Talking about money is one of the issues that is usually taboo in a church. Either people are consumed with watching every penny -- usually those are the people who don't give much; or others don't even want to see a financial statement. I feel that both extremes are wrong, but they also come into play regarding church salaries. I remember going to Bible College and Seminary excited about how much I would learn about ministerial work, only to find that upon entering my first vocational ministry position, I still had so much to learn (an continue to). In college & seminary I learned theology and we had some debates about methodology, but we often did not discuss the practical points of pastoral ministry. One of those items was church finances, specifically how to determine salaries for church employees. If pastors have questions and may not have received much training in church finances and budgeting, then how can we expect lay-volunteers (often deacons and lay-elders) to know what to do regarding setting church salaries? So, with this being the time of year that many churches are working on their budgets for the upcoming year, I want to take a moment to offer some insight regarding setting church salaries.
One of the most helpful resources that I've found is the "Compensation Handbook for Church Staff" by Richard R. Hammar. This is a tremendous resource and based on national survey results, the compensation profiles are classified by part-time, full-time, church size, income budget, geographical setting, etc. Each position’s compensation levels are presented based on personnel characteristics including: years employed, denomination, region, gender, and educational training. In addition, compensation profiles are broken down by categories so you can easily determine: Base salary, Retirement, Health insurance, Housing allowance & parsonage, Life insurance, Continuing education, Auto expense, etc. The book can be ordered at the Church Law & Tax Store or on Amazon.
Another good resource is the local or state headquarters for your denomination. Most will have a questionnaire for you to complete (often online) regarding some of the same items mentioned above: church setting, budget, attendance, education, years employed, etc. They will input that data and provide a report for you. Again, you will need to determine whether that report is based on your local, state, or national data and adjust accordingly; but it will give you the average pay for the positions requested.
While information regarding state and national compensation levels is important, the local factor should also be investigated. Church staff compensation definitely varies by community! What do the other churches in your local community do with regard to compensation? A couple of years ago I called the other churches in our community that were close to our size and had confidential conversations regarding staff compensation. I found out that we were paying our staff at the top level for our community and above the median household income. In addition, I discovered that we were one of only a couple of churches that were covering full medical benefits for our employees. Thanks to the healthcare changes, 100% medical coverage seems to be a thing of the past in most businesses. We were also providing full mileage reimbursement, while most only offer a percentage (ranging from .32-.44 cents per mile). My point is that local compensation information is essential when setting staff salaries and will give you a true perspective of what is fair and comparable for your community. Every church should want to be fair and desire to take good care of their employees.
Another factor for discussion is how to determine an annual raise for church employees. I have a strong business mind, but also a heart for people. While opinions will differ, I personally don't think it is appropriate to give annual raises, just for the sake of giving a raise. Sadly, I've found that church staff are often lazy and need incentives to increase their productivity. Offering raises based on productivity is fair and can also be motivational. If the Worship Director doesn't grow the choir, introduce new songs, establish new vocalists and groups, recruit new musicians, lead anyone to Christ or bring any new families into the church... then "why" is he being paid at all? Even more so, "Why would you give him a raise?" The same is true of the Pastor, Youth Director, or any other ministerial position. The biblical principle in 1 Timothy 5:18 is that a workman is worthy of his hire (wages). As in any business, employees should be rewarded for going above and beyond. If you reward poor performance, you set a precedent and can never expect more. So, when considering pay increases for church staff, consider productivity as a gauge to determine raises.
What percentage of your church's annual budget should be going toward salaries? The simple rule of thumb is that salaries should be around 50% of the church's annual budget, but not much more. I don't advocate revealing individual salaries to the congregation, as that would cause unnecessary division with the congregation and even between co-workers if they knew one made more than another (as is often the case). I do, however, advocate that the congregation be made aware of the total budget percentage (or lump sum) going toward employee compensation. I am a strong advocate for accountability in every area of ministry, especially church finances.
Last but not least, make sure your church is well versed in the IRS rules for church staff compensation. Like it or not, the church is a business. Too many churches exhibit zeal with no knowledge when it comes to compensation. Utilize all available resources, hire a CPA firm, ask questions, and don't be too proud to ask for help. Churches should set the example for transparency and accuracy in all financial matters.
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