Membership fees are a sensitive topic for every association. This is because—unlike donations and sponsorships—they are the only stable source of funding. Because of this, it’s important to keep a few things in mind if you want to avoid any legal issues or disputes within the association. In this article, we’ll explain the different kinds of membership fees and the legal principles that apply to them. We’ll also help you determine who has to pay membership fees and who may be exempt, what you need to keep in mind when increasing fees, and how you can collect them.

What’s in this article?

• What types of membership fees are there?
  
• Do all members have to pay fees?
  
• What is the legal basis for membership fees?
  
• What should be considered when increasing membership fees?
  
• How can associations collect monetary fees?
  

What types of membership fees are there?

Associations require income to finance themselves. In general, a regular membership fee is charged. However, this membership fee does not necessarily have to be a monetary contribution. Four types of membership fees can be distinguished:

• Monetary contribution: The traditional type of membership fee is a monetary contribution. Each association can set the amount individually. The key factor is that the association can cover its operating expenses. The total annual costs of the association can be used as the basis for calculating the membership fee. All income is deducted from these costs, excluding the monetary membership fees. This may include donations, rental income, or proceeds from events. The remaining total represents the minimum sum of contributions from all members. Finally, this can be divided by the number of members to determine the individual membership of the association. The club can choose to pay dues on an annual basis or on a prorated monthly, quarterly, or semiannual basis. You can find more information on income and expenditure in our article on bookkeeping for associations.
  
• Labor: The association’s membership fee may also be paid in the form of labor. This can range from making repairs to the clubhouse to selling cakes at an event. However, keep in mind that not all members will be able to provide such services—for example, due to health reasons. Others might not be able or willing to commit the time. In such cases, clubs should allow members to make monetary contributions in lieu of work.
  
• Benefits in kind: Membership dues may also include in-kind contributions. These might include items such as sports equipment or gear, office supplies such as printer paper and cartridges, or food and beverages.
  
• Admission fee: The association may also waive regular dues and instead charge a one-time initiation fee. Typically, this fee covers the administrative costs of admitting a new member. However, it might be set higher to cover operating costs.
  

In addition, clubs might offer special types of dues, such as family dues. In this case, a reduced fee is usually charged for the entire family. Discounts for children, students, and retirees are also common.

Types of membership fees for associations

Do all members have to pay fees?

Associations may decide to exempt individual members from paying dues. This might include groups of people who are eligible for the discounts mentioned above. In addition, exemption may be granted to socially disadvantaged individuals who are unable to pay the membership fee due to their financial situation.

Honorary members are often exempt from paying membership fees. These are members of the association who receive special recognition due to their exceptional merits or long-standing membership. They are appointed as honorary members by the association and therefore enjoy special rights (see section 35 of the German Civil Code—Bürgerliches Gesetzbuch, or BGB).

Members who have served the association for many years might also be exempt from paying dues or might pay reduced dues in recognition of their loyalty. This also applies to volunteers. They might also receive a tax-free volunteer allowance. Often, board members or individuals who serve in other significant roles within the association do not pay dues.

Decisions on exemption from membership fees are usually made by the association’s board and outlined in the association’s articles of association.

What is the legal basis for membership fees?

Whether association members pay membership fees, and how much, must be specified in the association’s articles of association. The basis for this is section 58 of the German Civil Code , which sets out the recommended content for the articles of association. These also include provisions on the admission and resignation of members, the composition of the management board, and the prerequisites for convening a general meeting. If this content is missing in the articles of association, the association cannot be registered with the Vereinsregister (official register of associations) as per section 60 of the BGB. The amount of the membership fee is usually decided at the general meeting; however, if specified in the association’s articles of association, the managing board may also set the fee.

For the provision of membership fees, the wording in the articles of association could be something similar to the following example:

“The members are required to pay an annual membership fee of €100. The amount is due on January 1 of each year, in advance for the following year. It should be transferred into the association’s account or, alternatively, paid in cash to the treasurer. If the membership fee is not paid by January 31 of any particular year, the member will receive a reminder. After two unsuccessful reminders, the managing board may decide to expel the member in accordance with section XYZ of the articles of association. In special cases, the managing board may grant reductions of or exemptions from the membership fee. Applications for this, along with their justification, must be submitted in writing to the managing board. Changes to the membership fee may be made by resolution of the general meeting. The managing board proposes the amount of the membership fee, which is voted on at the general meeting.”

If an association requires an entrance fee when admitting a new member, this must also be stated in the articles of association. If the bylaws do not provide for this, neither the board of directors nor the general meeting may impose an initiation fee.

The amount of the membership fee may be adjusted—for example, if there is a change in operating costs or in the number of members. To avoid the need to rewrite the bylaws in this case, the obligation to pay dues can be described in a separate set of dues bylaws. The bylaws will then only specify whether and how dues are to be paid. The general meeting determines the actual amount of the fee, which is documented in the fee schedule. Thus, the bylaws serve as the authority for the fee policy.

What should be considered when increasing membership fees?

When membership dues are no longer sufficient to support the association’s mission or projects, associations can increase dues. This is often the only option for associations when faced with rising costs for energy, rent, or staff, and when additional funds cannot be raised through donations or sponsorships. However, it’s always important to balance the association’s financial obligations with its social responsibility, which includes making membership available to lower-income groups.

Transparency is key when increasing membership fees. Members should be able to understand why they are paying more. A clear explanation of the reasons increases the likelihood that the increase will be accepted. For example, providing an overview of the association’s income and expenses over the past few years might be helpful. A description of the association’s services and activities, if they have increased over the years, can be helpful as well.

Unless the association’s bylaws provide otherwise, the general meeting decides on any increase in dues. In addition to a reasonable justification, the difference between the existing fee and the proposed fee is key to the acceptance of the increase. A moderate price increase of up to 30% is recommended. Implementing drastic price increases of 50% or more is usually more challenging. Large increases should generally be avoided, in favor of more moderate, continuous fee increases, which might be more effective in regards to acceptance from members.

When setting membership fees, associations should look at the fees charged by similar associations, which can also provide a safeguard in the event of judicial review. If the fees are in a similar range, the association has a good chance of successfully implementing the fee increase. If the fees are significantly higher than the average, it is only permissible if the association has a unique selling point that makes it difficult to compare with other associations. A retroactive increase is allowed only if it is specifically provided for in the association’s bylaws.

How can associations collect monetary fees?

Associations have various options for collecting financial contributions. The most common options are:

• Cash
  
• Direct debit
  
• Bank transfer
  
• Standing order
  
• Single Euro Payments Area (SEPA) Direct Debit
  

If a member does not comply with a request for payment, those responsible in the association should remind the member that they are obliged to pay fees. Since this obligation is not tied to specific services, a member cannot simply refuse to pay. As a rule, default occurs if the association member does not pay after the amount becomes due (see section 286 of the BGB). From that point on, the association may charge interest and late fees. However, mediation should always be attempted as a first step—for example, to agree on installment payments or an alternative method of paying dues. If this fails, members may be expelled from the association if the bylaws permit. As a last resort, it is possible to take legal action to collect the outstanding fee. According to section 195 of the BGB, there is a standard limitation period of three years.

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