Working With Family on the Farm: How to Set Fair Wages When Children Return to the Business
“Dad, I can earn more money working at the local garage than I can here on the farm.”
It’s a conversation happening in farm kitchens across New Zealand every day. Your child has finished their studies, gained experience elsewhere, and now they’re considering coming back to work on the family farm. But when they start comparing potential earnings, the numbers don’t always favour farm life.
This scenario unfolds on thousands of Kiwi farms annually. Sometimes it leads to uncomfortable family discussions. Sometimes it results in talented young people walking away from agriculture altogether. And sometimes, it creates lasting resentment that can damage family relationships for decades.
But it doesn’t have to end this way.
The Challenge of Family Employment
Running a family farm often means children or younger relatives return to lend a hand — sometimes temporarily, sometimes as the first step in a comprehensive succession plan. When family members are involved, financial arrangements become complex. Pay too little and you risk breeding resentment while losing valuable family members to competing industries. Pay too much and you might strain your farm’s already tight cash flow.
Finding the right balance is crucial for both your business sustainability and family harmony.
Why Getting Family Wages Right Matters More Than You Think
It’s tempting to treat family labour as simply “helping out” rather than formal employment. After all, they’re family — surely they understand that the farm’s needs come first? Unfortunately, this informal approach often creates significant problems:
Your working children may feel undervalued if their compensation doesn’t reflect their actual contribution, especially when they observe friends earning substantial wages in other industries. Nothing destroys motivation faster than feeling taken for granted, and this can lead to your most capable family members seeking opportunities elsewhere.
Siblings not working on the farm may harbour concerns about unequal treatment, suspecting that working family members receive unfair advantages through below-market wages that ultimately increase farm profitability (and their eventual inheritance). These suspicions can poison family relationships for generations, creating lasting divisions that extend far beyond business matters.
Professional advisors will scrutinise informal arrangements. The IRD increasingly question the validity of unpaid or significantly underpaid labour in farm financial statements. These arrangements can complicate your financial reporting, tax obligations, and future business planning, potentially creating compliance issues that could have been easily avoided.
Most importantly, establishing fair wage structures demonstrates genuine respect for family members’ contributions while ensuring your business operates professionally — creating a solid foundation for long-term success and sustainable growth.
Your Comprehensive Guide to Setting Fair Family Wages
- Start With Market Reality, Not Family Sentiment
Research what farm workers with comparable skills and experience earn in your local area. Check current job advertisements, speak with neighbouring farmers, or contact rural recruitment agencies for current market data. Even if your farm cannot afford to match market rates exactly, use this information as your baseline for fair compensation discussions.
Remember that paying significantly below-market “family rates” might save money initially, but often drives talented family members away from farming permanently. The short-term savings rarely justify the long-term loss of capable, committed family labour.
- Pay for the Job, Not the Relationship
Ask yourself honestly: What specific role is your family member actually performing?
If they’re handling general farm work — fencing, stock handling, tractor operation — their compensation should align with what you’d pay a casual worker or experienced farm hand with similar responsibilities. However, if they’re assuming significant accountability like managing livestock operations, overseeing staff, or handling financial decisions, their remuneration must reflect that elevated level of responsibility and decision-making authority.
Don’t allow family relationships to cloud your professional judgment about the genuine value they’re contributing to your operation.
- Open Your Books (Strategically)
Reaching wage agreements becomes significantly easier when all parties understand what the farm can realistically afford. Consider sharing simplified versions of your cash flow projections or budget summaries with returning family members, helping them understand your financial constraints.
You don’t need to reveal every confidential detail, but demonstrating the reality of seasonal cash flow variations, debt servicing requirements, and necessary capital investments helps family members understand why farm wages might not match urban salaries dollar-for-dollar. This transparency builds trust and facilitates more productive wage discussions.
- Factor in the Complete Compensation Package
Often, returning family members live in family homes or farm accommodation without paying market rent. In today’s challenging housing market, this represents substantial monetary value that should feature prominently in compensation discussions.
Be explicit about everything included in their total remuneration package:
- Accommodation (calculate and discuss its current market rental value)
- Meals, groceries, or food allowances
- Personal use of farm vehicles and equipment
- Additional benefits including fuel, internet access, utilities, or other farm resources
This transparency ensures everyone understands the true financial value of the working arrangement, often revealing that total compensation is more competitive than initial salary figures suggest.
- Document Everything in Writing
Even for family members — especially for family members — a clear employment agreement prevents future misunderstandings and establishes professional standards. Your written agreement should include:
- Base pay rates and payment frequency schedules
- Expected working hours and overtime calculation methods
- Holiday entitlements and sick leave provisions
- Detailed accommodation and benefit descriptions
- Clear job responsibilities and reporting structures
- Regular review periods for performance evaluation and pay adjustments
This documentation isn’t about family mistrust — it’s about establishing professional employment standards that protect everyone’s interests and prevent future conflicts.
Practical Example: Making It Work
Consider this realistic scenario: Your son returns home after completing a trade apprenticeship. He works 55 hours weekly handling stock management and fencing maintenance. Say the current market rate for similar work: $30 per hour.
Instead of offering a reduced “family rate” of minimum wage, establish fair compensation at $25 per hour, plus provide free accommodation valued at $300 weekly. This creates total weekly value of $1,675 — genuinely competitive compensation that’s both fair and transparent.
Document this arrangement clearly, including accommodation value, job responsibilities, and review schedules. This approach demonstrates respect for your son’s contribution while maintaining family harmony and professional business standards.
Connecting Fair Wages to Succession Planning Success
Many farming families overlook this crucial connection: fair wage practices today directly influence successful succession planning outcomes tomorrow.
When one child works on the farm while others pursue different careers, transparent wage records provide clear evidence that the working child has received appropriate compensation for their labour contributions — not hidden advantages that could trigger inheritance disputes later.
Comprehensive employment records also prove invaluable when evaluating each family member’s historical contribution to business success. Clear documentation eliminates guesswork and reduces potential family conflicts during asset division discussions.
Professional wage structures implemented today create significantly smoother farm transition processes tomorrow, protecting both family relationships and business continuity.
The Bottom Line: Building Sustainable Family Farming
Paying returning family members fairly extends far beyond simple financial calculations — it’s about building sustainable farming operations that can support the next generation while preserving crucial family relationships.
When young people observe that farming can provide competitive compensation for their skills and dedication, they’re significantly more likely to choose agriculture as their long-term career path. When siblings witness transparent, professional employment arrangements, they’re far less likely to develop resentment about perceived “unfair” treatment.
By benchmarking wages against current market rates, maintaining transparency about farm financial realities, and documenting all agreements professionally, you create strong foundations for both farm profitability and long-term family harmony.
That difficult conversation in your farm kitchen doesn’t need to end with talented family members walking away from farming. With thoughtful approaches to wages and professional employment practices, it can mark the beginning of successful transitions to the next generation of sustainable family farming.
Need assistance structuring employment agreements for family members or developing comprehensive succession plans that work for everyone? Contact CMK’s experienced rural advisory team for guidance specifically tailored to your unique farming operation.