Compensation In The Church

As an Executive Pastor, you will have tremendous influence on everyone's compensation. I have intentionally used the word "influence" because there should be (and needs to be) other people involved in these conversations as well, such as a CFO or a Finance Team. But, without a doubt, you are expected to lead when it comes to employee compensation. 


Let me encourage you with this... use your position of influence to be generous with your team. Your number one asset is your people. If you take care of your team, they will be able to focus on their ministries without worrying about whether or not they can afford groceries or their mortgage payment. Trust me, your personnel dollars are some of the most effective dollars in your budget.


With that being said, let's take a look at a few different compensation strategies:



Salaries


Strategy 1: Compensation Studies

Looking at and comparing compensation studies is the most common way that churches determine the salaries for their staff (full-time and part-time). If you prefer this method, I would recommend that you use the compensation studies from LifeWay or Ministry Pay. Both of these companies provide a helpful starting point for setting a salary. The compensation studies from LifeWay are free, but since the Southern Baptist Convention owns LifeWay, you will only see numbers from Southern Baptist churches. The compensation studies from Ministry Pay are not free, but you will have access to data from a wider variety of churches and denominations.


Strategy 2: Partnering Churches

Talking to partnering churches is another common way that churches determine the salaries for their staff (full-time and part-time). Basically, when a church is hiring someone, they will reach out to other churches that they partner with and ask for their salary numbers. And, if there is a trusted relationship between the churches, they are usually willing to help. However, if you decide to use this method to determine the salaries for your staff, please remember that you are not considering a lot of data. For example, if a church down the road is stingy with their staff, it doesn't mean that you have to be. You need to do what is best for your church. So, use this model cautiously. Sometimes this method is helpful, but sometimes it is not.


Strategy 3: Percentage-Based Compensation

Another option to consider is percentage-based compensation. And, for full disclosure, this has become my preferred compensation strategy, and the one that we now use at our church. Allow me to explain how it works:


For our full-time staff, we have four levels of leadership. We have the Leader level, Executive level, Associate level, and Director level. And each level has a different salary range. In this model, we are only discussing salary. Each one of our full-time pastors also receives a full benefits package that is given to them in addition to a competitive salary (see below for more information about benefits). And, the benefits package is the same for all of our pastors, regardless of their level. 


Here are the salary ranges for the different levels of leadership at our church. However, feel free to change these ranges for your church:

  • Leader: This level is for the Lead Pastor only, and is the highest-paid level in the organization.
  • Executive: This level is for the Executive Pastor(s), and their salary range is 75% - 95% of the Lead Pastor's salary.
  • Associate: This level is for the Associate Pastor(s), and their salary range is 60% - 80% of the Lead Pastor's salary.
  • Director: This level is for the non-pastors on the team. At our church, we call them Directors, and their salary range is the Federally Exempt Minimum Salary up to 65% of the Lead Pastor's salary.


Here are the benefits to this compensation strategy:

  • This model allows us to have a strategic plan of keeping each full-time person in their correct compensation range. As long as they are in the salary range for their level, we don't have to worry if they are underpaid or overpaid.
  • As you will see, we have intentionally allowed for a 5% overlap for the level above. For example, this would allow for a really great, well-educated, very experienced Director to earn more than a brand new, uneducated, inexperienced Associate Pastor.
  • Since each level has a 20% range, this gives us the ability to adjust salaries based on education, experience, responsibilities, performance, and work ethic, while still keeping each person in the salary range for their level.
  • If someone reaches the top of their range, our plan would be to reward them with bonuses rather than additional raises. That keeps them in the correct salary range while still honoring and rewarding their hard work.
  • This model also helps our church prevent the "runaway train" issue where the Lead Pastor is paid significantly more than everyone else on staff. For example, when a church gives everyone a simple 3% raise, the Lead Pastor's 3% is always larger than everyone else's 3% (because his salary is higher). Over time, this can create an issue where the Lead Pastor earns significantly more than everyone else on the team. However, this model prevents that by keeping the ranges tied to the Lead Pastor's salary with percentages.


For our part-time staff, we have an hourly range that we keep everyone in that is competitive for part-time work in our area. However, the part-time range is not tied to the Lead Pastor's salary.


To be clear, no model is perfect. There are definitely pros and cons to any model you choose. However, I have found the percentage-based compensation model to be simple to understand, easy to manage, and it allows us to be generous to our team in a strategic way.



Benefits


An important part of employee compensation is benefits. If you want to keep great employees on your team, you need to provide strong benefits for their family. And, this is especially true for your full-time pastors.


Here are the benefits that I recommend that every church provide at no cost to their pastors:


Insurance:

  • Medical insurance for the pastor and his family.
  • Dental insurance for the pastor and his family.
  • Vision insurance for the pastor and his family.
  • Short-term disability insurance for the pastor.
  • Long-term disability insurance for the pastor.
  • Term life insurance for the pastor and his family.


Retirement:

  • The church should make a contribution to the pastor's retirement account every month without requiring a match. I recommend that the church contribute at least 10% to help their pastors prepare for retirement.


Social Security Allowance:

  • If the pastor stayed in Social Security, the church should give them a Social Security Allowance (equal to 7.65% of their salary) as additional income to help them avoid double taxation.
  • If the pastor opted out of Social Security, the church should give them a Social Security Allowance (equal to 7.65% of their salary) as a contribution to their retirement account to help them prepare for retirement. To be clear, this is in addition to their retirement benefit.


Other:

  • Monthly cell phone reimbursement.
  • Discretionary ministry budget for ministry expenses (ministry meals, books, mileage reimbursement, etc.).
  • Conference/Sabbatical budget to help your pastor grow as a leader and stay refreshed.
  • Paid time off.


By providing these benefits to your pastors, you can have confidence that you are properly taking care of the leaders of your church.