 – 12.49
12.50 – 14.99
15.00 or more
Percent of employees
Cash wages
Total compensation
19
15
18
16
16
10
3
3
100%
5
8
12
13
15
23
17
7
100%
Benefits
Many employers prefer 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
Table 3. Benefits provided to employees.
nonwage benefits exPercent
Average value for
tended to farm employees
Type of benefit
receiving
those receiving
Average value
varied widely. Table 3
the benefit
the benefit for all employees
shows the proportion of
Insurance (total)
43
$2,638
$1,138
employees who received
Health, single
21
various types of benefits,
Health, family
18
and the average annual
Life
9
Disability
5
cost for those who received
each one. The average total
Housing (total)
37
$2,951
$1,109
cost per employee for all
benefits received was
Utilities (total)
30
$2,130
$638
$4,852 per year, or 18
Electricity
25
percent of their total
Water, sewer
21
compensation. This does
Heat
19
not include the employer’s
Telephone
8
share of Social Security or
other payroll taxes.
Meals
45
$1,610
$687
Personal use of vehicle
39
756
261
More than 43 percent of
Farm produce to consume
39
227
82
the employees received
Clothing
23
198
45
some type of insurance
Continuing education
20
230
43
plan, usually for health
Recreation
34
695
162
expenses, at an average
Farm commodities
12
4,331
440
annual cost of $2,638 per
Retirement plans
11
2,131
227
worker. Health coverage
plans were about equally divided between family plans and individual plans.
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. Thirty-seven percent of the employees received housing as
part of their compensation, at an average annual value of nearly $3,000, 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 7 meals per week. These were valued at $5 each.
Personal use of a business vehicle was another common benefit. Those who enjoyed
this privilege drove the business vehicle an average of 2,400 miles per year for personal
use. This benefit was valued at $.315 per mile. Many employees received farm produce
to consume, usually meat, and clothing needed for work duties, as well.
One-fifth 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.
About 12 percent of the employees received farm commodities as part of their
compensation. These usually consisted of several head of cattle or hogs, or
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, 11 percent of the employees received contributions from their employers toward a retirement plan. These were equally divided between IRA and IRASEP plans.
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 43 percent of the employees received some
type of incentive or bonus payment. The average bonus for the employees who
received one was $2,192. Although there are many types of incentive plans, most
of those reported were based on volume of production, performance, or profitability. Many bonuses consisted simply of a cash payment made at the end of the
year, not closely tied to performance. ISU Extension publication FM 1840, “Bonus
Plans for Farm Employees,” shows examples of specific bonus plans and discusses some of their advantages and disadvantages.
In addition to the types of compensation described above, 21 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, type of farm, employee duties, and years
of farm experience had a major influence on how much an employee was paid.
Gross sales
Farm size was meaTable 4. Full-time employees and total compensation by gross sales per year.
sured by annual gross
Full-time
sales. Larger farms generGross
farm
sales
Percent
of
employees
Average total compensation
ally paid higher compenper
year
employees
per
farm
Per
year
Per hour
sation, as shown in Table
Under $250,000
14
1.4
$22,627
$ 10.24
4. In particular, farms with
$250,000-$500,000
28
1.7
23,241
9.43
gross sales of more than
$500,000-$1,000,000
31
2.3
29,664
10.72
$500,000 paid significantly
Over $1,000,000
27
4.9
29,661
11.20
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 1.4 to 4.9 employees.
Major enterprise
Farms specializing in beef or swine production tended to pay higher levels of
compensation than those
Table 5. Total compensation by major farm enterprise.
producing other types of
Percent of
Hours worked Average total compensation livestock or crops (Table 5).
Mixed crop and livestock
Major enterprise
employees
per year
Per year
Per hour
farm employees received
Beef or beef/crops
20
2,675
$27,795
$10.61
the lowest average comSwine or swine/crops
29
2,582
27,662
10.71
pensation. These farms
Crops only
30
2,423
26,581
10.87
may allow for less specialDairy or dairy/crops
8
2,864
26,150
9.20
Mixed crop and livestock
13
2,724
25,081
9.17
ization of skills than other
farms.
