Agricultural Wages Order and Packhouses

The Agricultural Wages Order 2008 ("the Order") applies to all those employed in dairy farming, rearing animals, growing consumable produce, market gardens and maintaining meadow or pasture land and reed beds.

If an employee is an agricultural worker they are covered by special provisions, in particular with regard to minimum rates of pay, holiday entitlement and sick pay. The provision of most practical significance to employers and employees alike is the minimum wage - under the Order a standard worker must receive at least £6.26 per hour and overtime rates of £9.39, compared to the National Minimum Wage which is currently £5.73 for workers over 22 years.

Employers may not realise packhouse workers will fall under the definition of "agricultural workers" unless one of two exemptions apply. The first of these is where the workers are employed on a farm and the produce being packed was not grown on that farm by the same enterprise. The second applies where the employees are based in an off-site packhouse except where the packhouse and the farm are owned by the same enterprise. The definition of "enterprise" is important and is dealt with below.

Put simply, a packhouse is subject to the AWO where the work involves packing the produce before the first point of sale. Therefore if the employees are only handling third party produce - i.e. it is produced by other farms, then the Order will not apply. Instead the employees will be subject to all the usual employment legislation - including, importantly, the National Minimum Wage rather than the agricultural - and higher - equivalent.

The situation becomes more complicated where employees are packing a mixture of home-grown produce and third party produce. In this situation, employers should apportion the time that employees spend on each. For every hour that employees spend dealing with home-grown produce they are agricultural workers, and therefore the provisions of the Order apply. However, for every hour spent dealing with third party produce, the Order does not apply and the employees are not automatically entitled to the same rates of pay and other benefits during this time.

Employers may find that it is impractical to apportion hours in this way to avoid having to pay the higher wages due under the Order when it is not compulsory to do so. Whether it is in their interests to do so depends on the proportion of home-grown to third party produce that is being dealt with - where the vast majority of produce is the farm's own, it may be easier to apply the Order throughout, but if the ratio is reversed, further thought into this matter may be required.

It has been mooted that where the farm sells its produce to another company prior to the produce being packaged and the other company agrees to send the produce back to the farm's packhouse to be processed, employers can avoid their employees being classed as agricultural workers. However, such an approach is inherently risky particularly where it is arguable that the companies are in any way connected or the second company is controlled by the farm. In these circumstances, it is likely that this transaction would be disregarded by an Agricultural Inspector and/or an Employment Tribunal when assessing whether the Order applies to the employees and as such it is likely that they would still be counted as agricultural workers. It is strongly advised, therefore, that legal advice is taken before embarking upon such an approach.

If a complaint is made against the employer, the Agricultural Wages Team will contact the employer to give them the chance to put things right. If they fail to do so, an Inspector may visit the employer to inspect the wage records and put into place measures to enforce compliance with the Order.

This article is intended as guidance only and legal advice should be sought before any action is taken.

For further information, please email Sally Prosser or call 01223 461155.