When a church chooses or elects a pastor, it is their sole responsibility to provide some type of compensation for that pastor. The Bible is very
clear in instructing the church to provide for those called into service. Many of our churches struggle in determining ways to compensate their pastor.
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Most denominations do not have an organized plan to help assist church leaders in determining a fair compensation package, leaving them guessing
or comparing their own personal package to what a minister might make. This point of view is a dysfunctional way of providing for the needs of a pastor. There are many reasons why this approach
- This does not take in account of what a pastor needs. What are his/her obligations? Does it take in account of the years of service they have
provided? Enclosed is a Ministry Needs Form that will help a minister and church determine an amount the pastor actually needs.
- 90% of the pastors work between 55-75 hours a week. Some compare a 40 hour work week salary to what a minister should make. How dysfunctional is
this? Is the church saying it is perfectly normal for one to work almost twice as many hours as they would for the same pay? For those people who think this way, let them live on a 20-24 hour
paycheck but continue to work a 40 hour work week. All of a sudden, they realize this way of thinking is not exactly fair.
- Most salaried people never travel outside their intended area, does not manage a business, does not deal with hundreds of different opinions,
only has to deal a specific task or skill, comes home after work to retire and rest, is able to take vacations without interruption, and does not have to worry about being voted by a popularity
contest every year or every few years.
- Older leaders may compare their income and benefits to what they believe their pastor should make. Should they compare their social security
income to what a regular wage earner should make? Should they compare the premium of Medicare and giving the same dollar amount to a pastor with 4 children as a medical premium benefit? The premiums
of a pastor and their family are much higher than that of Medicare and so are their needs.
- In comparing salaries, are the church leaders comparing the highest wage earners in the church or are they trying to bring an average
comparison? Some may be unemployed or be on a very limited income. Is the church saying that their pastors should live in poverty? The way the church approaches this speaks volumes of how a church
loves and appreciates God and their pastor. If a church truly wants to seek God’s blessings, it will choose the largest incomes and build on top of
them! One cannot out give God!
These are just a few reasons why a church and
pastor need to have some sort of plan before and during the course of employment. Without a plan, one plans to fail. Effective and proper planning will pay dividends for all parties involved. Our
goal is to provide information that will assist the church and pastor in determining a fair compensation package.
Compensation Planning Important?
- That God’s Word May Be Honored. The New Testament provides a basis
for all churches to pay their pastors. 1 Corinthians 9:14, Galatians 6:6, Luke 10:7, 1 Timothy 5: 17,18)
- To Reduce Confusion and Bring a Smoother Transition. A clearly written policy can help expedite the hiring process. It allows a
minister to understand that the church has spent time in preparing an outline that can then be negotiated or reviewed.
- It is a Demonstration of Love and Care to the Pastor and Family. Having a workable compensation plan shows the pastor and their family that the church cares enough for the health and well-being of their pastors.
- A Compensation Plan Helps Maintain Stability and Tenure of a Pastor. If a church loves their pastor, they should adequately review and compensate them on a regular basis. A compensation plan will outline reviews. Too many pastors
have left a church for greener pastures due to a lack of appreciation or having their needs looked at.
- To Reduce Tax Liability. How a church pays its pastor is very
important. Many churches “package” a salary plus benefits. These are attractive in acquiring a pastor as well as retaining one. Turnover of ministers and staff can weaken a church’s ministry. Many
pastors want to “shelter” as many items that are legally possible but of course, not violate their tax liability. Some of these will be outlined in a later section.
- To Ensure Accountability to the Church. Written plans outline benefits and salary to their pastor. Congregations are very
interested in making sure their pastor is paid properly. Planning also eliminates a tax liability to the minister and church if compensation is not paid correctly.
- To Ensure Protection of the Pastor and Church. By providing a
benefits package of life insurance, medical, or disability insurance, a minister can protect their family from financial ruin as well as protect the church from inconsistent service. A minister is
not as likely to put off a medical procedure if they have medical coverage. Ministers without medical coverage often wait until it is too late and costly, which can be a burden to the
- A Plan Will Determine Whether a Pastor is an Employee or Self Employed. Tax-wise, it could make a big difference to the pastor and church. Pastors are usually considered for Federal tax purposes if they are ordained, licensed, or
commissioned. Other considerations to determine whether a pastor is an employee include whether a minister is eligible for a church designed housing allowance, whether a person has management
responsibilities of the church, and do they conduct religious worship.
Most ministers have a “dual-tax” status, which means that ministers are considered as self-employed for Social
Security purposes but are usually employees for income tax purposes. For more information, please consult your accountant or IRS.
A written policy will outline expectations a church may have for its ministers, such as work hours,
office hours, outside speaking engagements, hiring practices within the church, pay periods, etc. A written outline will eliminate misunderstandings from what a minister or board may seem normal.
Both could have different expectations.
Consider Viewing the Tax Change Consideration and
Retirement Strategies (Section 125) When Working with Your Pastor