George Chichester

Senior Director, Farm & Estate Management

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George

It is the time of the year when many farm employers will be asking themselves how to go about wage reviews for any farmworkers.

In the past, employers were able to base their reviews around the recommendations of the Agricultural Wages Board, but this was disbanded in England and Wales two years ago.

The situation is further complicated, as the law on workplace pensions is also changing so that every employer with at least one member of staff has to enrol them in a suitable workplace pension scheme, in a process called auto-enrolment.

Our view is that employers should use this year’s employees’ wages review to get prepared for the new pension rules.

We are recommending to clients that they set up the new auto-enrolment scheme now and to apply a 2% rise in total for the coming year of which 1% is paid as an increase in wages and 1% is paid as the first stage of contributions to the new pension scheme.

Any extra individual remuneration employers might want to pay can be made via a discretionary bonus paid out at the end of the year.

This recommendation takes into account that while the National Minimum Wage will rise 3.1% to £6.70/hour from 1 October 2015, this is greater than either the Consumer Price Index (0.1% at July 2015) or the Retail Price Index (1% in July 2015). It is also greater than the 1% increase in public sector wages generally being applied for 2015/16.

However, the government announced during the last Budget that it intends to increase the NMW for over 25-year-olds to £7.20/hr from 1 April 2016.  This new figure will be called the National Living Wage and is part of the government’s commitment to increase wages to the lowest paid in society.

Over the past few years, increases for farm workers have generally exceeded those in other sectors because they were rising from a low base.

However, gradually they have been catching up with other sectors – especially when perks such as the usual provision of no- or low-cost accommodation are taken into account. There must come a time when the rate of increase should slow, to mirror that in other sectors.

One must be mindful of the impending arrival of auto-enrolment, which will add to employers’ costs and is effectively an additional form of remuneration to the employee as the ultimate beneficiary.

One must be also be mindful of the current state of the farming sector. The crisis in the dairy sector is very evident from press reports – with employers in that sector struggling to make ends meet and not in a position to pay any increases in overhead costs.

Arable commodity prices are also little better than break-even, even for the most efficient operators.

The effect of the recommended increase would be as follows: