Why Employee Benefits Matter

Offering employee benefits is about investing in the heart of your farm—your people. Employee benefits can help small farms recruit and retain skilled workers, reduce turnover, boost morale, and show genuine care for your employees’ well-being. When strategically chosen and offered with care, benefits can improve employee satisfaction and productivity while making the farm an attractive place to work.

However, determining which benefits to invest in and offer can feel overwhelming. This roadmap can help you determine which options—if any—align with your farm’s goals and budget and the needs of your workers. It also serves as a gateway to our detailed guides on implementing specific benefits. If you already know which type of employee benefit you’d like to offer, feel free to go straight to the detailed guide:

• Offering Bonuses and Pay Raises to Farm Employees
• Offering Health Benefits to Farm Employees
• Offering Retirement Benefits to Farm Employees

If you’re not sure which option is a good fit for your farm, continue reading.

Common Options for Employee Benefits

Bonuses and Pay Raises

Bonuses. Bonuses are one-time payments given to employees to reward specific achievements or contributions. They can be tied to meeting farm objectives such as reaching harvest goals, finishing a project, or completing a successful season. Bonuses are flexible and do not carry the ongoing financial commitment of a pay raise. Yet, they can boost employee morale and motivation so long as the criteria and expectations are clear and attainable.

Bonuses are a good option for farms that want to motivate employees to meet short-term goals, recognize specific contributions, or celebrate seasonal successes without committing to ongoing costs.

For example, a farm finishing a large harvest could offer bonuses to employees who help exceed production targets.

Pay Raises. Pay raises are fixed increases to an employee’s base salary, often tied to factors like skill development, increased responsibilities, or length of employment. Unlike bonuses, pay raises represent an ongoing financial commitment. They can build loyalty and show employees they are valued by the farm. Offering raises can also align with farm goals such as incentivizing staff to take on leadership roles.

Pay raises are a good option for farms that want to retain long-term employees, reward skill development and leadership, or offer fixed compensation increases for longstanding dedicated workers. For example, a farm with a loyal team of employees might implement an annual review process to determine eligibility for raises.

Health Benefits

Group Health Insurance. Group health insurance plans provide comprehensive healthcare coverage to employees under a single insurance policy. These plans often come with lower premiums due to group rates, but employers are usually required to cover a portion of the costs, such as 50%-70% of premiums. Group health insurance also requires significant administrative work, including managing enrollments and ensuring compliance with regulations. While the costs and effort can be substantial, group plans are often highly valued by employees and can be a powerful tool for recruitment and retention.

Group health insurance is a good option for well-established farms that are financially stable and have more than five employees. For example, a farm striving to attract skilled workers in a competitive labor market or that already has a longstanding dedicated team might invest in a group health insurance plan.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). A QSEHRA allows employers to reimburse employees tax-free for qualified health insurance premiums and medical expenses. Unlike group health insurance, QSEHRA lets employees choose their own health plans, offering employees more flexibility than group plans to meet their diverse healthcare needs. This option is also more affordable than group health plans, as the employer decides how much to contribute. However, you still must navigate specific rules to comply with the Affordable Care Act (ACA) and take on administrative tasks such as setting reimbursement limits, providing notifications to employees, and verifying employees’ health coverage.

QSEHRA is a good option for farms that want a flexible, cost-effective way to support workers’ healthcare needs and are willing to take on a bit of administrative load. For example, a small farm that has a growing team with diverse healthcare needs might use QSEHRA to let employees select plans that suit their individual circumstances.

Health Stipends. Health stipends are fixed, taxable payments provided to employees to help cover healthcare-related expenses. They are the simplest of health benefits to offer, as they do not require compliance with healthcare regulations. However, stipends are considered taxable income and therefore lack the tax advantages of other benefit options. While health stipends provide flexibility, employees might not appreciate them as much as formal health insurance plans.

Health stipends are a good option for farms that want to provide some healthcare support but lack the resources or administrative capacity to manage more complex options. For example, a farm with a small, part-time, or seasonal staff might offer monthly stipends to help cover workers’ out-of-pocket health expenses.

Retirement Benefits

SEP IRA (Simplified Employee Pension). A SEP IRA is a retirement plan that is funded fully by the employer (i.e., there’s no option for the employee to make their own contributions). The employer contributions are based on a percentage of each employee’s earnings. SEP IRAs are highly flexible, meaning that the farm can adjust its contributions each year based on the farm’s financial situation. This makes them a good choice for farms with seasonal operations or fluctuating income. SEP IRAs are relatively easy to set up and maintain. Contributions are tax-deductible for the employer and tax-deferred for employees. Farms offering SEP IRAs may be eligible for the SECURE 2.0* start-up tax credit.

SEP IRAs are a good option for farms that experience variable income and want to offer retirement benefits. For example, a farm with seasonal workers might use SEP IRAs to contribute in profitable years while skipping contributions during leaner years.

SIMPLE IRA (Savings Incentive Match Plan). A SIMPLE IRA allows both employers and employees to contribute to retirement accounts. This gives employees a sense of control over their retirement savings and provides them the opportunity to save a considerable amount. Employers are required to either match employee contributions up to 3% of their salary or make a 2% non-elective contribution. Either way, employers must commit to consistent contributions, which makes SIMPLE IRAs less flexible than SEP IRAs. However, SIMPLE IRAs are relatively easy to set up, and the administrative load is considerably less complex than that of a 401(k). Contributions are tax-deductible for the employer and tax-deferred for employees. Farms offering SIMPLE IRAs may be eligible for both the SECURE 2.0 start-up and employer contribution tax credits.

SIMPLE IRAs are a good option for farms that want to encourage employee savings and are prepared to make moderate, predictable contributions.
For example, a farm with a reliable team of full-time employees might choose a SIMPLE IRA to build long-term financial security for their workers.

401(k). A 401(k) is a robust retirement plan that allows both employers and employees to make contributions to retirement accounts. Employers can offer additional features such as matching contributions, profit-sharing, and vesting schedules. While 401(k) plans have the highest contribution limits and offer significant benefits, they also come with higher administrative costs, paperwork load, and regulatory requirements. This makes them better suited for farms with stable finances and the capacity to handle the added complexity. Contributions are tax-deductible for the employer and tax-deferred for employees. Farms offering 401(k)s may also be eligible for both the SECURE 2.0 start-up and employer contribution tax credits.

401(k)s are a good option for farms that are financially stable and want to provide a comprehensive benefits package to attract and retain long-term employees.
For example, a larger farm with a dedicated workforce might implement a 401(k) plan to remain competitive in the labor market.

Payroll Deduction IRA. A payroll deduction IRA is the simplest retirement benefit to implement. It allows employees to contribute to their own IRA accounts through payroll deductions. Employers do not contribute anything, and the administrative burden is minimal. It simply requires the employer to coordinate with their payroll system to handle the automatic deductions and transfers to the IRA account that the employee has set up. While this option does not offer employer contributions, it provides employees with an easy way to save for retirement. Employers get no direct tax deductions or credits, as it’s fully funded by the employee. The employee’s contributions are tax-deferred for their benefit.

A payroll deduction IRA is a good option for farms that have limited administrative and financial resources but want to support employees’ retirement goals.
For example, a small farm with part-time staff might use payroll deduction IRAs to give workers an easy way to build their retirement savings.

At-A-Glance Comparison Chart of Farm Employee Benefits