A Word to the Wise: Rethinking Pastor Compensation (Share with your Churches!)
Consider how other comparable professionals in your community are compensated and set your pastor’s salary appropriately.
Start by looking at salaries for local jobs in for-profit and non-profit sectors, such as business owners, accountants, school administrators, religious organization directors or others with similar responsibilities. Too often, churches look exclusively at factors such as a pastor’s experience and previous salary, what they paid their previous pastor or the church’s size. This narrow approach does not consider other key factors, such as cost of living or market trends.
Consider how other comparable professionals in your community are compensated and set your pastor’s salary appropriately.
Start by looking at salaries for local jobs in for-profit and non-profit sectors, such as business owners, accountants, school administrators, religious organization directors or others with similar responsibilities. Too often, churches look exclusively at factors such as a pastor’s experience and previous salary, what they paid their previous pastor or the church’s size. This narrow approach does not consider other key factors, such as cost of living or market trends.
Structure your pastor’s compensation using the “salary and benefits approach” instead of the “package approach”.
Under the package approach, your church sets aside money to pay the pastor but then tasks him with allocating those dollars for his needs. He is responsible for setting aside portions of his salary to cover medical insurance premiums, housing costs, retirement contributions and ministry-related expenses such as travel costs or continuing education. But as a result, the full salary, excluding any retirement contributions that he makes, may be subject to taxes. This can distort the amount of money available to him and his family.
However, with the salary and benefits approach, your church pays for health care coverage, makes retirement contributions on his behalf, designates a portion of his salary as a housing allowance, and creates an accountable reimbursement plan (ARP) for his ministry-related expenses. Your church would still be paying the same amount, but only the pastor’s cash salary would be subject to taxes, resulting in a potentially smaller tax liability and more money to provide for his family. This approach takes full advantage of the benefits accorded to ministers under U.S. tax law. Using this method could result in an immediate pay raise for him without raising the church budget.
Review his salary and benefits annually.
Churches should always account for inflation by making an annual cost-of-living adjustment. Every year that a pastor’s pay is not adjusted to meet the rate of inflation, he has less and less buying power to provide for his family.
Your church should also consider periodic merit raises. Pastors maintain a delicate balance between their churches’ needs and their families’ needs, so advocating for pay raises could be difficult. However, pastors should receive a livable wage and be generously rewarded for the diligent work that they do for their congregations (1 Timothy 5:17).
Churches have the opportunity and obligation to actively engage in the conversation to develop a compensation structure that reflects the true value of their pastors’ contributions so that they can serve and finish well. As part of GuideStone’s mission to enhance the financial security and resilience for those who serve the Lord, we have developed several resources to make this process easier for congregations and church boards, including our Compensation Planning Guide.
If you are an SBC pastor or represent an SBC church, we encourage you to complete our SBC Compensation Survey before June 30, 2024. If you have questions or need additional assistance, you may reach a customer solutions specialist by calling GuideStone at 1-888-98-GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. CT.
Christy Teeter, GuideStone Executive, Baptist Press First-Person article, 6.25.24
Here are Four Things to Know this Week:
Thankful to serve you,
Ray
Bonus! Here is a short video recap of SBC 2024 Day 4. It includes Debra and Allison Gentry! https://youtu.be/j7y8yxrobVo
Under the package approach, your church sets aside money to pay the pastor but then tasks him with allocating those dollars for his needs. He is responsible for setting aside portions of his salary to cover medical insurance premiums, housing costs, retirement contributions and ministry-related expenses such as travel costs or continuing education. But as a result, the full salary, excluding any retirement contributions that he makes, may be subject to taxes. This can distort the amount of money available to him and his family.
However, with the salary and benefits approach, your church pays for health care coverage, makes retirement contributions on his behalf, designates a portion of his salary as a housing allowance, and creates an accountable reimbursement plan (ARP) for his ministry-related expenses. Your church would still be paying the same amount, but only the pastor’s cash salary would be subject to taxes, resulting in a potentially smaller tax liability and more money to provide for his family. This approach takes full advantage of the benefits accorded to ministers under U.S. tax law. Using this method could result in an immediate pay raise for him without raising the church budget.
Review his salary and benefits annually.
Churches should always account for inflation by making an annual cost-of-living adjustment. Every year that a pastor’s pay is not adjusted to meet the rate of inflation, he has less and less buying power to provide for his family.
Your church should also consider periodic merit raises. Pastors maintain a delicate balance between their churches’ needs and their families’ needs, so advocating for pay raises could be difficult. However, pastors should receive a livable wage and be generously rewarded for the diligent work that they do for their congregations (1 Timothy 5:17).
Churches have the opportunity and obligation to actively engage in the conversation to develop a compensation structure that reflects the true value of their pastors’ contributions so that they can serve and finish well. As part of GuideStone’s mission to enhance the financial security and resilience for those who serve the Lord, we have developed several resources to make this process easier for congregations and church boards, including our Compensation Planning Guide.
If you are an SBC pastor or represent an SBC church, we encourage you to complete our SBC Compensation Survey before June 30, 2024. If you have questions or need additional assistance, you may reach a customer solutions specialist by calling GuideStone at 1-888-98-GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. CT.
Christy Teeter, GuideStone Executive, Baptist Press First-Person article, 6.25.24
Here are Four Things to Know this Week:
- First-Person: Five Things I Learned in Indianapolis
- New Overtime Rules For Salaried Employees May Impact Churches
- First-Person: Positive Ministry Implications of the SBC Resolution on IVF
- Pastors, Parents Encouraged to Consider Christian Education During NAMB Breakfast
Thankful to serve you,
Ray
Bonus! Here is a short video recap of SBC 2024 Day 4. It includes Debra and Allison Gentry! https://youtu.be/j7y8yxrobVo
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