These arrangements create independent wealth for the succeeding generation to invest in the family property, as well as enhancing their business experience. Gradual transitions into ownership may provide income for the retiring generation.
Another challenge for farm succession is the ever-growing opportunity available to children from farming backgrounds to travel, study and pursue careers outside of farming.
The effects of these are that farm ownership has become the domain of the experienced and well-capitalised -- the average ages of New Zealand dairy and sheep and beef farmers are 43 and 58 respectively.
Every attempt needs to be made to incentivise farm kids back on to the family land.
A clear succession plan which sets out a viable career path is a good place to start. A good succession plan will provide you, your family and your employees, with clarity about the future and confidence the business you have worked hard to develop will continue to succeed.
An impediment that farm owners may face when a successor is willing to return to the land is current farm employees.
The successor may need to take someone else's position. There are limited, defined circumstances that justify the termination of employment contracts, and often in this situation redundancy is the only viable option.
Employers are free to make commercial decisions to reorganise their business. However their ability to do so is constrained by a requirement that the decision is "genuine".
In a genuine redundancy, employment is liable to be terminated because the position is, or will become, surplus to the needs of the business.
A redundancy for reasons which are not genuine, or where the employer does not follow the correct process, may amount to an unjustified dismissal.
The focus of a redundancy must be on the position, not the person, and an employer must present evidence to justify the genuineness of the decision to disestablish the position. Such evidence usually involves a financial component.
A succession situation may be difficult to reconcile with redundancy requirements. Making a current manager or farm assistant redundant then immediately moving a family member into the same role indicates that the position is not surplus and therefore the redundancy was not genuine.
One approach could be to create a new role that is materially different, which incorporates elements of the current owner's role and the role(s) of the worker(s) to be made redundant.
Integrating an element of management responsibility will empower and motivate the successor, and develop their leadership potential, which will help to strengthen the resilience of the farming business.
It will also allow the outgoing owner to take a step back.
Relevant evidence to justify a restructure of this nature could be the financial benefits that would flow from the owner, whose time is more valuable, relinquishing an element of responsibility.
An indirect benefit of employing a successor is that wealth is kept within the family.
Successors work for more than just a pay cheque. They have a tangible interest in the property and revenue gained is typically redirected back into the family farm, which enhances the long-term prosperity of the business.
In addition to genuine substantive reasons and evidence supporting redundancy, the process must be carried out in a fair and reasonable manner.
Employees must be informed of their right to seek independent advice and to a support person. An employer must engage in meaningful consultation with affected employees, and may need to offer any redeployment opportunity if the employee has adequate skills or experience for it. The decision to make an employee redundant must never be predetermined.
It is also important to be sensitive to the consequences of redundancy for current employees.
Employers should carry out restructuring processes with tact and diplomacy, and seek to limit the distress which may arise out of situations where employees lose their jobs through no fault of their own.
If you have any questions about farming succession call 0800 FARMING for free, confidential and independent employment advice.
