“What should I do when an applicant tells me he should make more than our dairy’s established starting wage because he has worked at another dairy before?”

When a skilled applicant asks to be started higher up in the pay scale, he or she is arguing that it would be unfair to receive the same wages as someone with less experience or ability. Workers often discuss their pay and know what others make.

Compensation issues addressed by this dairy producer touch directly on one of several topics associated with internal and external equity. That is, how employees look at the fairness of their pay as it compares to others in the dairy – as well as those who work elsewhere.

The worst possible compensation approach is one when the dairy farmer grants pay increases just to those who ask for them. Pretty soon there is neither rhyme nor reason for differences in pay between employees. In contrast, a dairyman can use pay to motivate employees when there are clear parameters required for each step that employees climb within their pay grade. People do not get raises just because they survived another year at the dairy.

An excellent way to set up specific goals and parameters is through the negotiated performance appraisal – a topic we shall discuss on another occasion. Such an approach – tying the achievement of specific goals to pay rewards – can be a powerful motivator.

Maintaining pay equity within a compensation structure is an ongoing challenge. It is a balancing act. In making pay decisions such as the one raised in this question, the dairy farmer wants to recognize worker skill and ability, on the one hand, with employee need for pay increases over time, on the other hand.

Some workers may merit faster advances to the top of the pay scale than others. Unfortunately, employees who advance too quickly may not have any further economic increase to look forward to, and experience a feeling of stagnation. The only growth may mean trying for a promotion – or a job elsewhere.

Any job performed at the dairy has a range of value to the dairy operation. In order to avoid having employees climb a merit scale too quickly, upper levels of the scale must be harder to achieve. As a result, at the bottom of their pay scale, employees need to be evaluated more frequently for opportunities to receive raises. As employees climb up the pay grade, pay reviews should be increasingly less frequent and more difficult to achieve.

An internal wage structure is composed of a number of such pay grades. Some pay grades may combine several jobs together. At lower levels, pay grades have much shorter rate ranges (a rate range indicates the starting pay and top pay for any given job) than at higher levels. The amount of training and skill required for the job play an important role in setting both starting wages and the rate ranges. It also helps to ask, “Given an employee with potential, how long would it take to replace a top milker, field worker, calf feeder or herd manager?” The answers also help establish starting and top wages within any particular pay grade.

Yet another way of saying the same thing is to ask how much growth potential there is within any given job. For some jobs, employees can reach top performance much quicker than others. If a brand-new employee who knows little or nothing about cows can learn the job in less than three months, it is hard to justify a pay grade with many steps. On the other hand, dairy positions may be enriched, such that a milker also helps detect first signs of estrous, difficulties with locomotion or lameness and signs of cow health. A top milker at such a dairy would be much more difficult to replace. The rate range, as a result, would be taller than at a dairy where milkers only milk.

It is hard to conduct a wage survey for such positions as dairy manager or herd manager because these jobs vary enormously in terms of what is required of the incumbent at different dairies. Rate ranges for these jobs tend to be much taller.

To answer the question posed by our Idaho dairyman, we might ask: Is this a job that requires substantial time to learn? If not, do increases in pay at our operation reward length of stay more than gaining new skills? Will there be room to grow in terms of pay? If several other individuals do the same job, will others be able to recognize that this individual’s experience actually translates into more effective work? Is the pay level consistent with our internal wage structure policies? The taller the rate range in a pay grade, the more justifiable it is to start an experienced applicant at a higher level.

For more information on establishing internal wage structures, deciding when it is a good idea to pay workers at your dairy different wages, deciding how to incorporate cost of living increases to wage structures, and so on, read Chapter 7 of Labor Management in Agriculture: Cultivating Personnel Productivity. PD

• Gregorio Billikopf

• University of California
• Email Gregorio Billikopf