When producers think about a disaster plan, they often connect it with surviving a natural disaster. While written plans are important, the human resources aspect of a farm also needs a disaster plan to protect people
and the business.
"Having a written policy in place that covers personnel matters before disaster strikes can be worth a fortune,” said farm management consultant Dick Wittman to attendees at this year's Top Producer Seminar. "When an incident occurs with no policy in place, it is virtually impossible to come up with a rational policy that is fair and equitable.”
Wittman said that the time to develop what he calls a business benefit continuation policy is when farm owners and managers are healthy and it is easier to agree on how employees and family members should be taken care of. The policy should include decisions on workers' compensation, health insurance and disability insurance.
"These decisions need to be aboveboard so everyone understands how they will be treated, and how their family will be treated, if something occurs,” Wittman said.
People Management Plan. Bob Wells, field agricultural economist for Iowa State University, said a human resource risk management plan is an integral part of a farm's overall risk management plan.
"Part of that risk assessment should be to ensure there is adequate disability, health and death insurance in place,” he said. The coverage should be adequate enough to provide a safety net for a family member or employee and help defray the expenses of replacing that employee, either on a short-term or long-term basis.
Beyond the personal issues that come into play, Uncle Sam treats compensation decisions differently. "If you wait to develop a plan to take care of team members after they become sick or injured, compensation paid out can be treated as a nondeductible dividend or capital payout,” Wittman said. "When you develop a proactive policy beforehand, compensation is contractually bound by the policy agreement and becomes a tax-deductible business expense. That can be a huge tax advantage for both parties.”
No one wants to think about issues that involve disasters, especially when it comes to family members. But having a plan in place can allay fears and ease transition if the unforeseen does occur.
Top Producer, Spring 2010