Duties
Even on farms with more than one enterprise, some employees specialize in
just one area. Data from Table 6 show that employees who specialized in beef or
swine production were
the most highly compenTable 6. Compensation by duties of employee.
sated groups. Those who
Percent of Hours worked
Total compensation
specialized in crop proDuties
employees
per year
Per year
Per hour
duction or did other jobs
Beef only
6
2,620
$32,510
$12.42
such as bookkeeping
Swine only
12
2,586
29,541
11.39
earned the lowest annual
Swine and crops
15
2,626
27,260
10.48
compensation. Specialized
Dairy
5
2,620
26,506
10.11
crop production employGeneral livestock and crops
20
2,628
26,278
9.94
ees did work fewer hours
Beef and crops
10
2,786
26,251
9.60
per year than other emCrop production only
28
2,458
25,375
10.36
ployees, though, so their
Other
4
2,743
24,007
9.04
average compensation per
hour was about the same as the average for the entire survey group.
For employees who worked exclusively in swine production, those specializing in gestation and farrowing activities earned an average of $30,195 per year
while those working in finishing activities averaged $31,217 per year.
Education
Total compensation also was related to the employee’s level of education. Graduates of four-year colleges (8 percent of the total) received the highest average compensation, $29,029 per year. Those with less than four years of college education,
including a 2-year degree (26 percent), earned an average of $28,234 annually. Twothirds of the employees had only a high school degree or less, and averaged just
$26,228 in total annual compensation.
Experience
Wages and other compensation tended to rise according to the number of
years of farm work experience the employees had, up to a certain point. As
shown in table 7, total
Table 7. Average total compensation by years of farm work experience.
annual compensation was
highest for workers with
Years of farm
Percent of
Total compensation
work experience
employees
Per year
Per hour
11 to 15 years of experience, while hourly com0 to 5
25
$22,053
$ 9.05
pensation peaked for
6 to 10
23
28,600
11.17
11 to 15
18
30,441
10.96
employees in the 16 to 2016 to 20
15
28,585
11.72
year category. Employees
21 to 30
11
28,826
10.59
with more than 30 years of
over 30
8
23,471
8.43
experience included some
who were probably earning retirement income in addition to their farm wages.
Supervision
Employees who had supervisory responsibilities tended to be paid more. The
77 percent of the employees included in the survey that did not supervise any
other employees received an average annual compensation of only $25,285.
Those who supervised one
other employee (11 perTable 8. Average compensation for supervisors by enterprise
cent) earned an average of
Percent of
Total compensation
$31,112 in total compensaDuties
employees
Per year
Per hour
tion per year, while those
Crops and livestock
3
$36,808
$13.05
who supervised two or
Swine
7
32,428
11.61
more other employees (12
Beef
4
31,422
11.80
percent) were paid an
Crops
6
29,886
11.57
average of $31,944.
Dairy
3
29,902
9.87
When employees with
supervisory duties were sorted by the type of enterprise in which they worked,
supervisors working with both crops and livestock were found to receive the
highest average compensation (Table 8). However, they accounted for only 3
percent of the total sample.
Summary
Many factors enter into the decision of how much to pay a farm employee and
what benefits to provide. Each position requires a separate consideration. Skilled
and experienced farm workers will have many employment opportunities. Before
searching for a new employee, the employer should carefully define the duties of
the position, the level of experience desired, and whether or not the new employee
will be expected to supervise other workers. Then a competitive range of compensation, including possible fringe benefits and bonus plans, can be outlined. The
final package should be the result of a mutual agreement that takes into account
the individual employee’s own personal situation, skills, and experience.
For more information about hiring and managing farm employees see the
following ISU Extension publications:
FM 1840
Bonus Plans for Farm Employees
FM 1841
Farm Employee Management in Iowa
Prepared by William Edwards, extension economist. Edited by Elaine Edwards,
extension communications specialist. Designed by Valerie King. A large thank
you is extended to all those who contributed to the information contained in this
summary, and to the Iowa Agricultural Statistics personnel.
[A]
…and justice for all
The U.S. Department of Agriculture (USDA) prohibits discrimination in all
its programs and activities on the basis of race, color, national origin,
gender, religion, age, disability, political beliefs, sexual orientation, and
marital or family status. (Not all prohibited bases apply to all programs.)
Many materials can be made available in alternative formats for ADA
clients. To file a complaint of discrimination, write USDA, Office of Civil
Rights, Room 326-W, Whitten Building, 14th and Independence Avenue,
SW, Washington, DC 20250-9410 or call 202-720-5964.
Issued in furtherance of Cooperative Extension work, Acts of May 8 and June
20, 1914, in cooperation with the U.S. Department of Agriculture. Stanley R.
Johnson, director, Cooperative Extension Service, Iowa State University of
Science and Technology, Ames, Iowa.
File: Economics 1-5