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Your Church, May/June 2000
FINANCE & LAW
What to Pay the Pastor
Advice
from church leaders and financial experts on how to determine a pastor's salary
Jennifer Schuchmann
Because
YOUR CHURCH receives so many requests
for information on pastor compensation, we decided to go beyond our 1999 survey
on church budgets to see what those findings mean to church leaders and financial
experts.
The Pastors
Speak
The reactions
of pastors to their salaries vary widely; 70 percent feel they are fairly paid
and 30 percent that they are underpaid. At one end, an associate pastor of a
megachurch in the South is satisfied with his compensation. "We may not
make the median income for our community, but we are better off than the average,
typical minister in a small church," he says.
The senior pastor of an
1,100-member church in the Southwest is also happy with his salary, which was
determined partly by following the guidelines of "NACBA's Church Business
Administrators' Church Staff Compensation Survey."
At the other end are pastors
who are mildly to greatly dissatisfied with their pay. Bob Welch, associate
professor of administration at Southwestern Baptist Theological Seminary in
Dallas, Texas, understands why. "Most pastors are underpaid," he says.
Some churches are short
on tact as well as compensation. "We didn't make the budget this year,
pastor, so guess what?" is how one church began its budget report. The
300-member church has salary guidelines from its synod, but it doesn't follow
them.
Understandably, the pastor
of that church is unhappy. "It is very frustrating to be a rural pastor,"
he says. "Church members are whipped and beaten down by the economy, then
they pass that on to the pastor. One member even suggested that my salary increases
be tied to the hog market."
How to
Set a Salary
Resources that
can help churches determine a fair salary for pastors include The Annual
Compensation Handbook for Church and Staff from Christian Ministry Resources,
Zondervan's 2000 Minister's Tax and Financial Guide by Dan Busby, and
How to Set Clergy Compensation by Steve Clifford.
Your denominational headquarters
could tell you what pastors in churches like yours are paid. So might CPAs such
as Jack L. McGinnis of Brooks, McGinnis & Chafin in Atlanta, Georgia, who
collects data from more than 50 churches to help clients determine salary packages.
A typical package includes:
• Base Salary.
A salary of $40,000 sounds reasonable for a pastor, but the take-home pay will
be significantly less. In addition to tithing, 15 percent will be deducted for
federal tax, 15.3 percent for Social Security and Medicare, up to 9.3 percent
for state tax, and as much as 20 percent for unreimbursed business expenses.
"Now subtract those
things that are unique to being a pastor," says Steve Paul, president and
founder of ChurchPayroll.com. For example, if a pastor's church requires him
to wear a suit, subtract the cost of dress clothing and dry cleaning. Subtract
those costs for the pastor's family, too, because they also represent the church.
Now subtract the costs of entertaining church guests, such as missionaries and
speakers. What's left isn't much.
• Benefits.
All of the solo pastors who responded to our survey said they live in a parsonage
or receive a housing allowance. But how beneficial is a parsonage?
As Steve Clifford, owner
of Clifford & Associates, who once lived in a parsonage, says, "If
employer-owned housing is such a great deal, why don't the UAW and Teamsters
and other unions push for it?" The rural pastor we spoke to also questions
the value of a parsonage. Still, as he says, "In a small rural church,
you have to live in a parsonage or you would never be able to leave."
Four percent of the senior
pastors in our study do not receive a housing provision. "They should be
receiving it," McGinnis says. "If they're not, somebody doesn't understand
the tax rules."
• Paid plans.
Two-thirds of the solo and senior pastors who responded to our survey have pension
plans or receive contributions to a retirement plan. In addition, 92 to 94 percent
of pastors receive paid vacations, about 75 percent receive health insurance,
and about 35 percent receive life insurance, Christian Ministry Resource reports.
• Reimbursements.
If your church does not reimburse pastors for ministry expenses, a pastor can
list those expenses as tax deductions. However, the IRS has very specific regulations
about which items the pastor may deduct. Example: If a church makes payments
on the pastor's car, which is for business and personal use, careful tracking
of the mileage will allow the pastor to claim income only for the personal-
use miles. Without the tracking, the entire expense becomes taxable income.
