Equine Industry Survey: Compensation for Kentucky Thoroughbred Horse Operations

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1 2016 Equine Industry Survey: Compensation for Kentucky Thoroughbred Horse Operations

2 INTRODUCTION Finding and retaining quality employees continues to be an issue for many Kentucky Thoroughbred horse farms. Offering competitive compensation and benefits is one way that farms attract potential employees. This report focuses on compensation and benefits currently provided by Kentucky Thoroughbred horse farms as of this December 2016 survey. We hope that these compiled results will be a helpful tool for you to use in conducting your business throughout the year. We thank the 38 Kentucky farms for their participation, as it is your responses that continue to make this survey useful. As always, we welcome your feedback and suggestions for future survey topics. Sincerely, Jen Shah and Melissa Hicks Dean Dorton Equine Team 1

3 DEMOGRAPHICS The responding farms range in size from under 50 acres to over 4,000 acres across multiple states. Minimum: 46 acres Median: 330 acres Maximum: 4,000 acres Average: 674 acres 62% of farms have fewer than 500 acres 21% of farms have more than 1,000 acres Most of the responding farms maintain an average of 6 to 10 horses per full-time farm employee More 1-5 horses 6-10 horses horses horses horses than 25 horses 11% 21% 8% 0% 5% 55% 2

4 DEMOGRAPHICS Most of the responding farms have up to 15 full-time employees % 39 % 11 % 13 % 26 % Fewer than 5 employees More than 50 3

5 EMPLOYEES % change in employment The majority of farms that responded have maintained consistent staffing levels during the past year % 21% 5% 3% 3% 3% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 5% 5% % 4

6 AVERAGE PAY RATES: HOURLY Horse Labor: Groom Foreman Watchman 14 Number of Farms N/A $ $8.99 $ $9.99 $ $10.99 $ $11.99 $ $12.99 $ $13.99 $ $14.99 $ $15.99 Farm Labor: Agricultural Worker Skilled Laborer (mechanic, plumber, etc.) Number of Farms N/A $ $7.99 $ $8.99 $ $9.99 $ $10.99 $ $11.99 $ $12.99 $ $13.99 $ $14.99 $ $15.99 $20.00 $24.99 $25.00 $

7 AVERAGE PAY RATES: HOURLY Seasonal Labor: Sales Agriculture (mowing, trimming, etc.) Number of Farms N/A $ $7.99 $ $8.99 $ $9.99 $ $10.99 $ $11.99 $ $12.99 $ $13.99 $ $14.99 $ $15.99 $ $16.99 $ $17.99 $20.00 $24.99 More than 70% of the responding farms employ sales staff. Most of these farms pay sales staff between $200 and $209 per day Number of Farms $130 - $139 $150 - $159 $180 - $189 $200 - $209 $220 - $229 $240 - $249 $250 + Daily rate for sales staff 6

8 AVERAGE PAY RATES: HOURLY Office Labor: Office Clerk Bookkeeper Booking Secretary 8 7 Number of Farms N/A $ $11.99 $ $12.99 $ $13.99 $ $14.99 $ $15.99 $ $16.99 $ $17.99 $ $18.99 $19.00 $19.99 $20.00 $24.99 $25.00 $29.99 $30.00 $

9 AVERAGE PAY RATES: SALARY Operational Managers: Division Manager Stallion Manager Farm Manager Number of Farms Salary rate per year Office, Accounting, and Finance: Office Manager Accounts Payable Clerk Business/Financial Manager Farm Accountant Number of Farms Salary rate per year 8

10 EMPLOYEE WAGES % 21% 16% 16% 8% 5% 5% 3% 2% 10% 7% 6% 5% 4% 3% 2% 1% 0% % wage increases in the past year 47% 16% 16% 11% 3% 3% 2% 2% More than three-fourths of responding farms provided a wage increase for 2016, which ranged from 1% to 10%. While some farms provided anticipated wage increases for the upcoming year, nearly half of the farms that responded were unsure of raise amounts when completing this survey. 10% 7% 6% 5% 4% 3% 2% % wage increases in the next year Unknown 9

11 EMPLOYEE WAGES Most of the responding farms treat sales staff, trainers, and jockeys as independent contractors, and grooms as employees. Independent contractor Employee N/A Sales staff/help % 42% 50% Trainers % 29% 68% Jockeys % 61% Grooms % 24% 58% Just over one-third (39%) of the responding farms have been audited for worker classification within the past two years. 10

12 BONUSES 74 % of responding farms offer a bonus program. Eligible Participants: Owners 7% 71% Management 86% Full-Time Employees Part-Time Employees 21% (Note that multiple groups above may be eligible to participate in a farm's bonus program.) 79% of responding farms use a key metric when evaluating bonuses for eligible farm employees. The most popular metric is horse sale results (used by 43% of these farms). Other key metrics used by farms include net overall income, years of service, and employee performance. 11

13 BONUSES 14 % of responding farms specify a percentage of the key metric that funds the farm's bonus plan. Three-quarters of these farms indicated that 5-10% of the key metric funds the bonus plan. The remaining one-quarter of farms indicated that half of the farm's key metric funds the bonus plan. Most bonuses are paid annually, as illustrated below % 11 % 7 % 64 % Annually Semi-annually After sales proceeds are received Every five years of employment 12

