Pay for performance in agriculture: types, indicators and perspectives

Abstract

With a growing percentage of employees in German agriculture, human resource management has an increasing relevance for farmers and other interest groups. In economic literature, the question of optimal incentives and the effects of performance pay are discussed controversially. The empirical results of this article are based on a written survey of 260 agricultural employers. The analysis of financial incentives shows that pay for performance is of minor importance in agriculture, as it is complicated to find simple, measurable performance indicators that reflect the employees' individual effort in an objective way. In part 4 of this article, possible performance indicators for different farm enterprises are shown and framework conditions for their use are discussed. In the long-term perspective, precision agriculture will lower the transaction costs for measuring performance indicators. As the influence of stochastic determinants on agricultural production will not decrease in the future, pay for performance in agriculture will continue to play a minor role.