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Writing those monthly paycheques

Are we farmers paying ourselves as much as we’re paying our hired help?

The paycheques have been signed for another month and it brings to mind the joke about the tax man and the farm owner/operator having a conversation about wages: “I need a list of your employees and how much you pay them,” demanded the agent.

“Well,” replied the farmer, “there’s my farm hand. I pay him $200 a week plus free room and board. The cook is paid $150 per week, plus free room and board. Then there’s the half-wit who works about 18 hours every day and does about 90 per cent of the work. He makes about $10 per week, pays his own room and board and I buy him a bottle of bourbon every Saturday night. He also sleeps with my wife occasionally.”

“That’s the guy I want to talk to… the half-wit,” said the agent.

“That would be me,” replied the farmer. So that’s where the money goes. Or doesn’t.

I am not begrudging the wages we pay our employees. Absolutely not. As farmers we know that hired help is necessary. Happy hired help means long-term, stable working conditions for all of us, and a farm that functions smoothly makes money to pay everyone’s wages. However, sometimes I wonder if we’re making as much as we’re paying our hired help.

According to the website payscale.com, the average hourly wage for an agriculture worker in Saskatchewan is $18 per hour. The number my accountant quoted (off the cuff) when I quizzed her about “hired-man” wages in my area of Saskatchewan was $25. As I perused the online ads for farm labour, I could not find wages that reflected that wage — it was more in the range of $16 to $20. This is not to say that wages wouldn’t go up as you proved your worth and commitment, but they sure don’t seem to start off at that rate. As I dug to see how Manitoba and Alberta measured up, I found them to be similar.

As each month passes and I see those cheques to the hired men being filled out for more than the one I know is coming my way I wonder: Are we doing this right?

Valuing ourselves

Joe Moffatt of Blue Whale Financial Solutions in Moose Jaw, Sask., says that the business of farming is a culture in and of itself. Farmers treat “The Farm” as an entity like the “most valuable child in the family.” That, from his view, is not the best way to run a business.

Moffatt believes there is psychology behind how much we farmers value ourselves. The farm is not like, for example, a tire shop. The owner of that business gets up in the morning, drives to work, unlocks the doors and starts his day. Not so for “Joe Farmer.” Joe goes to bed in the yard where he works and wakes up looking at the same, every morning. There is no physical (and by extrapolation no emotional or financial) division. But that doesn’t mean there shouldn’t be.

Trying to find an average yearly income earned by a farmer has been a challenge. I was curious to know just what we are paying ourselves. I wanted to know how farmers were doing —really. “Family farm income” is often written about, but always seems to include a blend of off-farm income.

Accountant Leah Herback suggests $45,000 is the minimum annual income all farmers should claim. That breaks down to approximately $24 per hour and a 40-hour week. From a tax perspective it keeps you in the lowest tax bracket; from the living perspective, it keeps the lights on. Some take more, some take less, for many different reasons. Overall family income may also be boosted by paying each spouse that $45,000, bringing farm family income to an annual $90,000 payout. Of course this payout can be altered depending on off-farm income.

The Saskatchewan government agriculture website refers to Farm Families as “those involved in a single, unincorporated farm with gross operating revenues of $10,000 and over.” On these types of farms, in 2011, 29 per cent of income was from net farm operating income ($32,979) and 71 per cent ($80,811) was off-farm income, for a total annual income of $113,790. And that’s just according to one definition.

For varying government or non-government organizations, the definition of a farm or farmer varies. Another statistic on the same website, showed a “Farm Operators” average income for 2012 to be $98,929, and of that only 58 per cent or $57,557 to be net farming income. Comparisons are difficult to achieve. I found at least eight definitions of term “Family Farm” on the website.

What are you worth?

In Herbacks’ experience how much a farmer actually pays themselves varies widely. Moffatt concurs. But how much should you pay yourself?

When this question was posed to Moffatt, he suggested you consider how much you would have to pay someone to replace you. What would that take? Remember — you are not irreplaceable. It may take another management style, it may take two people (one for management, another for labour) but you could be replaced. How much would that cost? That should be your salary. You’d pay it to someone else. Why not to yourself?

Moffatt provided current industry standard wages for corporate CEOs, as shown in the table below. These salaries are considered average, legitimate, and reasonable values for income of CEO’s of corporations with gross sales in the different brackets.

industry standard ceo salaries

Every farmer is going to have to decide what is reasonable, realistic and liveable.

If the money isn’t there, it isn’t there. It’s the bottom line of any business and it’s no different here.

There are many factors to consider; emotions and family pressures also comes into play. It’s not necessarily about what the farm can afford to pay, but about what the farmer thinks they need to live. Most of us are not extravagant. Most of us would rather take less for ourselves and give more to that laborer or put it back into the farm than give ourselves a cash injection.

Cash in the pocket is not the only way we as farmers are compensated. There are perks that maybe we don’t always recognize. There are definite areas where we quietly benefit, although the wage that is coming in the door at the end of the month may seem meager in comparison to the cheque that was just written to a hired helper. Consider fuel, gas, propane, electricity, phone, taxes — these are all costs most likely off-set by the farm. Meaning: it’s not money out of your personal pot, but actually paid for by the farm before you even realize it has been covered. At the end of the year, your accountant has used a percentage of the overall costs as personal (and you will pay this) but the majority is absorbed, relatively painlessly, by the farm.

There is no black or white. It’s all grey and each farm has to structure itself and its resources using information and ideas gleaned from the sources around them to decide what will work for them. Realizing the wages paid to employees are an investment in the future of your farm company and that that the almighty dollar is not the only reason we are doing this may help alleviate any feelings of discontent when those cheques are written. It’s not a cross anyone bears, it’s the realities that farmers are willing to accept.

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