Paul believes a church
should reimburse a pastor's expenses. "When you pay me to buy tools to
build your church, that is not compensation to me. That is an in vestment in
your ministry that you will still have when I am gone," he says.
Budget
for Pastor Pay
If your church
can't pay what the pastor deserves, it may be time to adjust the budget. "If
there is a gap, make it the church's first priority to close the gap before
any other financial burdens are taken on," Cobble advises. "As the
church grows and prospers, the minister's compensation will improve, he will
recognize the supportive environment that it creates, and it will provide an
incentive to grow."
Welch suggests upping compensation
for the pastor by including more benefits. Health insurance for a pastor can
be relatively inexpensive when bought through a denominational plan, and churches
can provide up to $50,000 of group term life insurance tax-free to the pastor.
Tip: When structured properly, a church can spend $2 to provide a pastor
with $3 worth of benefits.
Other ideas:
• Hire a part-time
rather than full-time pastor. Clifford recommends that churches
write job descriptions that honestly itemize the work that can only be done
by the pastor and ask others to do the rest.
• Do annual reviews.
Our survey shows that only 39 percent of churches do annual reviews with their
pastors. Most pastors don't get that courtesy, Welch says. For help with this
process, NACBA offers the book Church Staff Evaluation, which includes
a chapter just on pastors.
When
All Else Fails, Ask
While our survey
shows that 9 of 10 pastors feel it is appropriate to ask for a raise, only half
have done so. "They're afraid to ask," Paul says. The survey shows
that it does pay to ask, however. Of the pastors who dared to ask for an in
crease, 75 percent received a raise.
Experts recommend giving
a pastor at least a cost-of-living increase every year. Churches appear to be
doing that. Our survey says total compensation in 1999 (base salary plus benefits)
stayed ahead of cost-of-living increases by about 1 percentage point.
In addition, churches should
factor in a pastor's performance and tenure, especially if the church is growing.
"A church that is unwilling to pay its pastor reasonable compensation is
dooming itself to mediocrity," Paul warns. If your church can't afford
to budget for salary increases, he suggests taking up a special collection.
"If individual families can pledge $50 to $100 a month for a new jeep for
a missionary, what about doing the same for the pastor who is wearing the wheels
off his Pinto?" he asks.
Show
That You Care
Small but continuous
steps towards paying more will lift the spirits of pastors. Besides that, a
congregation should do what it can to encourage its pastor. A note or card ex
pressing appreciation for a sermon or visit can help. So can a Pastor Appreciation
Day.
For example, a church in
the Chicago area showed its gratitude to its pastor for 20 years of service
by honoring him at a special Sunday evening service. After reviewing significant
events in the 20 years of ministry, the congregation presented the pastor and
his wife with luggage and tickets for a one-week stay in Switzerland.
A gift need not be costly
to show gratitude, however. For example, the pastor of a small rural church
received an unexpected surprise last winter. A farmer from his congregation
stopped by with fresh bacon, greenhouse tomatoes, and lettuce. "Pastor,
I know you like bacon-lettuce-and-tomato sandwiches," he said. "Here
are the ingredients."
Yes, money counts. But
so does the thought behind it.
Jennifer Schuchmann
is a management consultant in Marietta, Georgia. Her e-mail address is jschuchmann@mindspring.com.
helpful resources
- Christian Ministry
Resources, 800-222-1840
- ChurchPayroll.com,
800-523-7939
- Clifford and Associates,
800-456-1803
- NACBA, 800-898-8085
- Zondervan Publishing
House, 800-727-3480
Should
You Get Back Into Social Security?
On December 17, 1999, the
U.S. Congress opened a two-year window allowing pastors who opted out of Social
Security to get back into the system.
Should you get back in?
"This is a contentious decision based on your beliefs," says Jack
McGinnis, a certified public accountant. "However, in my experience, most
pastors that opt out of the system do so for tax reasons and only later find
out that makes them ineligible for Medicare. If they have regrets about that,
they should revisit the issue."
