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Defining a Compensation Structure for the Dairy Workforce

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In this presentation, Felix Soriano of APN Consulting leads us through important aspects of a compensation package, including indirect pay and tips for bonuses.

You can find the full presentation on Youtube at: https://www.youtube.com/watch?v=lKyiov1DSbk

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Defining a Compensation Structure for the Dairy Workforce

  1. 1. www.apndairy.com Defining a Compensation Structure for the Dairy Workforce Felix Soriano, MS, PAS APN Consulting, LLC
  2. 2. www.apndairy.com Importance of a Well Defined Compensation Package • Can be a powerful management tool for recruiting and retaining the best • Foundation to building a highly committed, productive, and efficient workforce • Reduces headaches due to constant requests for raises • Can reduce the number of unhappy employees
  3. 3. www.apndairy.com Defining the Compensation Philosophy
  4. 4. www.apndairy.com Compensation Structure Direct Pay Indirect Pay Variable Pay BenefitsBase Salary •Goal based bonus •End of the year bonus •Seniority based bonus •Informal bonus •Base salary – hourly – salary •Health insurance •Housing •Paid vacations •Boots and clothing •Use of farm truck •Cellular phones •Professional & personal advancement •Farm produce, meat, etc
  5. 5. www.apndairy.com Defining the Base Salary • Pay Grade: A group of jobs that share the same wage levels • Jobs are allocated in different pay grades depending of their value assessment • Job descriptions are very important! • Rate of Pay: Represents the lowest and highest pay within a pay grade. SUMMARY The cow pusher ensures proper cow flow into the holding area, cleans stalls and barn alleys, and provides assistance to animals in labor. QUALIFICATIONS • Stand and walk for up to 12 hours • Lift up to 50 lbs • Accurately follow directions • Gently and patiently handle cows DUTIES I. Push cows / General duties • Ensure that there are always cows in holding area for milkers (get cows every half hour) • Interact with animals calmly and without unnecessary disturbance • Follow accepted safety practices when working with animals • Visually observe changes in individual animal health status (example: lame cows, sick cows, etc) • Identify cows in heat • Check gates and doors to ensure they properly latch • Practice self management (is on-time every day, works at a reasonable pace defined by the herdsman, maintains internal motivation) • Communicate work related information with appropriate dairy personnel • Recognize the difference between work that is well done and work that is poorly done • Work as a team member to solve problems and improve work processes • Make basic work-related decisions • Identify opportunities for improving work processes II. Clean stalls, alleys, and water tanks • Rake and clean stalls when getting cows from pens (see SOP “Cleaning stalls and alleys”) • Scrape cross alleys where water tanks are • Inspect water tanks for cleanliness and proper function (see cleaning schedule) • Maintain bedding/resting area (see schedule and SOP) • Understand manure removal equipment and be able to maintain equipment in good condition III. Push up feed COW PUSHER - TJ DAIRY WWW.APNDAIRY.COM
  6. 6. www.apndairy.com Assigning Jobs to Pay Grades 0 1 2 3 4 5 6 7 8 9 10 Responsibility Education Physicalreq. Skills Milkers Feeders Supervisors • Requirements for the position • Rate the jobs according to the relative importance Pointvalue Adapted from G. E. Billikopf, 2003.
  7. 7. www.apndairy.com Pay Grades & Rate of Pay Examples Job Value RateofPay($) Adapted from G. E. Billikopf, 2003A B C D A=Milker B=Shift leader C=Feeder D=Herdsperson
  8. 8. www.apndairy.com Hourly or Fixed Wages? Employees feel is more fair More common for higher pay grade jobs Employees tend to work faster People are willing to work more hours Sometimes employees take longer to do chores Important to clearly define expectations for each task Harder to find employees willing to stay longer hours Quality of work may be diminished Hourly Salary
  9. 9. www.apndairy.com Variable Pay – Bonus Programs • Effective way of compensating people who does an excellent job • Excellent opportunity for improving communication and praise • Effective way for setting goals and expectations • Helps keep people motivated • Effective for team building
  10. 10. www.apndairy.com Merit/Goal Based Bonus • Helps employees stay focused and increase performance • Helps create a sense of ownership of their job • Helps develop better team work and a team culture • Can improve labor efficiency and productivity
