Patronage Calculation Example

This tool illustrates a simplified version of how patronage flows through a cooperative corporation.
If you would like a customized version please contact the Democracy at Work Institute at info@institute.coop.

How much of the work did each member do?

Track annual hours worked by each member.

Hours worked Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Ava 1,900 1,950 2,000 1,900
Benjamin 1,800 1,850 2,000 1,900 1,800
Chloe 1,900 1,950 2,000 1,900 1,800 1,700
Daniel 1,800 1,850 2,000 1,900 1,800 1,600 1,600
Emma 1,900 1,950 2,000 1,900 1,800
Fernando 1,800 1,850 2,000 1,900 1,800
Grace 1,900 1,950 1,950 2,000
Henry 1,800 1,850 2,000
Isabella 1,950 2,000
Jacob 1,850 2,000

Total 7,400 7,600 11,700 13,300 13,150 14,700 13,200

From this you know the percentage that any individual worker contributed in relation to all members.
This will be their precenage of the patronage allocation.

Members Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Ava 26% 26% 17% 14%
Benjamin 24% 24% 17% 14% 14%
Chloe 26% 26% 17% 14% 14% 12%
Daniel 24% 24% 17% 14% 14% 11% 12%
Emma 16% 15% 15% 13% 14%
Fernando 15% 14% 15% 13% 14%
Grace 14% 15% 13% 15%
Henry 14% 13% 15%
Isabella 13% 15%
Jacob 13% 15%

Total 100% 100% 100% 100% 100% 100% 100%

How much of the pre-tax profit was earned by members?

Calculate the percent of total hours worked by members each year.

This is the maximum percentage of the surplus that you can declare as patronage.
Your bylaws coould set a lower maximum of you have a growth strategy the requires high indivisible reserves.
Member hours 7,400 7,600 11,700 13,300 13,150 14,700 13,200
Non-member hours 12,600 12,400 8,300 6,700 6,850 5,300 6,800

Total hours worked 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Member % of hours 37% 38% 59% 67% 66% 74% 66%

Patronage $ 18,500 $ 19,000 $ 29,250 $ 33,250 $ 32,875 $ 36,750 $ 33,000

Taxable net income 31,500 31,000 20,750 16,750 17,125 13,250 17,000

Pre-tax profit 50,000 50,000 50,000 50,000 50,000 50,000 50,000

How much patronage is each member allocated?

This is based on their hours amove and assuming you will refund the maximum patronage.

Total patronage $ 18,500 $ 19,000 $ 29,250 $ 33,250 $ 32,875 $ 36,750 $ 33,000

Patronage Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Ava $ 4,750 $ 4,875 $ 5,000 $ 4,750 $ - $ - $ -
Benjamin $ 4,500 $ 4,625 $ 5,000 $ 4,750 $ 4,500 $ - $ -
Chloe $ 4,750 $ 4,875 $ 5,000 $ 4,750 $ 4,500 $ 4,250 $ -
Daniel $ 4,500 $ 4,625 $ 5,000 $ 4,750 $ 4,500 $ 4,000 $ 4,000
Emma $ - $ - $ 4,750 $ 4,875 $ 5,000 $ 4,750 $ 4,500
Fernando $ - $ - $ 4,500 $ 4,625 $ 5,000 $ 4,750 $ 4,500
Grace $ - $ - $ - $ 4,750 $ 4,875 $ 4,875 $ 5,000
Henry $ - $ - $ - $ - $ 4,500 $ 4,625 $ 5,000
Isabella $ - $ - $ - $ - $ - $ 4,875 $ 5,000
Jacob $ - $ - $ - $ - $ - $ 4,625 $ 5,000

Total $ 18,500 $ 19,000 $ 29,250 $ 33,250 $ 32,875 $ 36,750 $ 33,000

What is your cash payment schedule?

20% must be paid in cash in the first year, and the remainer of the schedule is up to your bylaws.

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Year 1 patronage 20% 20% 20% 20% 20%
Year 2 patronage 20% 20% 20% 20% 20%
Year 3 patronage 20% 20% 20% 20% 20%
Year 4 patronage 20% 20% 20% 20%
Year 5 patronage 20% 20% 20%
Year 6 patronage 20% 20%
Year 7 patronage 20%
Year 8 patronage
Year 9 patronage
Year 10 patronage

An individual's cash payment would then look some thing like this:

Ava Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Patronage refund $ 4,750 $ 4,875 $ 5,000 $ 4,750 $ - $ - $ -

Cash Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Year 1 patronage $ 950 $ 950 $ 950 $ 950 $ 950 $ - $ -
Year 2 patronage $ - $ 975 $ 975 $ 975 $ 975 $ 975 $ -
Year 3 patronage $ - $ - $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Year 4 patronage $ - $ - $ - $ 950 $ 950 $ 950 $ 950
Year 5 patronage $ - $ - $ - $ - $ - $ - $ -
Year 6 patronage $ - $ - $ - $ - $ - $ - $ -
Year 7 patronage $ - $ - $ - $ - $ - $ - $ -
Year 8 patronage $ - $ - $ - $ - $ - $ - $ -
Year 9 patronage $ - $ - $ - $ - $ - $ - $ -
Year 10 patronage $ - $ - $ - $ - $ - $ - $ -

Total cash $ 950 $ 1,925 $ 2,925 $ 3,875 $ 3,875 $ 2,925 $ 1,950

Ava
Retained patronage $ 3,800 $ 6,750 $ 8,825 $ 9,700 $ 5,825 $ 2,900 $ 950

What does the cooperative retain?

