I am organizing a new co-op. Here in Bulgaria, this is not a common practice, but as always I am trying something uncommon for the better good.
We are building a retreat center. However I couldn’t find any precise information of how to calculate the money distribution to the members.
First of all the coop should be limited liability company, because coops are know here only in the farmers communities since the communistic era and I don’t believe they will give me a good example.
I know there is not a magic formula, but still I think I am missing very important examples. Do you know where I could find sheets and instructions for dividing surplus/profit among the members?
In my co-operative we have the following system: all income is divided into tree parts. One is to cover the day-to-day running costs, including full-time workers. One goes to pay the workers who have worked on a particular project. And the rest goes into the strategic fund. The fund can be used for research and development, training of workers, purchase of capital goods.
How much you can put into each part depends on the current situation. I recommend that you always put something into the fund rather than distributing it as extra profit. It will help to make your co-operative more stable in the long term.
It is up to you to decide what form of organisation you want to use. But you should think about the possible risks, for example, can a small group of people take control of your organisation if it takes a particular form? Can one person do it? How can you avoid bad decisions being made by one person or a small group of people?
Feel free to ask more questions, I can always forward them to my colleagues for more detailed answers.
Hi Ivan
It is true that there are fewer UK examples of worker co-ops distributing profit (also known as dividend) to their member workers (or guides explaining how to do it), because there is a higher proportion of worker co-ops coming from a political background that values ‘common ownership’ (ie keeping all the surpluses for the good of all).
I imagine you might find more useful information from French, Spanish, Italian, US and Canadian worker co-ops, @Sion is our delegate to CECOP/CICOPA and @samnord is our worker who’s recently made lots of contacts with USFWC in the US, they might be able to point you somewhere.
In my co-op which is in design and manufacturing (printing) we focus on the balance between reinvestment (to maintain or improve productivity), our financial reserve (for a rainy day), and wages/worker benefits. Rather than pay a dividend, we try and raise wages whenever possible, because guaranteed income looking forward is what our members depend on and plan with. We are also ‘common ownership’ but this is not in itself any barrier to either paying a dividend (looking back over previous year’s surplus), or consolidating a higher hourly pay rate (looking forward to the coming year).
In the UK, becuase the majority of workers in worker co-ops are employees, they have to abide by employee tax laws which means they should pay the majority of their surplus (not going to common funds/reinvestement) in the form of a bonus, typically linked to the amount of hrs worked for the co-op, or as a % of their wage.
You should check your tax situation in Bulgaria and make sure whatever you do is within your local laws.
Here I have found some basic explanation of how money flow in a workers coop. I will try make a sheet for several years of calcs. Of course the taxes are different, but once I make it, I will share here.
Also I am thinking if it is a good idea to invest the members accounts into ETF stocks or government securities. Did some of your coops is trying to boost a bit the earnings by investment?