13 ways to incentivise and reward farm staff

Agriculture is not immune to the acute labour shortages plaguing many UK industries.

In the current fluid jobs market, farmers are experiencing challenges in recruiting good staff and keeping them too.

See also: Farm staff: Employed, self-employed or worker – know the rules

Offering good employment terms should be a given, and a competitive pay structure is a significant draw, says Sam Kelly of Kelly Farm Consulting.

“Farm staff should be fairly financially rewarded for the time and effort they put into their work,” he says.

More businesses are now going a step further and recognising the value in providing additional incentives, many of which can be set against tax.

Non-monetary factors such as the provision of good facilities are another valuable attraction.

“I think it comes down to understanding your staff and what they would like as a reward,” says Sam.

There are some employee incentives that will help farm businesses stand out from the crowd.

1. Production bonuses

To encourage good performance, some employers top up salaries with a bonus or other reward such as additional time off.

Keeping target-related bonuses realistic and achievable is important to avoid demotivating staff, says John Crimes of CARA Wales.

This is a system mostly used in the dairy sector, perhaps a bonus paid if specific bactoscan and cell count targets are met, as the individual will have control over long-term averages.

Achieving low stock mortality rates is another common target.

John advises some caution with operating a bonus system: “Farmers worry that staff can sometimes influence results and that can have a detrimental effect on profitability and costs.”

Sam reckons targets are only workable if they are set to be measured realistically.

“This needs to happen so the member of staff can have some impact on the goals set,” he says.

One-off bonus at employer’s discretion

Individual bonuses can be a tricky area to get right.

Sam believes if an employee has gone above and beyond their duties, it isreasonable to reward them individually.

“But it will depend on the person as to whether that is a monetary bonus or something different such as being treated to lunch at the pub,” he says.

However, a bonus given only to individuals can be a source of conflict.

“It’s almost impossible to keep these amounts confidential and it can cause bad feeling among staff,” Sam warns.

“It is best to be clear up front about how the bonuses are calculated, and basing them on hours worked seems to be the fairest solution.”

For bonuses across all staff, he again recommends tiering according to hours worked and an employee’s contribution to the business.

For tax purposes, cash bonuses should be added to the employee’s monthly payslip on top of their salary and non-cash bonuses that can be easily converted to cash should also be added.

“Non-cash bonuses that cannot be easily converted to cash will depend on what is actually provided to the employee,” says John.

Long-service bonus

Offering employment longevity bonuses can be a means of demonstrating that employees who stay are valued.

Ricky says a business doesn’t have to report or pay tax on a non-cash award if the employment period is at least 20 years, the award is worth less than £50 for each year of service and if an award hasn’t been given for service in the past 10 years.

“As an example, a non-cash award with a value of up to £1,000 can be given for 20 years of service,” he says.

2. Mileage

Compensating staff for the use of their own vehicles for work-related journeys seems only fair, but a business is not required by law to reimburse for mileage. It therefore puts those who do so at an advantage as  an employer.

Ricky Taylor, of accountant Dodd & Co, says if farmworkers use their own car for work purposes, other than the journey to and from the farm, the employer can pay up to 45p/mile for the first 10,000 miles every year, and 25p/mile thereafter in that year.

“The employer will reduce their profits by making the payment to employees and obtain tax relief by doing so,” says Ricky.

The employee does not pay income tax on the mileage payment. If the employer chooses to pay at a higher rate, HMRC will treat this as a benefit in kind and tax the employee accordingly.

“If the rate paid is lower, the employee is entitled to claim tax relief on the underpayment,” Ricky adds.

3. Healthcare

Health benefits are commonplace in some sectors, but less so in agriculture.

Ricky suggests they are a perk that can be tax efficient, as several medical and dental benefits can be paid on behalf of an employee, including an annual medical check or health screening, without tax implications for either party.

This is the case too if up to £500 in costs are paid for medical treatment to help an employee return to work – usually in circumstances where that employee has been deemed unfit to work for at least 28 days, he says.

An employer can also pay for one eye test a year tax-free, and spectacles or contact lenses too if health and safety legislation deems it applicable to their job.

4. Professional development

Allowing workers to develop their skills in different areas, through training courses or membership of a discussion group, is not only important for them but also the business.

Investing in training creates a culture of development and opportunity, Sam points out.

“Developing  knowledge and skills keeps the workforce engaged and well-motivated,” he says. It also allows networking opportunities with others in the same line of work, so potentially bringing back new ideas.

Costs incurred by an employer for work-related training are tax deductible and tax exempt for the employee.

5. Protective clothing

The nature of the job requires farm staff to wear protective clothing such as overalls, boots and gloves and, although a necessity, not every business provides these.

When they are, they can be given tax free.

6. Mobile phone

An employer can provide a member of staff with one mobile phone tax free, as long as the contract is between the supplier and the employer, not the employee, Ricky advises.

The tax deduction for the employer is applicable to the cost of the phone itself, any line rental charge and the cost of both business and private calls paid for by the employer on that phone.

7. Flexible working

Rewards for good work need not be extravagant gestures – staff sometimes value time off more than a financial bonus.

Improving work-life balance has benefits both for the worker and the employer, believes Sam.

“Sensible time off to allow your staff to spend time with their families and pursue their other interests can mean that they are more engaged when they come to work, and they are less tired.

“The hours will always be long in agriculture, but giving workers one-and-a-half or two days off a week always goes down well.”

8. Cycle to work scheme

If the employer operates this scheme, the lending or hiring of bikes to employees does not count as a benefit, but the scheme must be available to all employees, and the bike used mainly for getting to and from work.

9. Social functions and parties

A common perk for employees is an invitation to a Christmas party or similar social function.

To be tax free, the function must be open to all employees, be an annual event such as a Christmas party or a summer barbecue, and cost £150 or less per person, says Ricky.

Multiple events are exempt if the combined cost is no more than £150 a head.

10. Gifts

As an alternative to a party, staff may appreciate a gift, such as vouchers for a meal or a leisure activity.

If that gift costs £50 or less, tax does not have to be paid on it, so long as it is not cash or a cash voucher, a reward for their work or performance or in the terms of their contract, Ricky explains.

11. Additional holiday

Although farm staff are notoriously bad at taking annual leave, an extra day of leave after a defined number of years’ service can be valued.

“There are certainly some staff that would really appreciate an extra day of holiday, others won’t see it as an advantage as they probably wouldn’t take the extra day anyway,” says Sam.

12.Subscriptions

Farm discussion groups or similar platforms are important for professional development and an opportunity for staff to share ideas, problems and solutions.

Membership mostly incurs a subscription and if an employee pays this and this is reimbursed by the employer, or if the employer pays the subscription directly, these can be paid tax free as long as the professional body is on HMRC’s list of approved bodies. 

“If an employee pays for a subscription to an organisation not on the list and they are not reimbursed by the employer, the employee should consider contacting HMRC to see if they can get tax relief on this payment,’’ Ricky recommends.

13. Flat-rate expenses

Employees in agriculture can claim tax relief on up to £100 spent on clothing and tools needed for the job without the need to keep receipts.

This means that if a farm employee pays tax at 20%, including the £100 in their tax code will save them £20/year.

“Employees can seek to claim more if they keep receipts, but will need to prove that the expenses have been incurred wholly, exclusively and necessarily for the purposes of their employment, which can be difficult,’’ says Ricky.