Federated Farmers says poor results from a government survey of dairy farms are a wake-up call to farmers to keep up to date with employment laws and record-keeping.
Labour inspectors visited more than 40 dairy farms countrywide between December and April and found 75 percent were not complying with minimum employment rules.
The Ministry of Business, Innovation and Employment said most of the breaches related to not keeping accurate records.
Federated Farmers dairy chair, Willy Leferink, said farmers have to make sure they are complying with employment laws and the increasingly demanding paper work.
But he said part of the problem was confusion over the way different government agencies are applying the rules.
"The biggest problem is the inconsistency of applying parts of the employment package. For instance, in minimum wages we're not allowed to take the housing allowance into account. So that's a reasonable part of their employment package.
"The inspectors, they have a different interpretation from the ones from IRD, where they say you have to take it into account."
Central region manager for the labour inspectorate Kris Metcalf said it has taken enforcement action on more than 20 of the non-compliance cases.
"So if they are not complied with, the case can proceed to the Employment Relations Authority where there are penalties for non- compliance of up to $10,000 for an individual or $20,000 for a corporate or company farm."
Mr Metcalf said farms employing migrant workers will come under the labour inspection spotlight next.
He says the information farmers need to comply with employment laws is readily available, through IRD, Dairy NZ and Federated Farmers.
Federated Farmers says paying $60 for its employment contract pack could prevent a $20,000 penalty.
Mr Leferink says he doesn't think farmers are deliberating breaching the rules in most cases, but he says they need to make sure they're complying with the law.
"It's all compulsory, it's been there for a long time, it's not that it was all invented yesterday, so farmers just have to pull up their socks in that respect and fill out the paper work. Employing people is not for the faint-hearted and it's important to do procedures properly."
Mr Leferink says Federated Farmers has been meeting the ministry to iron out areas where there's still confusion over employment and minimum wage laws.
CTU - non compliance 'no surprise'
However, Council of Trade Unions president Helen Kelly says the high level of non-compliance revealed in the farm inspections comes as no surprise.
She says it reinforces the need to tighten the employment laws to protect the rights of farm workers.
"The fact that so many of them are breaching the minimum employment laws of New Zealand shows what poor employers many of these farmers are, not to mention the 18 deaths in agriculture last year.
"The two things add up. Where workers are being exploited at this sort of rate in one of our most profitable industries, with very little scrutiny, there's also likely to be a very high accident rate, so we are not surprised at all."
Ms Kelly says if farmers are not keeping records of time and wage accounts, there's no telling whether workers are being paid properly.
"Federated Farmers does a remuneration report every year, and that itself exposes how close these workers are to the minimum wage and what long hours they're working."
Ms Kelly says there's a huge turnover of a third of employees each year which she believes is unsustainable.
"It shows no collective bargaining at all in dairy farming, or any farming, and the industrial law needs to change so these workers can have collective terms and conditions."