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04/2008Nucleus-International.net3 What is "fair" ? Membership fee system A : 1 member 1 vote 1 membership fee amount Everyone pays the same amount ! The system is comparable with a "Poll Tax"
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04/2008 Nucleus-International.net 1
Considerations about the Membership Fee System of Business Associations
and Chambers
Nucleus-International.netNucleus-International.net
04/2008 Nucleus-International.net 2
Criterions for a Membership Fee System
• It must be "fair"
• It must generate sufficient financial means to finance a big share of the costs of the lobby and service work of the business association
04/2008 Nucleus-International.net 3
What is "fair" ?
• Membership fee system A :
1 member 1 vote 1 membership fee amount
• Everyone pays the same amount !The system is comparable with a "Poll Tax"
04/2008 Nucleus-International.net 4
• Under which conditions is this membership fee system efficient and fair?
• All members are more or less equal– same size of the enterprises– same number of employees– same turnover and profit
• In this case an identical amount as membership fee is fair, efficient and easy to manage
04/2008 Nucleus-International.net 5
• But what is when the member enterprises differ very much ?– different size– different number of employees– different turnover and income
• In this case the same membership feeis "unfair" and not efficient
04/2008 Nucleus-International.net 6
Example
• The membership fee is for all members 200 $ per year– a bigger enterprise with 200 employees
pays consequently 1 $ per employee– a small enterprise with 5 employees pays
consequently 40 $ per employee• The burden through the membership
fee is for the small company 40 times higher than for the bigger company !!!
04/2008 Nucleus-International.net 7
• This membership fee system has the effectof a barrier in order to keep out unwanted entrepreneurs, especially SMEs,from the business association
• It is efficient for "Business Clubs" where selected "right" entrepreneurs want to remain among themselves
04/2008 Nucleus-International.net 8
What is "fair" ?
• Membership fee system B: “Tier System”
The membership fee amount reflects the economic differences between the members :Bigger companies pay a bigger shareSmaller companies pay a smaller share
• The financial burden through the membership fee is more or less equal for all members
04/2008 Nucleus-International.net 9
The main questions …
• Which criterion to use ?
• How to define adequate categories ?(groups of member enterprises
04/2008 Nucleus-International.net 10
The problem …
• The more complex the membership fee system is– criterion : reliable access to data
and control – categories :many– exemptions : many
the more difficult it is to manageand the more it invites the members to manipulate their data
04/2008 Nucleus-International.net 11
Criterions linked with the economic power of the member
• Direct criterions– Turnover– Profit– Income tax payment
… but entrepreneursdo not like to publish
financial data …
… therefore normally not
recommendable!
… in addition : during an economic crisis the incomeof the chamber can decrease dramatically …
04/2008 Nucleus-International.net 12
Criterions linked with the economic power of the member
• Indirect criterions– Number of employees– In case of a sector association :
- Quantity of production or- Quantity of sold products
Usuallynot business
secrets
… therefore normally
recommendable!
