In my case, when a user is added to an account, they also require at least some notifications - if they're the accounting department, they need to receive invoices, etc. Some users need to receive all notifications or somewhere in between.
The way it is now, a user who must receive notifications has to be added twice. This is not terribly efficient.
I think the best alternative would be to include the options for all notifications when adding and managing users. By doing it this way, you can still keep simple contacts and users separate.