Top tips to consider before taking on a staff member

“Planning to employ someone in your agricultural business involves a wide range of considerations to ensure you make the right decision for your business, for yourself, and for your new employee.

Employing the wrong recruit or failing to manage them properly will compound the costs and jeopardise your business growth

This is a very big decision particularly for farmers who currently run their operation with little or no additional help, but the cost of employment make it a major financial step up even for bigger businesses, and the first decision to be taken is whether you need to employ someone at all.

If there is room for more efficiency in your management of your existing resources such as land, labour, machinery, and inputs to optimise productivity, you could improve your business performance without the need to recruit an additional employee.

Explore every opportunity for technology adoption, such as precision farming techniques, drones, or data analytics, to improve efficiency, productivity, and sustainability. You should also consider options such as contract farming arrangements or simply contracting out more work and retaining your existing labour for core activities.

Essential budgets

If you are sure you need to take on an employee and you’re recruiting for growth in your business, budgets are an essential tool in determining the impact of additional staff to your bottom line. Clearly, it’s important that any additional member of staff generates more than their cost – with a margin built in.

Within the dairy sector in Scotland, for example, we see decisions around staff recruitment determined by the additional headcount coming into the dairy herd or moving to more frequent milkings per day. In each case the net result may prove to be negative unless you more than match additional income against the additional cost.

Cash flow is king

Accurate financial planning requires detailed financial projections, including budgets, cash flow forecasts, and break-even analysis to ensure the financial sustainability and profitability of your business with the addition of your new employment costs. And those costs extend far beyond the payment of a wage or salary.

A new employee will need time and training to become efficient in the role and during that initial phase supervision will be required. In some cases, it has been estimated that the true cost of hiring staff is up to twice their salary during the first year.

You must budget for employee entitlement costs such as Pension and National Insurance contributions, and be aware of Agricultural Wages legislation governing overtime, the minimum wage and sick pay.

There may be Employment Agency or other one-off costs to secure an employee, there are insurance and employers’ liability costs, and the conditions of employment may involve capital expenditure on housing, for example, or new vehicles.

If your budget includes an accurate allowance for potential risks to the business, including market volatility, weather-related risks, and changes in governmental policies, and if the sum of those costs still leave you with a better balance on the bottom line, then employment is the right business decision to make.

Employing the wrong recruit or failing to manage them properly will compound the costs and jeopardise your business growth, so your employment planning should also include consideration of key factors that will affect your employee’s perception of their job, such as working conditions and hours, salary and benefits, training and development.

Retention plan

You will need to ensure you create the best environment for staff to maximise retention, and you will need to schedule regular catch ups with your staff to manage engagement.

Any decision on recruitment also needs to be made with consideration to your long-term succession planning. In some cases, there might be the potential to bring a new entrant into the business to offer a longer term solution and providing an opportunity for a young farmer to establish a track record, but taking a comprehensively planned and budgeted approach to employment can help you navigate challenges, capitalise on opportunities, and achieve long-term success for your farming business.