Rising employment costs and their impact on the agriculture sector

By Chris Wright, Partner and ARA specialist

The Budget’s new policies introduce a big increase in employment costs, posing a problematic challenge for the agricultural sector.

Increased expenses for hiring, especially for lower-paid and part-time workers, are likely to strain farming businesses that depend on these employees.

Sectors like dairy, horticulture, pig farming, and poultry production are especially vulnerable, as they rely heavily on lower-wage, seasonal, and part-time staff to keep operations running.

Impact on farm budgets and productivity

The rise in employment costs means many agricultural businesses will need to reassess budgets, potentially leading to a reduction in hiring.

Lower staffing levels could limit productivity, creating a ripple effect across the business and reducing the ability to invest in innovation or infrastructure.

Innovation is important for competitiveness in agriculture, enabling farms to maintain output and quality standards while managing cost pressures.

However, when labour costs rise sharply, the financial flexibility for such improvements is diminished.

Additionally, higher employment expenses can prompt some farms to consider automation to manage productivity.

While automation offers potential cost savings, it requires a large upfront investment, which is often out of reach for smaller or family-run farms.

This can create a dilemma: invest in technology to maintain productivity or continue relying on labour at a higher cost.

Wider impacts on food production and the supply chain

The effects of rising employment costs are not just confined to individual farms, they impact the entire food supply chain.

Reduced hiring affects food production capacity, leading to potential delays or increased costs in processing and distribution.

This can drive up prices for consumers and put additional financial strain on farmers.

The agricultural sector, already grappling with high input costs and market volatility, may face even greater challenges in managing these new pressures.

Our accountancy team understands the agricultural sector’s pressures and is here to help.

From exploring tax-efficient strategies to identifying potential funding options, we offer guidance to help you manage these employment cost increases.

Reach out to our team to explore how we can help you navigate these rising employment costs and secure a sustainable workforce for the future.