Labour and financial assessments for operational expenses
Goals and resources
The goal is that all members contribute substantially similar amounts of labour or cash equivalent toward operational expenses. The coop has agreed on a method of splitting utility expenses that apply to housing, but has not yet agreed to a method of splitting non-housing operational expenses.
In our current situation, we have two members who are relatively income-poor but time rich, and two members who are relatively income-rich, but time-poor. So we are in an ideal position to craft an agreement that meets these needs.
The goal of this agreement is that everyone provide some labour and some cash, and that those who contribute the most labour contribute proportionately less cash.
The original proposal has been withdrawn as too complex and inherently unfair to those who provide labour.
- Status quo: tracking, but not rewarding hours worked.
- Advantages: only for those not working as much!
- Disadvantages: negative incentive for work, negative incentive for good time-keeping.
- Simply pay members for hours worked, then divide assessments equally.
- Advantages: simple, fair, rewards labor, creates incentives for proper time keeping and work.
- Disadvantages: income-rich members end up 'hiring' income-poor members to do their work, possible tax implications, time-poor members end up paying more than in the proposal above.
- For the month,
- Ted works 200 hours, and is credited with $3000 (200 * $15/hr)
- Ursala works 10 hours, and is credited with $150 (10 * $15/hr)
- Lorenzo works 47 hours, and is credited with $705 (47 * $15/hr)
- Stephanie works 12 hours, and is credited with $180 (12 * $15/hr)
- there was a $300 shortfall in meeting expenses this month.
- Total assessment for the month is $4335 (3000 + 150 + 705 + 180 + 300)
- This is divided equally, four ways, for individual assessments of $1083.75
- Ted receives $1916.25 (1083.75 - 3000)
- Ursala pays $933.75 (1083.75 - 150)
- Lorenzo pays $378.75 (1083.75 - 705)
- Stephanie pays $903.75 (1083.75 - 180)
- For the month,
- Elaboration of above: pay labour first, then equally share expenses. Those who work are paid from co-op gross income first, including rent, biodiesel production, market garden sales, refunds/rebates, and all other gross income.
- Distribution of gross income goes first to the person who worked the most, then divided equally by those who worked the next most, etc. Non-compensated labour is tracked in our accounting system as a debt, which upon dissolution, is paid before any shares are redeemed.
- The co-op has gross income for the month of $1020, $850 from rent, $100 from biodiesel sales, and $70 from market garden sales.
- The co-op has expenses for the month of $960, $160 for excess water usage, $300 for methanol, and $500 assessment toward a reserve restricted to paying property taxes
- For the month, Griswold worked 150 hours, Sonja worked 130 hours, Jonas worked 22 hours, and Marie worked 17 hours.
- The $1020 gross income is first distributed:
- First, $300 goes to Griswold for the 20 hours he worked more than the next highest person (Sonja), leaving $700 to be distributed. Griswold's now has 130 non-compensated hours of co-op labour.
- The remaining $720 goes $360 each to Griswold and Sonja, who now have 106 uncompensated hours remaining for the month.
- The four members now have 106, 106, 22, and 17 hours, respectively, accrued to their non-compensated labour account, to be paid ahead of share redemption upon co-op dissolution.
- The $960 expenses for the month is assessed equally among the members; each of which pays the co-op $240 ($960 / 4) as their share.
- Advantages: labour is recognized and at least partially compensated, expenses are divided equally. Not as expensive in high-labour months as previous scheme.
- Disadvantages: unless the co-op becomes profitable over a long period, debt to members for labour continues to accrue. More complex than simply paying for all labour.
- All operational labour is booked as a current expense. Gross income and gross expenses are split according to the ratio of investment shares owned.
- Advantages: Simple. Provides maximum incentive to those who own the most shares, both to increase revenue and to reduce expenses.
- Disadvantages: Tends to reduce the influence of minority shareholders and make it less like a co-op and more like a corporation. May work well in our case, where major investors provide most of the labour, but may not work as well in other situations.
- Griswold has 90 investment shares, Sonja has 88 investment shares, Jonas has 8 investment shares, and Marie has 7 investment shares. The ratio of shares held by each is: 46.6%, 45.6%, 4.15%, and 3.63%, respectively.
- First, the labour worked is "paid out" (in accounting only, until everything is settled for the month): Griswold is "paid" $2250, Sonja is "paid" $1950, Jonas is "paid" $330, and Marie is "paid" $255. (Each of their hours at $15 per hour.)
- That total is added to the expenses for the month which now totals $5745, for a net deficit of $4725.
- The net deficit is divided according to the proportion of investment shares held: Griswold owes: $2210.85, Sonja owes: $2154.60, Jonas owes: $196.09, and Marie owes: $171.52.
- Each of them then has the following disbursements:
- Griswold receives $95.40 ($2250 - $2203.37)
- Sonja pays $204.40 ($1950 - $2154.40)
- Jonas gets $134.15 ($330 - $171.37)
- Marie gets $83.63 ($255 - 171.37)# Some other scheme.
- Advantages: we can put this whole thing off.
- Disadvantages: someone has to come up with something else, negative incentive for good time-keeping until an alternative is agreed.
Why is this a priority? See Ecovillage economics
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