FDC: Do you know the real cost of employing farm labour?

THE growth in average dairy herd size has required many farmers to seek additional labour and this has created a completely new challenge for farmers. 

A farmer should consider the true cost of employing a farm worker and the obligations placed upon the employer and the workers’ rights before a decision is made to employ.

An employer has certain obligations which he owes to his employee as follows:

To ensure that employees are provided with a written statement of terms and conditions of employment; to register employee with Revenue and give employees a written statement of pay or payslip.  All wages paid to employees must be reported to Revenue in advance of payment; to pay employees not less than the statutory minimum wage rates; to comply with the maximum working week requirements; to provide breaks and rest periods during working hours; to give annual leave from work; to give a minimum amount of notice before termination of employment; to maintain records in relation to employees and their entitlements.

A full contract of employment is not obligatory but every employee must be given written terms and conditions of their employment within two months of commencing employment. 

The pay and conditions of employees is governed by employment legislation such as the minimum wage which currently stands at €10.20. 

Rates can vary depending on the level of experience and in some cases bonuses or profit shares will apply. 

From my experience a common mistake is for employers to agree a net/into-the-hand rate of pay.  

One should agree a gross rate of pay from which you are obliged to deduct all relevant tax, USC and PRSI.

Working hours are generally the hours set out in the contract of employment. These hours  include overtime, travel time where this is part of the job, time spent on training authorised by the employer and during normal working hours. 

Working hours do not include time spent on standby other than at the workplace, time on leave, lay-off, strike or after payment in lieu of notice or time spent travelling to or from work. 

The legal maximum working hours is 48 over an average period of four months for most employees but has been an average over six months for those employees working in the agricultural industry.

Holiday entitlements are calculated by one of the following methods: four working weeks in the year in which the worker works at least 1,365 hours; 1/3 of a working week per month that the worker works at least 117 hours; 8% of the hours worked in a year, subject to a maximum of four working weeks.

Holiday entitlements are calculated for part time workers in the same manner as set out above for full time employees.

Full-time workers have immediate entitlement to benefit for public holidays, and part-time workers have entitlement to benefit when they have worked a total of 40 hours in the previous five weeks. There are nine public holidays in the year. An employee is entitled to whichever of the following his/her employer determines: a paid day off on that day; a paid day off within a month of that day; an additional day of annual leave; an additional day’s pay. Currently there is no statutory entitlement to sick pay in Ireland. An employee who is unable to work due to illness or injury may be entitled to receive State-paid Illness Benefit, after three days of absence, if they have made sufficient PRSI contributions. 

The government has indicated that it plans to introduce statutory sick pay into law by the end of 2021. Compulsory paid sick leave could potentially result in significant costs for employers.

Individual circumstances, as always, may vary. If you are unsure of the best course of action, talk to your accountant before making any decisions.

John Coombes is an accountant with FDC in Skibbereen.