  11. 11. www.apndairy.com Merit/Goal Based Bonus • Should be specific and monitored periodically • Should be simple (ideally not more than 3 performance parameters to evaluate) • Should have a positive impact in profitability, herd health, etc • Employee’s work should have a direct impact on those goals
  12. 12. www.apndairy.com Example of Goal Based Bonus Milkers Bonus Item $60 $35 $15 PLC <5,000 <10,000 <10,000 SCC <100,000 <150,000 <200,000 Cooling/ Antibiotic Negative Negative Negative •Bonus is per week per employee •To achieve this bonus, shift must average at least 150 cows per hour for the week •Also, cows must not get mixed up between groups in order to obtain the bonus
  13. 13. www.apndairy.com Example of a Goal Based Bonus Milker’s bonus SCC (thousands) Bonus <100,000 $150.00 <150,000 $100.00 <200,000 $50.00 Milk flow (lbs 30-60 sec) Bonus 7.0 – 7.9 $25.00 8.0 – 8.5 $50.00 8.6 – 9.0 $100.00 *A minimum of 200 cows / hour must be achieved in order to get the bonus. *Cows must not get mixed between pens in order to get the bonus *Standard plate counts (SCP) cannot exceed 5,000 CFU/ml in order to get the bonus
  14. 14. www.apndairy.com How to Get the Most Out of a Goal Based Bonus Program 1. DON’T implement a bonus program until performance is at least at your standards 2. Define SMART goals 3. Keep it simple, use only a few performance parameters (3-4 max) 4. Keep track of performance daily – be consistent 5. Give people all the tools and support they need 6. The bonus plan should be flexible
  15. 15. www.apndairy.com How to Get the Most Out of a Goal Based Bonus Program 7. Have conditions to be eligible for the bonus 8. Workers must be properly trained 9. Communicate and explain the bonus structure 10. Separate incentive pay from regular pay
  16. 16. www.apndairy.com Seniority Based Bonus • Effective way to reward loyal employees with long tenure • Perceived as more fair in some cultures
  17. 17. www.apndairy.com Seniority Based Bonus Program Example • Giving longevity bonuses for employees on the anniversaries of their employment with the company • Example: • After 2 uninterrupted years with the company $250 • After 3 uninterrupted years with the company $350 • After 4 uninterrupted years with the company $450 • After 5 uninterrupted years with the company $550 • Every additional year after 5 years with the company: 10- 15% increase over the previous year’s bonus will be awarded every year.
  18. 18. www.apndairy.com Other Types of Bonuses End of the year bonus: • A fixed $ amount for each worker • A % of the profits of the company • A variable bonus amount depending on the employee’s pay grade Informal bonus: • Recognizing someone who goes the extra mile due to unforeseen problem or project
  19. 19. www.apndairy.com Indirect Pay - Benefits Package • Define what the company can afford • Can help recruit good quality candidates • Should match the demographics of the workforce and needs/wants of the employees • Can help promote employee’s personal and professional growth and well being
  20. 20. www.apndairy.com Benefit Examples •Health insurance •Housing •Paid vacations •Boots and clothing •Use of farm truck •Cellular phones •Professional & personal advancement •Farm produce, meat, etc
  21. 21. www.apndairy.com Communicating the Salary Structure Plan • Document the program in writing and explain to all employees • Meet individually or in group with every employee to explain pay structure and $ raises • Describing and communicating benefits to employees is a must • Putting a $ figure to each benefit can be an eye opener for employees
  22. 22. www.apndairy.com Paycheck description - Example Direct Benefits Indirect Benefits Time worked payment $2,312.36 Housing $600 Bonus $260.30 Expenses Electric bill $85 *Vacations $200 Heat $443.70 Gas $63.51 Boots and uniforms $48 Cell phone Meat and others Total $200 $2,572.66 Total $1,240.21 Other Benefits Non-monetary Benefits Social Security $196.82 Job security Health Insurance $122.87 Flexible hours Unenployement compensation $51.66 Opportunities to grow within the company Total $371.35 Great working envirnonment Summary of total earnings Salary $2,572.66 Indirect compensations $1,240.21 Other benefits $371.35 Total earnings $4,184.22 Total compensation per hour $13.92 *Vacations are not included in this calculation www.apndairy.com Itemized Pay and Benefits Example
  23. 23. www.apndairy.com Final Thoughts • A well-designed compensation program can be a great start to building a committed, highly productive workforce • A compensation program must be clearly communicated to all employees to be effective • Bonuses and salaries must be paid on time • Defining and communicating when raises will be given can reduce uncertainty and will help employees stay focus on their jobs
  24. 24. www.apndairy.com Thank You!

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