Employee Compensation and Satisfaction on Dairy Farms in the Northeast

R.B. 99-02As economies of size become fundamentally important in production agriculture, farm sizes continually increase. For dairy producers, this results in larger herds, more acres of crop production, and more full-time, non-owner employees, which result in more human resource management concerns. Research is needed to better understand the human resource aspects of the dairy industry. This research quantifies and illustrates the internal pay structure and enumerates the current employee satisfaction levels present on the farms of members of the Northeast Dairy Producers Association (NEDPA). To enumerate the study, the NEDPA membership was divided into two groups. The first group consisted of all NEDPA member farms. This group participated in the internal pay portion of the study where an enumerator conducted personal interviews with the farm owner or manager and gathered detailed compensation information for each full-time, non-owner employee. A second, more homogeneous group of farms, those with herd sizes ranging from 500 to 1500 cows, participated in both the internal pay study described above and the employee satisfaction study. On these farms, the owner or manager provided detailed compensation information about the employees, and the employees themselves were interviewed to assess their job satisfaction levels. General managerial and production data were also gathered from the owners or managers at both groups of farms. Personal interviews on 92 farms resulted in compensation data for 709 employees, satisfaction information for 296 employees. The internal pay structure on these farms was determined from classifications the employers made for each employee with respect to that employee's supervisory capacity, level of decision-making authority, and skill. The data indicate a natural hierarchy related to tenure and education, as the members of each competency level become more experienced and educated from one band to the next. Total compensation values follow the same upward trend with the standard deviations, or depths of the bands, increasing with higher levels of competency. The pay bands are supported in two regression analyses where total compensation and annual cash wage are each regressed against farm and employee characteristics. The annual wage model has a slightly stronger R-squared value and coefficients that are more consistent with economic theory and a priori information, but both models illustrate several interesting factors consistent with their respective dependent variables. For instance, both models indicate that larger herd sizes translates into higher cash wages and total compensation while the opposite is true with respect to acreage. According to the analyses, each competency level is equivalent to about $3,000 in total compensation. While the average annual compensation is $27,433, the compensation packages varied with respect to value and complexity. Typically, cash wage constitutes a smaller percentage of the total compensation package with increasing competency demonstrating that upper level employees receive more compensation through benefits and incentives. Health insurance and housing were the compensatio