Hiring the right way
A 2005 University of Minnesota Extension survey of Minnesota dairy producers showed 38% of Minnesota dairy farms have greater than two full time equivalent employees. Even if respondents included themselves and paid family members as employees, it is a fair assumption, most of those farms are employing some non-family employees.
Regardless of whether the employees are family or not, there are a number of laws and rules that must be followed to comply with state and federal labor regulations. Larger farms with several employees are more likely to have someone on their management team responsible for human resource management, taking care of reports and filing in a timely fashion. On smaller farms, some of these regulations may not be followed or even known. Unfortunately for the employer, lack of knowledge doesn't excuse one from the law. Let's look at three examples that might slip through the cracks if one doesn't do their homework.
Employment Identification Number (EIN)
As an employer, you will be responsible for proper tax withholding and submission of social security deposits for your employees. In order to file these reports and make the deposits, you need an employer identification number. This is accomplished with form SS-4, Application for Employer Identification Number. The form establishes the type of business you operate, the number of employees you expect to have in the next year, and your business structure. Upon completion of the SS-4, the IRS will issue an EIN, which is then used on all your tax-related reports and filings.
The state of Minnesota has a companion application, Form ABR, Application for Business Registration. The two forms are quite similar, but both must be filed to be in compliance. Both these forms should be filed before anyone is employed.
The SS-4 is available online. It can be printed, filled out and sent, or it can be filed online for immediate assignment of an EIN. The Form ABR is also available online. The ABR can also be filed directly online.
Alternatively, IRS forms can be ordered over the phone. Check your local phone directory for the closest office.
Worker's Compensation Insurance
Worker's compensation insurance is not an option; it is a requirement of all employers. It is required to cover all employees, full-time or part-time. Family members on the farm payroll can also be included in the coverage.
Worker's compensation insurance should be secured before the first employee is put on the payroll. Keep in mind this is an insurance policy, not a tax levied on the business. It is an insurance policy offered by many private companies.
Even though worker's compensation is designed to cover injuries on the job, it should be noted that a medical insurance policy the farm might offer as an employee benefit is not an acceptable substitute. Family members may be exempted on some small farms.
The state puts a significant importance on businesses having this insurance by imposing stiff penalties for being uninsured. Penalties can be up to $1000 per day per employee. That can add up fast, making the insurance premium look rather affordable.
Media coverage of immigration policy and undocumented workers has made more people aware of laws around hiring. What many people may not know is that at least one report of an employee's eligibility to work, the I-9 form, Employment Eligibility Verification, must be completed for all employees of the business, not just those who may not be native US citizens. This should also include paid family employees. In fact, if a business only has I-9s for employees they believe may not be citizens, the business could be accused of discrimination and subject to prosecution.
After just these three examples, there are probably some farmers wondering if they really want to have employees. That shouldn't be the case. Many farms in Minnesota are more profitable because they have the right employees performing in the right positions. Fear of regulations and the work of keeping up proper filings and reporting should not deter a farm from moving ahead with good employees. It does mean, though, that today's farmers need to know more than agricultural production. A basic knowledge of laws or willingness to contract someone to help with human resources issues is a must.
Published in Dairy Star November 16, 2007