Collective agreements specify that employers must deduct union dues from employees. Which of the following is not a common method of calculating union dues?

• A. A percentage of net pay
• B. A flat monthly fee per member
• C. A percentage of gross pay
• D. A fixed annual amount

Answer: (A)

Dues are normally deducted from earnings using a basis that is determined before the employee’s taxes and other deductions are taken out, so the amount collected is predictable and stable. The method of calculating union dues as a percentage of net pay is not common because net pay is the amount remaining after taxes and other deductions have already been subtracted. Using net pay to determine dues creates a circular problem: the dues affect the net amount, and the net amount then affects the dues, making budgeting and payroll processing more complex and less predictable. In practice, you’ll see dues based on gross pay, or as a flat amount per member per period, or as a fixed annual amount (often prorated over the year).