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The Rural Voice, 1986-04, Page 16CREATING AN INCENTIVE PLAN FOR EMPLOYEES by Michelle Timko Retaining good employees on the farm can be difficult. Such employment is often considered only to gain experience for other jobs or as a stepping -stone to own- ing one's own operation. As a result, the length of stay for farm employees at any particular loca- tion is relatively short. A high turnover of employees can affect production and the employer's at- titude towards hiring. Besides offering wages, which can not often be high in these troubled economic times, produc- tion incentive plans can give the employee more responsibility and provide improvement in the farm's production, hopefully, increasing the employee's interest in the farm and encouraging him to stay. "The idea behind it (an incentive plan)," says Bev Shipley, a dairy farmer from Denfield who milks 50 cows, "is that if you have someone that's good, a real asset to your operation, it helps provide a reason to stay." An incentive plan is simply a reward for good work based on performance within the control of the employee, above and beyond the usual rate of pay. Paying seasonal employees, such as fruit and vegetable pickers, by the box, pint, or pound, is the simplest form of incentive plan. The wages are based on how much work gets done rather than on the amount of time it takes. Various types of farms can have different plans. For example, in a farrow to finish operation, the in- centive may be related to an in- crease in pigs per litter or number of pigs weaned; with feeder pigs, the incentive could be based on the number of pigs fed out. Beef pro- ducers could develop an incentive plan based on calves weaned or number of cattle marketed, de- pending on the style of operation. Cash croppers can base the plan on bushels above the county average or farm average. Increased milk production or B.C.A. could be us- ed in a dairy operation. 14 THE RURAL VOICE Bev Shipley believes one has to step into the employee's shoes and ask oneself, "Would I be satisfied?" If not, it is time to of- fer something that would be beneficial. "If you. yourself, would not be satisfied, it's hard to expect someone else to be." This attitude encouraged Bev to talk to his accountant and develop a registered retirement savings plan where contributions of the employee are matched by contribu- tions from the employer. Besides providing tax advantages to both parties, there is an incentive for the employee to remain at the Shipley's. The longer and the more he contributes, the greater will be his future sum. The employee has control over the incentive by hav- ing the responsibility to contribute first. Any incentive plan must be within the employee's control. There is little advantage to establishing an incentive based on crop yield when the employee spends the majority of time in the barn. The new responsibility should encourage him to work harder in the enterprise for which he was hired, enabling the employer to have time to concen- trate on other areas of his business. Furthermore, if poor production is largely due to improper ventila- tion or poor barn facilities requir- ing massive renovation, an incen- tive offered will only frustrate the employee because improvement depends on the employer, not the employee. Also, be careful not to set unrealistic goals. If they can never be reached the employee will be discouraged. If the B.C.A. average of a dairy herd is 140, an improve- ment to 180 or 200 within the year would be ridiculous. A 10 per cent improvement may be possible, but expecting 5 per cent improvement would be realistic provided the employee has some influence over the factors which affect B.C.A. Like the example above, an in- centive plan should be simple to compute and understood by all. There seems little sense in calculating an incentive for a swine operation based on increase in lit- ter size, number of pigs weaned, and death loss, when a simple dollar value per pig marketed would provide the same benefit. The greater care the employee demonstrated from the birth to the sale of the pigs, the more he will receive at the end, and, hopefully, the greater the total number of pigs marketed. An incentive plan should be established to meet the specific goals required on an individual farm. If one finds that crops suffer because of excessive time spent with livestock, develop an incen- tive to encourage the employee's efforts toward crop production. An incentive plan should be based on the end product of the operation: bushels, milk produc- tion, or the number of pigs marketed. If a farrow to finish operator forms a plan based on pigs weaned, his employee may become overly concerned with piglets to weaning, ignoring them as feeders, and lowering final pro- duction. A plan should be economical and should not hamper the employer's decision making. The manager of the farm has the final say. Paying an incentive based on above average crop yield does not mean the employee can decide what to grow. If the employee has been given opportunity to keep his own sows or heifers and the operator decides the barn space is needed to expand his own herd, tension is created by upsetting both employer and employee plans. Make sure possi- ble future decisions will not be af- fected, and that the plan will benefit the farm by accomplishing what the manager intended. Only offer what you feel is fair compensation. The exact dollar value depends on the size of the herd, farm income, and the employee. Do not over -price an in- centive so when it is met, payment