By Franklin Dumond

A prayer on behalf of a pastor was short and direct, “Lord you keep him humble; we’ll keep him poor.”

Even if this prayer was never prayed, the result in the local church has often been the same.  Sometimes this result was unintentional, but the method to determine fairness was the actual culprit.  I have seen four attempts to create fairness when it comes to pastor’s salaries.  Some fit that description better than others, but they are as follows:

1.  What is the average income for the church?  On the surface this seems like the most reasonable approach since it is based on the incomes for the families in the church.  Beneath the surface, however, the fairness may be lost if:

• the salary package does not properly account for benefits that are also given to wage earners in the congregation
• the report from the congregation is incomplete
• the congregation includes a large number of retirees who have a smaller, retirement income that is adequate for their status as mortgage-free home owners
• the pastor is an entry level pastor but the average income is substantially above entry level income.  (Here the fairness to the church is lost since they would be paying more than necessary.  In the other cases, the fairness to the pastor is lost since he is being paid less that should be expected.)

2.  What does it cost to live in our community?  What a church needs to do to make this method work is to find the value of a respectable middle-class home in their area, factor in any student loan debt the pastor may have, loan on a vehicle, etc.  They should then figure out what kind of salary the pastor needs to make to qualify for the mortgage on that home.

3.  What can we afford? While this may be the actual bottom line issue for most churches “What do we choose to afford?” may be the real question.  Church budgets should generally allocate 40-65% of income for employee costs.

4.  What is the professional equivalency in our community?  The suggestion is that a church should look at a secular profession that is most similar to pastoral work and pay accordingly.  Most of the time, this will be a high school classroom teacher.  Local school districts will have salary scales developed based on educational level and tenure.  So when the church looks up the education level of its pastor along with his years of experience in full time ministry, a community-based standard of pay will be in hand.

If the pastor manages a number of staff, then pay him as a building principal would be paid according to the school district salary schedule.

Of all the systems reviewed, this last one seems the most fair to all concerned.  All pastors (not just senior pastors) receive a decent middle-class salary that directly compares to salaries being paid in their community.  All pastors are compensated in accord with their education and experience with proper benefit packages.  Those pastors who pastor larger churches are compensated in line with their expanded responsibilities.

The New Testament calls for fairness in pastoral salaries by insisting that “The worker deserves his wages.” (I Timothy 5:17 NIV)

This article is part three (read part 1 here, and part 2 here, and part 4 here) of a six part series by Dr. Franklin Dumond, Director of Congregational Ministries, on understanding and planning for a pastor’s salary.  Check back over the next few weeks (or subscribe using the box to the right) to learn more about the process and intricacies of paying your pastor.

By Franklin Dumond

One of the major costs in a church’s budget is the cost of employees. Since most churches only have one employee, the major cost in these church budgets will be the cost of the pastor’s salary package. As a rule of thumb 40-65% of a church budget should be spent on employees. These percentages will seem entirely too high for many businessmen who keep employee costs to 10-20% of operations. These percentages will seem too low for many school administrators since education budgets often spend 80-90% of total budgets on employees.

At the heart of the matter is a basic question that, when answered, will guide the process to a fair conclusion. How do you compute a salary package?

1. Is the pastor a self-employed, independent contractor or an employee of the church?

An interim pastor, a guest speaker or an evangelist function as self-employed contractors with limited oversight from the church and a great deal of flexibility about scheduling their limited services. A permanent pastor—whether bi-vocational or fully funded—is an employee of the church by all the standard descriptions of employees. Self-employed contractors receive a 1099 report of payments made to them. Pastors as employees receive a W-2 with a detailed list of income, tax payments, retirement contributions and housing benefits.

2. What benefits will the church provide?

In the United States, some benefits paid on behalf of employees are legally required of the employer. Others have become cultural expectations. Still others have been developed to attract and hold quality employees.

A church would be wise to develop benefits for its employees that address:

• self-employment tax  This can be an added line item in the budget, but remember: it is not part of the pastor’s take-home pay!
• vacation schedule  Should additional days of vacation be earned by employees based on length of tenure?
• health insurance  This is a very BIG issue in light of the affordable care act. Individual health insurance is increasingly expensive. Many pastoral spouses subsidize the church by providing family coverage through their workplace. As a rule of thumb, health insurance premiums are not taxable income if the church pays the insurance company directly. However, if the same premiums are paid directly to the pastor they are probably taxable income.
• professional expenses  What the church will and will not cover as professional expenses must be determined in advance and in writing to avoid misunderstanding, conflict and tax problems.
• retirement  The General Baptist Pension Program provides a strategy of employee contributions with employer contributions in a self-managed portfolio that is available to all General Baptist church employees.  For more information on the Pension Program, click here.

3. Will housing be part of the package?

Many churches provide a parsonage. Others use a housing allowance. Each has its benefits and its pitfalls. Housing in rural communities or small towns is often at a premium. In those cases a parsonage is advantageous. On the other hand, every year spent in a parsonage is one less year’s equity in a home!

4. What about continuing education?

Although it could be included in the benefit list above, Continuing Education merits a separate paragraph. Currently, General Baptist Ministries provides conference and event packages that provide quality continuing education through the Mission & Ministry Summit and the General Baptist Minister’s Conference. Additionally, young leaders have access to the Leverage Conference and Youth Pastors can find specialized training opportunities and networking through the National Youth Conference.

The built-in difficulty for most oversight committees that develop church salary packages is that they have never seen the true cost of having an employee. The weekly pay stub received by most employees will have a list of tax deductions and other contributions but it will not include a behind-the-scenes look at what an employer contributes.

Unfortunately, church budgets often look only at the bottom line of total cost for an employee to determine if that is a fair wage when in actual fact a salary package is very different from take home pay.

The New Testament is pretty clear about salary packages for teaching pastors:

“The elders who do good work as leaders should be considered worthy of receiving double pay, especially those who work hard at preaching and teaching.”  1 Timothy 5:17 (GNT)

This article is part two (read part 1, part 3, and part 4)of a six part series by Dr. Franklin Dumond, Director of Congregational Ministries, on understanding and planning for a pastor’s salary.  Check back over the next few weeks (or subscribe using the box to the right) to learn more about the process and intricacies of paying your pastor.