The relatively stable employment of the enterprises guarantees a more secure income for the chamber
04/2008 Nucleus-International.net 13
Categories of members
• A membership fee system without categories– X1 $ per $ turnover / profit or
X2 ‰ from the turnover /profit– X3 $ per employee
• Advantage : – Very exact and fair
• Disadvantage : – Causes much administrative work
because of permanent changes of the data to be queried
04/2008 Nucleus-International.net 14
Categories of members
• A membership fee system with categories– X1 $ for turnover / profit up to T1 $
X2 $ for turnover / profit between T2 and T3 $
– X3 $ for up to a employeesX4 $ for between E1 and E2 employees
• Recommendation :– maximally 10 classes
• Advantage : – Causes limited administrative work
because the data do not vary that much
04/2008 Nucleus-International.net 15
Example for a tier membership fee system per number of employeesCate
-gory
Employeesbetween
Fee Fee per employee
max. – min.1 1 - 4 20 $ 20 $ – 5.00 $2 5 - 9 50 $ 10 $ – 5.60 $3 10 –19 100 $ 10 $ – 5.30 $4 20 – 39 200 $ 10 $ – 5.10 $5 40 – 79 400 $ 10 $ – 5.10 $6 80 –159 800 $ 10 $ – 5.00 $7 160 – 319 1,600 $ 10 $ – 5.00 $8 320 – 619 3,200 $ 10 $ – 5.00 $
04/2008 Nucleus-International.net 16
Differentiation between sectors
• Perhaps it is necessary to differentiate between companies per sector – industry, agriculture, service– commerce– bank
• They produce with the same number of employees considerable different economic results
04/2008 Nucleus-International.net 17
Example for a membership fee system per employees and sectorCate
-gory
Employees
between
FeeIndustryService
FeeCommerce
FeeBanks
1 1 - 4 20 $ 100 $ 200 $2 5 - 9 50 $ 200 $ 400 $3 10 –19 100 $ 400 $ 800 $4 20 – 39 200 $ 800 $ 1,600 $5 40 – 79 400 $ 1,600 $ 3,200 $6 80 –159 800 $ 3,200 $7 160 – 319 1,600 $8 320 – 619 3,200 $
04/2008 Nucleus-International.net 18
Registration fee
• When is a registration fee reasonable– Members invest in costly infrastructure for
their own benefit– A new member, who wants to use it, shall
later adequately participate in its financing• Examples :
– Social and sport clubs, i.e. tennis, golf, etc.
04/2008 Nucleus-International.net 19
Registration fee
• What is the purpose of a registration fee of a business chamber or association– Except eventually an office building it does not
have and need a costly infrastructure, because its tasks are lobby and service
– It does not need a registration fee !!!• Registration fee charging chambers
– Create an additional barrier around themselves– In order to keep entrepreneurs out !!!
04/2008 Nucleus-International.net 20
… but the logic of chambers is to be
attractive for more entrepreneurs
ServicesInformation / Consultation
Training / Support
Lobby in front of Government and other groups of the
society
Higher attractiveness for Entrepreneurs
Law of great number:the more members, the more influence
Chamber
More Entrepreneurs apply for membership
More members pay more membership fees
More means to finance more and
better services
04/2008 Nucleus-International.net 21
Registration fee
• Consequently, a registration fee for new members is
highly contra-productive for the development of a chamber !!!
Note: Many chambers and associations do not know registration fees.
04/2008 Nucleus-International.net 22
Some tricky points …one entrepreneur, more companies• In some countries, entrepreneurs like
to run a couple of smaller companies than one bigger one due to tax, organisational or marketing reasons. As economically thinking persons they enter into the chamber only with one of these enterprises, preferably with the smallest one, using the lobby and service work for all of them.Not good for the chamber! What to do?
04/2008 Nucleus-International.net 23
Some tricky points …one entrepreneur, more companies
– The best : They enter with all individual companies into the chamber
more members, more fees
– The 2nd best : They enter with all individual companies and get x% discount for the 2nd, y % for the 3rd, etc., company
more members, still more fees
04/2008 Nucleus-International.net 24
Some tricky points …one entrepreneur, more companies
– The 3rd best : They enter with one company, but for the calculation of the membership fee is used the sum of employees of all companies
not more members, but more fees
– The 4th best : They enter with their biggest company, not with the smallest
not more members, little bit more fees
04/2008 Nucleus-International.net 25
Some tricky points …What is an "employee" ?
• Especially in SMEs, but sometimes also in bigger companies, the question about the number of employees is sometimes unclear and difficult to answer :Who is counted as "employee"?
• The answer can have a considerable effect on the chamber's membership fee income– (Observation: therefore, statistics often give a
wrong image about the employment situation)
04/2008 Nucleus-International.net 26
Some tricky points …What is an "employee" ?
Persons in the company Employee ?Entrepreneur noFamily member noEmployee, monthly paid yesWorker, daily paid yes / no"Helper", apprentice, trainee yes / noFormally subcontracted persons but in reality dependent workers
no
04/2008 Nucleus-International.net 27
Some tricky points …What is an "employee" ?• Therefore, it might be better to ask for the
persons, working in the company
inclusive– the entrepreneur– the family– monthly and daily paid employees and workers– apprentices, trainees, others– subcontracted persons working only for the
company
04/2008 Nucleus-International.net 28
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