14 RETIREMENT PLAN 32 % of the responding farms provide an employee retirement plan. 17% 17% 17% 9% 8% 8% 8% 8% 8% 0-10% 11-20% 21-30% 31-40% 41-50% 51-60% 61-70% 71-80% 81-90% % of employee participation Of these farms that provide a retirement plan, 83% provide a 401(k). Other profit sharing and simplified employee pensions (SEP) are additional plans provided, at a rate of 8% and 17%, respectively. None of the responding farms provide money purchase, defined benefit pension, or deferred non-qualified compensation plans. The percentage of employees participating in a farm's retirement plan varies significantly, from less than 10% to 90%. Of the farms which provide a retirement plan to employees, 8% of the employers fund 100% of the plan, while the remaining 92% responded that both the employer and employee fund the plan. None of the farms indicated that the employee funds the entire retirement plan. 13

15 PAID TIME OFF While most farms provide paid vacation for full-time employees, only 5% of farms provide part-time employees with paid vacation. Full-Time Employees Part-Time Employees No paid vacation time provided 9-10 days dependent on tenure days 7-8 days days days More than 14 days Vacation time is 3% 8% 5% 2% 11% 8% 21% 18% 16% 13% 95% 14

16 PAID SICK LEAVE While most farms provide paid sick leave for full-time employees, only 3% of farms provide part-time employees with sick leave. Full-Time Employees Part-Time Employees 97No paid sick leave provided 24% 97% 1-2 days 3% 16% Sick leave is provided on a case-by-case basis0+3 10% 3-4 days 18% 24% 7-8 days 5% 9-10 days 3% 5-6 days

17 26 89 ON-FARM HOUSING 74 % of the responding farms provide on-farm housing for one or more of the farm's employees. 74+ Farms providing on-farm housing for one or more employee 26 % % Of the farms that do provide housing... Farms that do not provide on-farm housing 11+ Rent charged below market rate 8% 66 % No rent charged None of the responding farms which provide housing charge rent at market rates. 16

18 ON-FARM HOUSING 39 % of the farms who provide housing require signed agreements with tenants. According to most of our survey participants, the employer is responsible for expenses related to on-farm housing. Utilities Insurance Maintenance Employer Employee Both % 21 % 72 % % 11 % 82 % 4 % % 78 % 17

19 HOUSING ALLOWANCE 39 % of the responding farms provide a housing allowance to offset offfarm housing costs. Of those, one-third base the amount of housing allowance on an employee's position or title. The remaining two-thirds which do not base the amount of housing allowance on an employee's position or title provide a monthly allowance at varying rates. Maximum: $400 per month Minimum: $125 per month Median: $350 per month Average: $300 per month 18

20 VEHICLES Three-quarters of the responding farms provide vehicles for one or more employees. Of these, 100% of the farms are responsible for the fuel and repairs/maintenance, while 96% of the farms cover insurance (the remaining 4% have the employee cover insurance). 79% of the farms restrict vehicle use to farm business. Of these farms, one-third maintain a written vehicle policy to formalize the arrangement. 19

21 ABOUT DEAN DORTON Located in Kentucky, known for its world-class horse farms, racing, and sales, our firm has provided accounting, tax, and business consulting services to the horse industry for over 35 years. Our clients cover a broad spectrum of organizations involved in the horse industry, from small boarding farms to large multi-departmental farms involved in boarding, breeding, selling, and stallion management; from racing stables to a racetrack; from bloodstock agents to equine veterinary firms; and from industry associations to equine insurance agencies. Not all of our clients are based in Kentucky; horse industry clients from other parts of the country and from outside the United States also gain comfort from having our industry specialists work with them. As a firm, we endeavor to know the business of horses, not just accounting and tax rules relating to the industry. We accomplish this in a number of ways, including, most usefully, by working with our many clients in the industry on their business matters. We perform a variety of services for our clients involved in the equine industry. And, we welcome inquiries, whether from new participants in the industry who want assistance in properly structuring and administering their stables or farms or from longtime industry participants seeking to improve the performance and administration of their operations. 20

22 DEAN DORTON TEAM The Dean Dorton equine team is available to assist you with your needs throughout the year. Jen Shah, CPA Director of Tax Services Doug Dean, CPA Director of Tax Services Leigh McKee, CPA Director of Tax Services David Smith, CPA Director of Tax Services Melissa Hicks, CPA Associate Director of Tax Services Bill Kohm, CPA, MBA Director of Assurance Services Jason Miller Director of Technology Consulting David Richard, CPA Director of Assurance Services Nick Lynch, CPA/CFF, CFE Associate Director of Forensic Accounting and Litigation Support Services David Angelucci, CPA/ABV Associate Director of Business Valuation Services

23 Lexington 106 West Vine Street, Suite 600 Lexington, KY Louisville 500 West Jefferson Street, Suite 1400 Louisville, KY deandorton.com Dean Dorton is a full-service accounting and business consulting firm which provides services to clients of all sizes in a variety of industries. The firm has grown to be one of the largest Certified Public Accounting firms based in the Commonwealth of Kentucky. At Dean Dorton, our philosophy centers on an unyielding commitment to provide services that exceed our clients expectations and are consistently superior to our competitors in quality and timeliness. Further, we strive to do so in a setting that is satisfying professionally and personally for firm employees.