Retaining patronage can be positibe for the cooperatives cash flow and operations.

All Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Patronage refund $ 18,500 $ 19,000 $ 29,250 $ 33,250 $ 32,875 $ 36,750 $ 33,000

Cash Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Year 1 patronage $ 3,700 $ 3,700 $ 3,700 $ 3,700 $ 3,700 $ - $ -
Year 2 patronage $ - $ 3,800 $ 3,800 $ 3,800 $ 3,800 $ 3,800 $ -
Year 3 patronage $ - $ - $ 5,850 $ 5,850 $ 5,850 $ 5,850 $ 5,850
Year 4 patronage $ - $ - $ - $ 6,650 $ 6,650 $ 6,650 $ 6,650
Year 5 patronage $ - $ - $ - $ - $ 6,575 $ 6,575 $ 6,575
Year 6 patronage $ - $ - $ - $ - $ - $ 7,350 $ 7,350
Year 7 patronage $ - $ - $ - $ - $ - $ - $ 6,600
Year 8 patronage $ - $ - $ - $ - $ - $ - $ -
Year 9 patronage $ - $ - $ - $ - $ - $ - $ -
Year 10 patronage $ - $ - $ - $ - $ - $ - $ -

Total cash $ 3,700 $ 7,500 $ 13,350 $ 20,000 $ 26,575 $ 30,225 $ 33,025

Retained patronage $ 14,800 $ 26,300 $ 42,200 $ 55,450 $ 61,750 $ 68,275 $ 68,250

institute.coop.

Year 8 Year 9 Year 10

1,700
1,600
1,900 1,800 1,700
1,900 1,800 1,600
1,900 1,800 1,700
1,900 1,800 1,600

10,900 7,200 6,600

Year 8 Year 9 Year 10

16%
15%
17% 25% 26%
17% 25% 24%
17% 25% 26%
17% 25% 24%

100% 100% 100%

sible reserves.
 10,900 7,200 6,600
9,100 12,800 13,400

20,000 20,000 20,000

55% 36% 33%

$ 27,250 $ 18,000 $ 16,500

22,750 32,000 33,500

50,000 50,000 50,000

$ 27,250 $ 18,000 $ 16,500

Year 8 Year 9 Year 10

$ - $ - $ -
$ - $ - $ -
$ - $ - $ -
$ - $ - $ -
$ 4,250 $ - $ -
$ 4,000 $ - $ -
$ 4,750 $ 4,500 $ 4,250
$ 4,750 $ 4,500 $ 4,000
$ 4,750 $ 4,500 $ 4,250
$ 4,750 $ 4,500 $ 4,000

$ 27,250 $ 18,000 $ 16,500

Year 8 Year 9 Year 10

100%
100%
100%
20% 100%
20% 20% 100%
20% 20% 20% 100%
20% 20% 20% 80%
20% 20% 20% 60%
20% 20% 40%
 20% 20%

Year 8 Year 9 Year 10 Total

$ - $ - $ - $ 19,375

Year 8 Year 9 Year 10 Total

$ - $ - $ - $ 4,750
$ - $ - $ - $ 4,875
$ - $ - $ - $ 5,000
$ 950 $ - $ - $ 4,750
$ - $ - $ - $ -
$ - $ - $ - $ -
$ - $ - $ - $ -
$ - $ - $ - $ -
$ - $ - $ - $ -
$ - $ - $ - $ -

$ 950 $ - $ - $ 19,375

$ - $ - $ -

Year 8 Year 9 Year 10 Total

$ 27,250 $ 18,000 $ 16,500 ###

Year 8 Year 9 Year 10 Total

$ - $ - $ - $ 18,500
$ - $ - $ - $ 19,000
$ - $ - $ - $ 29,250
$ 6,650 $ - $ - $ 33,250
$ 6,575 $ 6,575 $ - $ 32,875
$ 7,350 $ 7,350 $ 7,350 $ 36,750
$ 6,600 $ 6,600 $ 6,600 $ 26,400
$ 5,450 $ 5,450 $ 5,450 $ 16,350
$ - $ 3,600 $ 3,600 $ 7,200
$ - $ - $ 3,300 $ 3,300

$ 32,625 $ 29,575 $ 26,300 ###

$ 62,875 $ 51,300 $ 41,500