Over the last decade, we have been in the midst of a talent struggle in agriculture. And as we enter into uncertain territory post-pandemic, it’s important to recognize we are not the only industry that’s facing challenges finding and attracting top quality candidates.
More than three quarters of hiring managers and recruiters say they are struggling to find hires across all industries. The compensation we have historically paid throughout the agriculture industry is no longer bringing in the quality of hires needed for strong performance.
As we see consistent increases in pay rates across many other industries, it’s critical for agriculture executives and employers to follow suit in order to attract and retain top talent. In this guide, we’ll discuss the best practices for setting competitive pay.
The Two Main Problems
There are two primary reasons driving the big disconnect between what we are looking to pay today and the quality of ag recruits you’ll find at that pay range:
1. Increasing wages
The first reason is wages continue to increase at a faster pace than in the past. Although the agriculture industry has slowly begun to increase its pay rates, it is still falling behind other competing industries.
According to the Current Bureau of Labor Statistics, a 10 year projection of the annual rate of change for agriculture jobs shows a 0.2% decline. Conversely, the report projects an increase of 0.4% for construction jobs and 1.3% for mining.
With the amount of jobs in competing industries on the rise and only so many great hires to go around, the pay levels we have seen in the past just don’t align with the market.
A quick snapshot of what we are up against: Walmart’s base wage for a general labor employee is now $15 per hour (according to an article from the corporate website). Now compare this to the median hourly wage for agriculture jobs, which is currently only $14.43.
As of November 2020, the Bureau of Labor Statistics reports the average manufacturing wage has risen to $28.94 per hour and the average construction equipment operator is earning over $31.94 per hour on average. Both of those positions have the advantage of paid time and a half when employees work more than 40 hours.
At AgHires, we’ve seen wages fluctuate the past 5 to 7 years. According to the Bureau of Labor Statistics, the mean annual wage for those listed as farm, ranch and other agricultural managers, (not first-line supervisors/assistant manager roles) back in 2017 was $80,310. However, in 2019 the median annual pay dropped to just $71,160 for this role.
Agriculture has seen wage increases depending on the sector within the industry of 3% to 3.5% on average the past fifteen years. This aligns with what we are seeing with our clients. Depending on the operation’s size, complexity and diversity of crops, salaries for farm managers that are leading operations range from $75,000 to six figures.
For the everyday agriculture laborers, however, the average annual salary remains between $25,000 to $42,000. When compared to competing industries such as construction, the difference in wages is substantial with laborers making on average $35,000 to $65,000 annually.
2. The need for higher level skills
The second reason driving up wages on farms is due to the fact that what we are looking for in employees has changed. We aren’t looking for just a driver or a farm hand anymore.
We are looking for thinkers that can add value, understand technology and solve problems. Technology enables us to work with leaner teams, but to stay competitive those hires need to come with higher level competencies.
To attract someone at a higher level that brings the behaviors, mindset and experience we want, we need to increase the hourly rate to attract and retain those candidates.
During these current down ag market times, I realize every dollar spent needs to be justified. When you consider paying a $16-per-hour employee that isn’t bringing to the table what you are looking for compared to a $20-per-hour employee that adds more value, you are looking at a $12,000 cost differential (estimating 2,500 hours/year and taxes).
If the higher candidate was more efficient, made fewer mistakes, wasn’t as rough on equipment and cared more about every bushel, could the additional cost be covered through their performance and then some? We often look at the cost of just the employee, but what other costs are incurred when you hire the sub-par candidate?
Tips for Setting Competitive Pay Rates
What are we to do with this information? As farmers we can do what we do best: Be innovative.
When we need to stick to a budget, there is the option to think outside the box with younger candidates or individuals from other industries that can be trained.
Look to hire relatable skills in individuals with the right characteristics that can get up to speed quickly. You could also develop an incentive program to increase the overall compensation package without having to increase the base wage.
However, when it makes sense, it is imperative to adjust your wages to align better with the current job market. Here are tips to consider when doing so:
1. Calculate the Median Wage for Your Available Position
Before you begin your agriculture recruitment process, it’s important to gain an understanding of where the median wage lies for the specific role you need to fill. “Median” is the keyword here, as it is the halfway point between the highest and lowest annual wages. This will give you a better idea of what qualified candidates will be expecting to be paid.
While we may have provided average pay rates for specific roles above, it’s important to do your own research based on the particular role for which you are hiring. The agriculture industry is vast and continuously evolving. You might think you have a clear understanding of the current pay rate for a certain position. However, it is possible the rate has changed.
Calculating the median salary will also help you understand what your company can afford to hire. The salary you’re actually able to afford can influence the level of experience, education and other qualifications to look for in a candidate.
2. Learn About the Current Job Market in Your Region
Agriculture executives and employers will often base their pay practices on those of other comparable jobs at similar organizations. For this reason, it is critical to take note of the trends not just within your industry, but within the entire job market of your region. Payscale, Glassdoor and the Bureau of Labor Statistics are all helpful resources to research average wages by region and job specifics.
Additionally, companies located in regions with higher costs of living have to set higher salaries in order to find and retain more qualified candidates. This extends into lower sector positions. The pay rates for these roles will still be lower than those for jobs that require a higher skill set, but they will be more compared to the “average” service laborer.
3. Consider the Value of the Position
With a clear understanding of the median wage and other factors of the job market, the next step to setting competitive pay is determining the value of the position for which you’re hiring. This will vary depending on your farm or agribusiness.
To determine the value of the position, consider the following: the amount of time and energy the position will demand, as well as the impact this employee’s contributions will have on your business’s long term objectives. The bigger the impact, the higher the value, and the salary should reflect the value this employee will provide.
4. Offer More than a Paycheck
Paychecks are just a part of a competitive compensation package. There are several other ways you can sweeten the deal in order to attract and retain the right level of employees. The most common benefits you can offer include bonuses, health insurance, commissions, and paid vacation time.
For the agriculture industry specifically, candidates are looking for a certain kind of work-life balance and culture, so offering your employees more than just a bi-monthly paycheck is key. It also gives you a little bit of wiggle room when setting the pay rate. In fact, we’ve seen highly qualified candidates accept a lower paying position over a higher paying position because of the benefits offered.
The process of benchmarking salaries involves comparing internal job descriptions with that of outside jobs with similar characteristics to make sure pay rates remain competitive with the current market salaries.
It’s important to benchmark salaries at least once a year to maintain your company’s reputation, retain your high performing employees, and maintain your employee satisfaction. It is particularly essential for positions that come with a higher turnover rate.
When you set salaries competitively from the beginning, you’re able to retain talent long term. This means the funds you might have set aside for turnovers, ag recruiting, and training are no longer needed and can be allocated to pay for more competitive salaries.
Setting competitive pay rates takes time and flexibility! If you want to attract and retain the highest qualified candidates, you’ll need to remain willing to adapt to the job market and the needs of each individual candidate.
As the agriculture industry continues to experience rising unemployment rates and shortages in labor, it’s important to adjust salaries accordingly to keep up with other industries. Otherwise, you’ll likely lose top talent to competing industries.
We have a lot to offer in agriculture! In general, the candidate pool is looking more for cultural fit and family-owned companies than ever before. We can offer that on the farm. We are in an industry where individuals see their impact and spend time outside. Use that as an advantage point to attract talent!
And if you need additional help navigating the agriculture recruitment process, we’re happy to lend a helping hand. Here at AgHires, we’re always up to date with changes in the current job market and can help you determine the right pay rate to stay competitive.