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

1. www.apndairy.com
Defining a Compensation Structure for the
Dairy Workforce
Felix Soriano, MS, PAS
APN Consulting, LLC

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. www.apndairy.com
Defining the Compensation Philosophy

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. www.apndairy.com
Seniority Based Bonus
• Effective way to reward loyal
employees with long tenure
• Perceived as more fair in some
cultures

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. 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. 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. 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. 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. 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. 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. www.apndairy.com
Thank You!