Pastoral Compensation

Philosophy of Compensation

Some ministries avoid discussing money, material possessions, and salary, but the reality of compensation in the ministry must be considered. Traditionally non‐profit organizations come under more scrutiny than other entities. Some churches view pastors that ask for adequate compensation as unspiritual; others strive to offer fair salaries and benefits. A good compensation package frees up the pastor to minister with their full energy and focus (I Timothy 5: 17–18, Galatians 6:6, I Corinthians 9:13–14).

While a general salary range should be included in the job description, a good time to discuss the specific compensation package is at the start of the final candidating process. The ministry should present the package to the candidate and ask for feedback, giving the candidate time to reflect on the offer. Give the specific details of the package including salary, housing allowance, insurance, vacation, holidays, sick leave, sabbaticals, retirement, taxes, ministry expenses, continuing education and conference expenses, moving expenses, and any other part of the package.

When you are in the final stages of your decision making with a particular church or ministry, and they have yet to broach the specific details of the compensation package, feel free to discuss salary and benefits at this time. While it may not be the deciding factor in your decision, the compensation package certainly impacts your planning and should not to be overlooked.

Factors in Determining Compensation

Cost of Living
a. Contact the local Chamber of Commerce to determine average housing costs, best areas to live, school information, and the median income for the area.
b. Preview the local newspaper, green sheet, real estate information, and the renter’s guide.
c. Contact the local real estate office to receive housing cost estimates and a general listing of houses in the area.
Geographical Setting
a. Contact the city government or library for information on the median income of families in your area.
b. Compensation is generally highest in suburban and urban settings, followed by medium-sized cities, small towns, and rural areas.
c. Contact the local school district to determine the type and quality of education.
d. Contact the local Chamber of Commerce to determine demographics for the city, country, and state and for growth trends in population.
Church Income
a. This is generally the most significant factor affecting pastoral compensation.
b. Examine the giving record and current budget.
c. Examine appropriateness of the proportion between the local church and world missions.
d. Determine if stewardship education is needed to promote fair compensation of church staff.
Education and Experience
a. Education and experience affect the quality of leadership and service given to the church.
b. Compare what other professionals of similar education and responsibility are paid (i.e., local school principals, accountants, engineers, and attorneys).

Components of Compensation Packages

Basic Personal Income
a. Basic salary
b. Housing allowance (for pastors who own or rent their homes)
c. Equity allowance (for pastors occupying church-owned parsonages)
Protection Benefits
a. Medical insurance
b. Life insurance
c. Disability insurance
d. Dental/vision plan
e. Professional liability
f. Retirement
g. Paid vacation
h. Paid sabbaticals
i. Sick leave
j. Paid personal leave
k. Paid holidays
l. Self-employment tax
m. Tax-sheltered annuity contributions (IRA/TSA)
n. Social security off-set
Church Ministry Related Expenses
a. Travel/auto
b. Conferences/seminars
c. Continuing education
d. Library
e. Professional expenses/hospitality

Evaluation of Compensation Plan

Are the salaries comparable to the median family income of your region?
Does the salary of the pastor compare to other professionals with similar educational backgrounds and responsibilities?
Is the compensation and benefits package separate from the salary package to allow for salary and cost of living increases?
Does the church keep up with inflation rates each year by providing cost‐of‐living increases?
Does the church have a system for offering merit‐based increases?
Does the church provide an adequate housing allowance for the area?
Does the church provide a Social Security tax offset for ordained pastors?
Does the church reimburse staff for auto/travel expenses incurred while performing job responsibilities?
Are conferences, seminars, and books reimbursed as part of a continuing education plan?
Does the church have policies for speaking engagements, holidays, sick leave, vacation, sabbaticals, and personal leave?
Does the church provide a complete insurance program for all paid personnel?
Does the church budget adequately include all paid personnel in a retirement plan?
Does the church include hospitality expenses of the pastor and other staff members who entertain people in their homes in the course of their ministry?
Is the church committed to being biblical and fair with financial support so the pastor and staff can serve without being hindered by economic worries?
What is the church’s ability to pay a salary if the church is in a building program or there is a wage problem due to current business concerns?
Are the salaries of paid staff members evaluated annually?

Resources

Cost of Living, Relocation Expenses, Real Estate, and Schools

These websites can help determine a variety of factors when considering a compensation package. Many of them have salary calculators. Knowing what it will cost to live and work in an area of ministry is a vital part of preparing a compensation package.

Salary Surveys

The Compensation Handbook for Church Staff by James Cobble, Jr. and Richard Hammar (Updated and published annually by Church Law Today, a service of Christianity Today International)(www.churchlawandtax.com)
Denominational Headquarters

Tax, Law, Finances, and Setting Compensation Packages

The Zondervan Minister’s Tax & Financial Guide by Dan Busby (Published annually by Zondervan Publishing House, Grand Rapids, MI)
https://www.churchlawandtax.com/
https://www.irs.gov/