Church payroll can be a daunting task. Not only do you have to figure out how to calculate wages and withholdings, but you also have to stay compliant with federal and state laws and exemptions. Fortunately, many excellent church payroll services are out there to help you get it right.
But which one is ideal for your church? Whether you’re a multi-site mega-church with hundreds of employees or a small to medium-sized church with a handful of staff, you can find church payroll software that fits your needs.
We’re going to cover five popular choices among churches. In addition, we want to answer your questions about what makes church payroll unique and what to look for when choosing a service.
Estimated reading time: 10 minutes
Table of contents
- What is Included in Church Payroll Software?
- Why Do You Need a Church Payroll Service?
- Before You Sign Up For a Church Payroll Service
- 5 of the Best Church Payroll Services
- What Makes Church Payroll Different?
What is Included in Church Payroll Software?
Payroll software typically includes features to help businesses manage employee pay and taxes. Some of the most common features include generating payslips, calculating tax withholdings, and processing direct deposits.
The software can also help manage employee time off, comp time, and vacation days and track sick days and other absences. In addition, many payroll software programs offer advanced reporting capabilities, allowing businesses to track employee productivity and identify areas where they can make improvements.
Obviously, payroll software is essential for keeping track of employee compensation, but the benefits go above and beyond sending paychecks. For example, when integrated with other HR systems, church payroll software can help to streamline the application, interview, and hiring process and cover additional Human Resources department needs.
The specific features available can vary from one service to the next. If you’re looking for an integrated HR solution, be sure to take that into account as you research your options.
Why Do You Need a Church Payroll Service?
Payroll software can save businesses time and money by automating HR functions. In today’s world, DIY payroll systems that require tracking and calculating in excel and writing checks by hand are virtually obsolete.
You need church payroll services that can quickly and accurately calculate employee hours, withhold the correct taxes, and deliver paychecks or direct deposits on time-every time.
The best church payroll services will do all of that and more. They will help also help you on the legal end to ensure you’re in compliance and make tax season less stressful.
The top benefits you’ll get from utilizing the right church payroll service include:
- Accurate records: church payroll services can help you keep track of employee information, compensation, hours worked, and time off.
- Saving time: church payroll services automate many of the repetitive tasks related to processing payroll, including calculating taxes, preparing direct deposit payments, and issuing paychecks.
- Compliance: church payroll services can help you stay compliant with federal and state laws and church-specific regulations.
- Streamlined HR processes: church payroll services can help you manage employee data, onboard new hires, and offer self-service portals for employees to view their information and request time off.
Before You Sign Up For a Church Payroll Service
Before you start diving into services, you need to ensure you have an outline of what you’re looking for and have some backend logistics set up, such as the following.
Determine Employment Classification
When it comes to church payroll, there are two main types of workers: employees and contractors. Employees are hired and paid by the church and receive a W-2 at the end of the year.
Contractors are hired and paid by the church but do not receive a W-2. Instead, they receive a 1099 form at the end of the year.
A part-time worker can be either a W-2 employee or a 1099 worker. The main distinction between the two is the right of control and relationship to business.
Organize Employee Information
When you hire someone, you’ll need to have certain information on hand to set up their church payroll account. This includes:
- Their full legal name
- Social security number
- Home address
- Date of birth
- Bank account information (if you’re going to set them up for direct deposit)
- Form W-4
In addition, you’ll want to know their church title or position, start date, and whether they are full-time or part-time.
Define Exempt vs. Non-Exempt Status
To understand the benefits and drawbacks of exempt vs. non-exempt church employees, it’s essential to first understand what these terms mean.
Exempt employees are not subject to overtime pay. Instead, they are considered “salaried” employees and are typically paid a set amount each week, regardless of the number of hours they work. Exempt employees generally are in management roles or positions that require a high level of skill and training.
Non-exempt employees, on the other hand, are entitled to overtime pay, and minimum wage laws do apply to them. You typically pay them on an hourly basis and their wages can fluctuate based on the number of hours they work each week.
Calculate Payment and Frequency
The next step is to determine how much and how often you will be paying your employees. The most common options are biweekly (every other week) or semi-monthly (twice a month).
You’ll also need to decide whether you want to issue paper checks or set up direct deposit. Most church payroll services can accommodate both options.
Set Up Payroll Deductions
To know what deductions are required by law, you need to specify which employees are in clergy vs. non-clergy roles. Paying pastors, ministers or clergy is more complicated because of the nuances with church-owned housing, stipends, and other allowances.
You need to ensure your payroll provider has experience with churches and can help you set up the proper deductions for your clergy and non-clergy employees.
A few deductions are required by law, such as federal and state taxes (which can vary from one state to the next). Although you may be exempt from certain taxes as a church if you’re set up as a 501(c)3, you will still need to withhold federal income tax, FICA taxes (Social Security and Medicare), and possibly state income tax from your employees’ paychecks.
In addition to federal and state taxes, you’ll also need to withhold other deductions like health insurance, dental insurance, and retirement savings. Most church payroll services can help you automate these deductions.
Choose a Payroll Service
Now that you understand what church payroll entails, you can start shopping around for a service that meets your needs.
