04/2008Nucleus-International.net1 Considerations about the Membership Fee System of Business Associations and Chambers Nucleus-International.net

04/2008Nucleus-International.net2 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

04/2008Nucleus-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"

04/2008Nucleus-International.net4 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

04/2008Nucleus-International.net5 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 fee is "unfair" and not efficient

04/2008Nucleus-International.net6 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 !!!

04/2008Nucleus-International.net7 This membership fee system has the effect of 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

04/2008Nucleus-International.net8 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 share Smaller companies pay a smaller share The financial burden through the membership fee is more or less equal for all members

04/2008Nucleus-International.net9 The main questions … Which criterion to use ? How to define adequate categories ? (groups of member enterprises

04/2008Nucleus-International.net10 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 manage and the more it invites the members to manipulate their data

04/2008Nucleus-International.net11 Criterions linked with the economic power of the member Direct criterions –Turnover –Profit –Income tax payment … but entrepreneurs do not like to publish financial data … … therefore normally not recommendable! … in addition : during an economic crisis the income of the chamber can decrease dramatically …

04/2008Nucleus-International.net12 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 Usually not business secrets … therefore normally recommendable! The relatively stable employment of the enterprises guarantees a more secure income for the chamber

04/2008Nucleus-International.net13 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

04/2008Nucleus-International.net14 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 employees X4 $ for between E1 and E2 employees Recommendation : – maximally 10 classes Advantage : –Causes limited administrative work because the data do not vary that much

04/2008Nucleus-International.net15 Example for a tier membership fee system per number of employees Cate- gory Employees between FeeFee per employee max. – min $20 $ – 5.00 $ $10 $ – 5.60 $ 310 –19100 $10 $ – 5.30 $ 420 – $10 $ – 5.10 $ 540 – $10 $ – 5.10 $ 680 – $10 $ – 5.00 $ 7160 – 3191,600 $10 $ – 5.00 $ 8320 – 6193,200 $10 $ – 5.00 $

04/2008Nucleus-International.net16 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

04/2008Nucleus-International.net17 Example for a membership fee system per employees and sector Cate- gory Employees between Fee Industry Service Fee Commerce Fee Banks $100 $200 $ $200 $400 $ 310 –19100 $400 $800 $ 420 – $800 $1,600 $ 540 – $1,600 $3,200 $ 680 – $3,200 $ 7160 – 3191,600 $ 8320 – 6193,200 $

04/2008Nucleus-International.net18 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.

04/2008Nucleus-International.net19 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 !!!

04/2008Nucleus-International.net20 … but the logic of chambers is to be attractive for more entrepreneurs Services Information / 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

04/2008Nucleus-International.net21 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.

04/2008Nucleus-International.net22 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?

04/2008Nucleus-International.net23 Some tricky points … one entrepreneur, more companies –The best : They enter with all individual companies into the chamber  more members, more fees –The 2 nd best : They enter with all individual companies and get x% discount for the 2 nd, y % for the 3 rd, etc., company  more members, still more fees

04/2008Nucleus-International.net24 Some tricky points … one entrepreneur, more companies –The 3 rd 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 4 th best : They enter with their biggest company, not with the smallest  not more members, little bit more fees

04/2008Nucleus-International.net25 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)

04/2008Nucleus-International.net26 Some tricky points … What is an "employee" ? Persons in the companyEmployee ? Entrepreneurno Family memberno Employee, monthly paidyes Worker, daily paidyes / no "Helper", apprentice, traineeyes / no Formally subcontracted persons but in reality dependent workers no

04/2008Nucleus-International.net27 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

04/2008Nucleus-International.net28 Nucleus-International.net This file is part of our material to present and illustrate our activities to professional and elected officials of business associations, personnel from technical cooperation projects, and other people with an interest in this field. We are involved in a constant process of elaborating and improving this material, and targeting it to the demands of specific groups. You may use, copy, and change this file as you like (we do not insist on a copyright). We would, however, like to ask you for the following: please send us a copy (as a file or printout) and additional information if you use the file or parts of it. Thank you! The Nucleus-International.net team