While many ranchers would love to see subsequent generations return to the ranch and continue its legacy, that does not always happen. Nonetheless, heirs often still want the ranch to continue and be available as an investment or recreational opportunity. Expansion and diversification have also become areas that help ensure ranch viability. This means employees are becoming increasingly necessary. In addition, those family members who choose to be involved in the business should have compensation packages that offer fair pay and benefits and are clearly outlined in the same manner as non-family members.

Bronson ross
Founder and Owner / Premier Ranch Management and Consulting

Minimum wage laws are trending toward $15 per hour across much of the country. Most agricultural employees are salaried. However, if the business does not offer fair compensation, a $15-per-hour job can look very appealing – even in a less desirable industry. In addition, vacation, health and retirement benefits are increasingly important to employees.

It is important that employees understand their total compensation package. This will include non-monetary benefits that contribute to the overall value of their employment. In addition to the basic benefits mentioned above, this can also include other items such as housing, allowing personal horses or recreational opportunities on the ranch. However, these often come with a cost to the ranch. 

Doing the math

First, it is important to start with a fair wage. A standard salary can vary greatly from state to state and even counties within states. To continue with the $15-per-hour example, an average employee will be paid $31,200 per year assuming a 40-hour work week. If an owner is looking for someone to manage the ranch, the average pay jumps to $50,000 or more per year. It is worth noting that, most often, employers can attract a higher number of qualified candidates by providing above-average pay.

In addition to a base salary, a ranch will need to provide general benefits. A general rule of thumb is: An employer will pay an additional 30% of an employee salary toward benefits. This means that a general employee’s benefits will cost $9,360, and a ranch manager’s will cost an additional $15,000. That’s a total of $40,560 per year and $65,000 per year, respectively. These costs cover benefits such as health insurance, workers comp insurance, social security tax, sick leave and 401(k) match by the employer. In addition, higher level benefits might include life insurance or additional leave such as maternity or paternity leave and dedicated sick leave.

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Once a basic compensation package is put in place, additional benefits can be added that may not been seen as “pay” but add great value to employees. Many ranches are remote enough that commuting out to the ranch can be difficult for employees. Housing is a great benefit that can often been seen by employees as having higher value than the actual cost to ownership. If the area has an average rent for a three-bedroom, two-bath house of $1,500 per month, a house can add $18,000 of value to your employee’s total compensation package. Setting aside the opportunity cost of renting out that house, the ranch’s actual cost can be much less. Especially if the home already exists on the ranch. Keep in mind that housing should be acceptable. If ownership would not live in it, it’s not appropriate to ask an employee to. An annual maintenance budget should be put into place as well as long-term capital improvements for things such as roof replacement or large plumbing and electrical issues. If ownership sets aside $2,000 for general repairs annually and a long-term budget of another $3,000 per year toward capital improvements, that large value to the employee has an annual cost of $5,000 to the business. Including utilities is another way to create value. For many homes, this will be $200 to $300 per month, which would be an addition cost of $2,400 to $3,600 annually. And don’t forget high-speed internet, which is becoming a necessity in our digital world. That will add an additional $1,000 per year.

Other benefits might include a work truck, which could easily cost $500 per month. If an operation purchases with cash, then the cost would be the depreciation of that asset over five years, minus salvage value. If the operation uses horses, allowing personal horses is a valuable benefit – especially if feed is provided. Two 1,200-pound horses being fed $230-per-ton hay will cost about $1,300 to feed over a six-month period. Do employees receive a section of beef each year, or is there pasture available for them to raise a beef? Does the ranch support the employee’s children’s 4-H projects?

Obviously, the list could continue, but the particulars aren’t as important as the thought process. With the assumptions above, a $31,200 employee has a real cost of $50,000 or more annually, and a manager would cost close to $75,000. The important thing is: The ranch takes all these costs into consideration when budgeting.

Don’t be afraid to compensate well and provide annual, merit-based raises or bonus structures into the employee budget. Good employees are hard to come by, and keeping them will be much easier than finding them again.