When evaluating potential services, there are a few key factors to keep in mind:
- Ease of use: you’ll want a service that’s easy to set up and use, especially if you don’t have a lot of experience with church payroll.
- Cost: make sure to compare the price of different services, as well as any additional fees that may apply (such as for direct deposit).
- Features: some services offer more features than others, such as the ability to track time off or process payroll online. Consider which features are most important to you.
- Customer service: if you have questions or run into problems, you want a company with a good track record for responding promptly and thoroughly to issues.
5 of the Best Church Payroll Services
Paycom is one of the most popular and highly rated payroll software programs on Capterra. They’re also on the shortlist as an established player and top performer for multiple categories, including:
- Payroll Software
- Time Clock Software
- Compensation Software
- Human Resources Software
- Talent Management Software
- And others!
This comprehensive payroll technology offers a single database for all employee information and streamlines HR processes. Paycom is your one source for talent management, onboarding, benefits enrollment, and more.
Positive reviews on Paycom state that the best qualities include simplicity, seamless process, ease of use, and saving time on the backend.
You can request a meeting with Paycom for a solution based on
- The size of your company (small, medium, large)
- Your role (CEOs, operations executives, HR managers, etc.)
- By industry (nonprofits)
Paycom doesn’t currently have pricing information on its website, but you can reach out for a demo and more information.
This company is based out of Arlington, Texas, and touts over 20 years of experience in all 50 states. They specialize in small to medium-sized organizations, so this payroll service is worth checking out if you’re a smaller church.
Their payroll features include:
- Customizable payroll processing
- Electronic Payroll and Tax Reports
- Payroll Tax Payments and Filings
- Garnishments Payments and Reporting
- Retirement Plans, Payments, and Reporting
- Pay employees via Check, Direct Deposit, Pay Cards
- General Ledger Integration
In addition to payroll services, Payroll Partners can also provide you with human resources support, background screening, workers’ compensation, employee scheduling, onboarding, and more.
Payroll Partners offers a free quote so you can get customized pricing for your church’s specific needs.
Gusto Payroll Service is a comprehensive payroll solution that offers a wide range of features and benefits for businesses of all sizes.
This is a popular up-and-coming service that’s won recent accolades, including a 4.7 average rating on Capterra (with over 3400 reviews), Best HR & Payroll Platform from NerdWallet in February 2022, and Editor’s Choice from PC Mag in January 2022.
Gusto can help you with
- Full-service payroll
- Employee benefits
- Time and attendance, including overtime, PTO, and holidays
- Hiring and onboarding
- Talent management like performance reviews and learning tools
- Insight and reporting
Gusto offers three basic plans plus a Select plan for those who need customized options. The Core plan for small businesses with simple payroll structures starts at $39 per month plus $6 per person.
The Complete plan serves more complex needs and costs $39 per month plus $12 per person. Finally, the Concierge plan is for more sophisticated payrolls and costs $149 per month plus $12 per person.
Rippling is a newer service that’s quickly making a name for itself in the payroll industry. You’ll see 4.9 out of 5-star ratings across multiple platforms when you visit their website!
Rippling is known for being very user-friendly and offering excellent customer support. The company covers everything from HR to IT, including app and device management.
If you’re looking for a company that will cater to your church’s size, Rippling promises to easily scale with you from 2 to 2,000 employees.
- Payroll including automatic compliance and tax filing
- Time and attendance with automatic notifications
- Talent management from onboarding to employee engagement and training
- Learning management with a catalog of courses or the ability to upload your own courses
- PEO (Professional Employer Organization) Services
You can purchase each HR and IT product separately. Rippling starts at $8 per user per month.
We have a well-established payroll service with over 30 years of experience to round out the list. Paycor has experience working with organizations and businesses across the country and is aware of the unique challenges nonprofits face and how they can be affected by state and federal laws.
Their software services include:
- HR and payroll software and analytics
- Talent management, including recruiting, onboarding, talent development, and compensation planning
- Workforce management, including time, attendance, and scheduling
- Employee experience software with curves, learning management, and career management
- Benefits administration software
Paycor is highly rated and known for excellent customer service.
A Basic plan comes with no setup fees and starts at $99 per month plus $5 per employee. Paycor offers three additional plans. The highest level is the HCM plan, priced at $199 per month plus $12 per employee per month.
In addition to the five companies listed above, we wanted to offer five honorable mentions to consider for church payroll services. You may be familiar with some of the following names:
What Makes Church Payroll Different?
While church payroll may have many similarities to general business payroll, there are a few key differences to keep in mind.
- Churches are tax-exempt organizations, which means they don’t have to pay federal income taxes. Many states also offer church payroll tax exemptions.
- Churches often have clergy or other employees who are considered ministers. This can affect how they’re classified for tax purposes and what benefits they’re eligible for.
- Churches may have employees who work in multiple states. This can complicate payroll since each state has different tax laws.
- Churches may have employees who are part-time or contractors.
To sum it up, church payroll services can be a bit different than regular business payroll, due to tax exemptions and other factors. The five companies listed above are all highly rated and offer excellent customer service. If you’re looking for payroll software that will make your life easier, any of these providers would be a great choice, but please be sure to do your due diligence and research to ensure the company meets all your needs.