If you've discovered that
Medicare ineligibility makes it difficult for you to get health coverage, and
if you haven't been saving enough toward retirement, you may want to consider
getting back into Social Security.
If you'd like to do that,
Steve Clifford of Clifford and Associates recommends that you begin immediately.
Just be aware that it will mean an immediate 15 percent drop in pay. If you
can't afford that now, plan to do it next year. In the meantime, talk to your
church about picking up part of the cost of your Social Security and Medicare.
No-Cost
Ways to Increase Pastor Pay
A church should
do everything it can to incorporate cost-of-living and incentive raises into
a pastor's salary. But if the budget is tight, there are ways to enhance compensation
without breaking the budget. Some suggestions:
• Add a week of vacation.
Additional time off can be a substantial benefit to a pastor, whereas the actual
cost to the church is minimal. Even an honorarium for a guest speaker can be
avoided if an elder or gifted layperson leads worship.
• Grant a study leave.
Study time encourages a pastor to enhance his training and grow spiritually.
But the congregation also benefits from the ideas and skills that the pastor
acquires while on study leave.
If your denomination or
regional group of churches sponsors pastor retreats, include these in the compensation
package of your pastor, but don't let them eat up study-leave time.
• Offer a sabbatical.
Usually this type of leave is awarded after six full years of service and is
taken in the seventh year of ministry at a church. Three to 12 weeks are normal
for a sabbatical. Supply preachers can fill the pulpit during a sabbatical,
and a neighboring pastor can cover hospital visits and emergencies. The pastor
should receive full salary during a sabbatical.
• Offer housing equity.
This allowance for a pastor who must live in a parsonage compensates for the
equity he would earn if he owned his own home. The cost can be budgeted into
the yearly manse expense.
• Allow time to serve
the larger church. Why not include a week per year for this? It may
encourage your pastor to get more involved in global missions, youth ministry,
or denominational affairs.
Perk
Up the Pay
A congregation
can extend many perks to a pastor without upping his pay. Before offering them,
check with the U.S. Internal Revenue Service about regulations regarding such
gifts. Some perks:
• Offer a getaway
place. If a member of your church has a vacation condo, hunting lodge,
or the like, offer it to the pastor for a week. This gift can be claimed by
the donor as a tax deduction.
• Donate air miles.
Some members of church accumulate more frequent flyer points than they can use.
Some of those could be offered to the pastor. A tax deduction may also be allowed
for this donation.
• Loan a vehicle.
Let your pastor use your RV or boat for a week. If you own a plane, offer to
fly the pastor and spouse to a vacation spot.
• Share tickets.
Shortly after I began my ministry in one church, a member offered me tickets
to a night game of the Steelers. It was a great evening. Likewise, think of
passing along tickets to the symphony, theater, opera, or plays to your pastor.
• Offer to babysit.
The cost of childcare can be a deterrent to a night out for the pastor and spouse
who have young children. Offer to babysit on a weekend night.
• Extend guest membership
privileges. Church members who have athletic club memberships could
invite the pastor along as a guest or even pay part of the membership to help
keep the pastor in shape.
• Volunteer expertise.
People in your church who prepare tax returns, fix cars, mow lawns, program
computers, cut hair, or have other expertise might be willing, on occasion,
to offer their services to the pastor. This is best done as a one-time offer
so as not to take advantage of the donor.
• Remember to honor.
Opportunities to celebrate ministry together and to tell a pastor "Well
done!" don't cost much, but they go a long way to strengthen relationships
between a pastor and congregation. Celebrate anniversaries of a pastor's ordination
or years of service with the church and other milestones such as earning an
advanced degree.
Keith M. Curran is pastor
of St. Andrew Presbyterian Church in Suffolk, Virginia.
Copyright © 2000 by the
author or Christianity Today International/Your Church Magazine. Click here for reprint information on Your Church.
May/June 2000, Vol. 46, No. 3, Page 22
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