Employees are often the backbone of farm operations. Without them, peppers or potatoes would rot in the fields, and livestock would go hungry. With so much riding on your team, paying them accurately and on time is non-negotiable.
What you’ll learn
What you’ll learn
Key takeaways
- Seasonal employment and migrant labor, industry and visa regulations, and hybrid pay structures make agriculture payroll challenging
- You must complete an I-9 form for all agricultural workers
- H-2A visa-holders are exempt from Social Security and Medicare taxes
- Agriculture payment solutions can help you onboard seasonal workers, pay hourly or per piece wages, and take the correct exemptions
Of course, that’s not as easy as handing out a wad of cash each week. There’s ever-changing tax laws, many farmers mix different pay models, such as hourly wages plus piece rate wages for every pound of strawberries picked, and every time you hire seasonal workers new paperwork needs to be completed.
But even if you have an overflowing to-do list, there are processes you can use to keep payroll from getting out of control. In this guide, we cover what goes into ag payroll so that payday goes smoothly.
Unique payroll challenges in the agriculture industry
In many industries, employees typically earn an annual salary or standard hourly wages. Agriculture, however, often relies on more complex payroll models that can be less than forgiving.
Seasonal and migrant labor needs
Seasonal employment can sometimes throw a wrench in payroll administration. One month, you might only have a handful of salaried employees. The next, you’ve got 50 people harvesting and sorting vegetables, and 30 more waiting for onboarding.
Setting up direct deposit and payroll tax withholdings for these seasonal employees could eat up days. And there’s always the risk of human error, especially when you’re trying to process paperwork as fast as possible.
Migrant labor poses other twists and turns. Many agriculture businesses hire people with H-2A Temporary Labor Certifications, which come with strict documentation and payroll requirements.
For example, the U.S. Department of Labor (DOL) requires employers to provide or pay the cost of transportation between the H-2A worker’s housing and job site.
Keep in mind
The department states, “If the worker pays these costs out of pocket, you must reimburse these costs no later than when the worker completes 50% of the contract period.”
Generic digital payment systems may not have an option for these reimbursements, forcing you to do it all by hand. The takeaway? Seemingly minor tasks like these can take hours, especially if you have a large or frequently changing workforce.
Hybrid pay structures
Differentiating pay types can be complex. You may pay an hourly wage for certain tasks, such as caring for a herd of dairy cows. On the other hand, workers may earn a set amount for every busload of watermelons they pick and load.
Keeping track of how much you owe each employee and specific compliance details can quickly become a headache. The table below illustrates what to consider as well.
| Challenge | What it means for farmers |
| Seasonal and migrant labor | Workforce size changes make onboarding, time tracking, and payments difficult to manage manually. |
| Hybrid pay structures | Hourly, piece-rate, and salary pay can overlap, leading to tracking and compliance errors. |
| Manual paperwork | I-9s, tax forms, payment records for dozens of short-term workers can pile up fast. |
| Visa and reimbursement rules | H-2A workers require transportation reimbursement and are exempt from some payroll taxes. |
Now that we better understand some of the important items that can take up time, let’s cover the must-know documents that those in the agricultural industry should be paying attention to.
Payroll compliance requirements for farms
As in any business, farms have to adhere to legal and tax regulations. But the combination of seasonal and migrant workers makes compliance extra tricky.
Worker classification accuracy
Employee classification is one area where you should tread carefully. In 2024, the DOL released new guidelines for classifying workers as employees or independent workers. Businesses must consider several factors, including:
- The worker’s skill and level of initiative
- Whether your relationship is permanent or temporary
- How much control you have over when and where a person works
If you expect your farm workers to show up every day at 8 a.m. and follow your instructions, they’re probably employees. On the other hand, someone who occasionally comes by to dust crops on their schedule would likely count as an independent contractor. That’s because you have less control over their labor, and your relationship is more temporary.
Exemptions are another key consideration. Typically, farm workers must pay federal income tax and Social Security and Medicare taxes. The exception are H-2A visa workers, who are exempt from Social Security and Medicare taxes for payments earned for agricultural labor.
IRS and Department of Labor rules
No matter which types of workers you have, documentation is key. The IRS and DOL require you to keep meticulous records for everyone who works on your farm, even if they’re only on your payroll for a few harvesting weeks.
Start by completing an I-9 tax form for all employees, including migrant workers. You’ll need to retain a copy of this document for three years after the date of hire, or one year after the last day of employment, whichever is later.
You’ll also need to file Form 943 for each agricultural employee subject to federal income tax withholding. That also applies for workers who pay Social Security and Medicare taxes.
For H-2A visa workers, you must report wages and can voluntarily withhold federal income tax with their permission. Otherwise, they must pay backup withholding, and you’ll need to report how much they earned on Form 1099 and Form 945.
If this sounds complicated, the good news is you don’t have to juggle all these forms and deductions yourself. A farming payroll solution can handle your agriculture banking needs.
| Requirement | Key details |
| Worker classification | Follow DOL’s 2024 guidance; most farmhands are employees, not contractors. |
| I-9 form | Must be completed for all workers and kept for 3 years after hire or 1 year after employment ends, whichever is later. |
| Form 943 | File to report employer taxes for agricultural employees subject to federal income tax, Social Security/Medicare. |
| H-2A visa workers | Exempt from Social Security/Medicare taxes; report on Form 1099 or 945 if tax withheld. |
| Record retention | Maintain accurate payroll and visa records for all employees. |
How payroll solutions simplify farm operations
Payment technology does more than make sure money gets deposited into your workers’ bank accounts on payday. It automates many tasks that can otherwise distract from the rest of your operations.
Use time-tracking software to accurately record your team’s work hours. That makes it easy to calculate wages and prevents manual errors, such as writing down that an employee clocked in at 1:00 p.m. instead of 1:00 a.m.
Digital payment systems designed specifically for farms can also handle hybrid pay structures. They calculate salaries, hourly wages, and piece rate pay, so your workers all get exactly what they’ve earned. Plus, you can offer different payment options. Some workers may prefer paper checks, while others want real-time payments deposited straight to their bank accounts.
Compliance monitoring is another perk. E-payment systems automatically withhold the correct taxes and maintain records without requiring paper files.
Run payroll in minutes
“As a farmer, I have no time for office work and payroll. OnPay lets me run payroll quickly without worrying about calculating taxes myself—which means more time in the field where I need to be.”
— Scott Chang-Fleeman, Shao Shan Farm LLC
Risks of ignoring payroll compliance
Filling out tax paperwork can be one of the more time-consuming to-dos, especially when multiplied by hundreds of seasonal workers. However, failure to file and non-compliance can lead to steep consequences, including fines, lawsuits, and even jail time. For example, one Texas farm foreman was sentenced to 27 months in federal prison after he forced H-2A workers to pay illegal fees and committed tax fraud.
Not following the laws also could also damage your relationship with your employees and threaten your business’s stability and future.
Streamlining farm payroll for long-term success
When it comes to managing your farm’s finances, don’t rely on spreadsheets or clunky general business software. You need ag-friendly products that can handle your complex payroll needs. The right tools will simplify your cash flow management while helping you stay compliant.
OnPay makes it easy to provide digital payments for seasonal and permanent employees. It’s easy to offer piecework pay, subsidies, and other incentives. Plus, the software verifies work authorization and collects I-9 forms, so you don’t have to worry about missing critical paperwork.
Try a free one-month trial to experience the benefits of OnPay’s agriculture payment solutions for yourself.
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.