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Date:
JANUARY 2004
Source:
DAIRY FARMER
Headline:
TAKE A CLOSER LOOK AT CONTRACT MILKING
Content:
Dairy Farmer January 2004 issue

With today’s tight margins, where the emphasis is on technical efficiency, the difference between profit and loss can come down to the skill of your herdsman in getting the best from your cows.
But the big question these days is where on earth do you find staff with the right skills and experience to deliver the goods?

For a growing number of producers the solution has been to switch to contract herd care where they can not only get the appropriate skill levels but also have more flexibility in their labour force.

The two main agencies in the UK are LKL Services and Dairyforce, both of whom offer relief milking and contract herd care services. LKL Services which is part of the ABN group currently provide contract staff for around 220 dairy units, while Dairyforce is a smaller privately owned and run business, operates on nearly 80 units nationwide.

Although the specifics of the contracts vary there are essentially two type of contract service- a 365 day contract which includes all holiday and sickness cover or a 295 day contract where the farmer provides the relief cover. In both cases the contract milker is self employed and is effectively carrying out a service on behalf of the contracting agency.

“Contrary to popular opinion contract milking agreements are far from temporary arrangements with the average contract herdsman staying on farm for seven years compared with directly employed staff who typically move on after less than four years,” says LKL’s managing director George Gordon.
“Contract milked herds also tend to have better levels of performance than average partly because the owners have a more progressive attitude but also because the contract staff are well motivated and have high levels of herd management skills,” he adds. “All our herds are costed by Kingshay as part of the service and they are currently averaging just over 8000litres a cow.”
There are a number of advantages to using contract herdcare, the first being the lack of hidden employment costs. Contracts are agreed in advance and are fixed for a year so the client is simply invoiced monthly by the agency. This means there is no payroll administration or National Insurance, sick pay or relief cover to find.
Under the terms of 365 day contracts the agency will also provide relief cover at no extra charge if the contractor is ill or injured. “This is an important benefit as relief cover supplied as a one off will cost between 8.50 and 9.50 an hour plus board and lodgings,” points out Michael Day from Dairyforce.
As part of the contract the herdsperson/manager will require rent and Council Tax free accommodation and the agency guarantees to hand back the property with vacant possession at the end of the contract. If there are any problems the agency bears any legal costs to secure vacant possession.
Since contracts are reviewed annually it is also possible to terminate the agreement or change your contract herdsman if you are not happy with the service or you feel the objectives agreed with the contractor and the agency have not been met. “Employment law is so heavily weighted in favour of the employee that it is now very difficult to dismiss a member of staff especially for under performance,” comments Mr Day.

One of the major advantages of going down the contract herd care route is that the agency carries out most of the recruitment work which not only saves time but invariably guarantees a better standard of applicant. The contract agencies not only advertise but also have an extensive database of CVs of dairy staff interested in contract work.

Contract herd care works best where the herdsman has a reasonable degree of autonomy to make the day to day herd management decisions and is working with, rather than for the herdowner. “Since the majority of contract herdsmen are on performance-related salary packages they work best in one man set-ups or as team leaders where they can have most impact on herd productivity,” explains Michael Day. “Two man team’s where the herdowner works alongside the contractor and provides relief cover can often work well especially when the skills of the herdsman are fully recognised and his input into the running of the business is encouraged.”
There are however some situations where a contract herdsman is not the solution. “Since the market for skilled staff is very tight those that are around will pick and choose their units so the more modern, labour efficient set-ups will have an advantage,” stresses George Gordon. “Even so, if the approach to man management and staff motivation is poor you will struggle to recruit and retain a contractor even if you run a cow palace,” he adds.
“Contract herd care should also not be regarded as an alternative to conventional employment if you are struggling to retain existing staff,” Michael Day points out. “It is important to remember that you are not the contractor’s boss and he is not there to take orders so it is not the solution for anyone with an autocratic management style.”
Perhaps the most important advantage of using contract staff is the management back-up provided by the agencies. Both companies arrange regular meetings on farm with the client and the contract staff to check on progress and to help deal with any technical problems or management issues that crop up.
“The majority of dairy farmers are not natural man managers and are very poor at sharing information and plans for the business,” explains George Gordon. “Often directly employed staff leave over minor issues that could have been resolved if tackled sympathetically at the outset. By having an experienced third party who can sit down with the herdsman and the client it is much easier to deal with any concerns before they become a major problem.”

LKL has now added dairy team staff management to the list of in house courses that it runs for its self employed contractors. Experienced herdsman who are stepping up to a larger unit with more staff or who are already in a large herd set-up are encouraged to come on the courses to development these essential management skills.

So how much will it cost to employ a contract herdsman or manager? Every contract has to be tailor made to suit individual farm circumstances and will be influenced by numerous factors including, herd size, level of responsibility, length of working day and the performance objectives agreed by the agency and the customer. Most salary packages will have a bonus element which can be related to milk quality, fertility, increased production or more commonly MOPF/litre. Since the contractor makes the final decision on whether to take the position, the quality of the house, location, access to amenities and working conditions will all be taken into account.

Both LKL and Dairyforce argue that customers will pay a comparable salary to a contract herdsman as they would pay a direct employee with the equivalent skill level. So you will have to pay 20-25,000 for a herdsman looking after 150-200 cows with some help with feeding and yard work. At the upper end of the scale two contractors offering a complete 365 day service for a 300 cow herd will cost up to 70,000. In addition to the salary package LKL charges a service fee which is not much more than you would pay in National Insurance contributions for a directly employed herdsman. Dairyforce also charges a service fee which is negotiated individually when the contract is drawn up.

In addition to its technical courses, LKL is restarting its apprenticeship scheme which lasts 2-3 years with day release college training. “We are actively looking for farms that are willing to take these youngsters on to help them develop their skills,” says Mr. Gordon at local agricultural college with the aim of giving them the skills and qualifications to take on the role of at least assistant herdsman by the end of the scheme.
For more information on contract herd care and relief milking please contact Dairyforce on 01981 241137.
Dairyforce Services Ltd, Agriculture House / Unit C, Old Sarum Park, Salisbury, Wiltshire SP4 6EB Tel: 01722 343805, Fax: 01722 335350