Pastor compensation can be tricky to discuss, like any money-related topic. But whether your church is small or mega-size, it’s vital to find the right pastor and compensate them fairly.
You may be a small church with a single pastor on staff or operate with a complex organizational structure including pastors, directors, and administrative support. In any case, this post will resource you with everything you need to know about pastor compensation. This article covers what’s included in a benefits package, what factors influence salary, how to set an equitable pay rate, and more.
Estimated reading time: 10 minutes
Table of contents
What Does Pastor Compensation Include?
Compensation provides monetary value to employees in exchange for work. However, a comp package includes more than just a salary. In addition, pastor compensation plans can include housing allowances, benefits, bonuses, reimbursements, and more. Here are some of the common components.
Cash Salary
Cash salary is subject to taxes on federal, state, and local levels. Furthermore, the salary determines retirement plan contributions. Cash salary is the first thing people account for, but there’s more.
Housing Allowance
The Housing Allowance covered in section 107 of the Internal Revenue Code is unique to ministers and is also known as a parsonage or rental allowance. Housing allowances allow ministers to exclude the designated cost of their principal residence from federal income tax. Visit the IRS website to read up on how this allowance affects salary and taxes.
Social Security-Medicare Offset
Another allowance comes in the form of social security offset. Ministers are covered under the Self-Employment Contributions Act (SECA). Under this law, they are responsible for paying self-employment tax but exempt from social security and Medicare withholding. Because of this, churches often provide money to help offset the SECA tax as part of the compensation package.
Benefits
The benefits in a pastor’s compensation package should cover all the basics, which include:
- Retirement savings plan such as a 401(k), traditional IRA, or 403(b) (most common for churches)
- Health insurance (medical, dental, eye)
- Life insurance
- Disability insurance
Paid Leave
Paid leave should include legal holidays, vacation, and sick leave. However, pastors are in the unique situation of working weekends and major holidays like Easter, Christmas. Other holidays may fall on a Sunday as well. In these instances, churches can schedule additional days for paid leave to compensate for the holiday.
Comp packages may include additional types of paid leave. For instance, pastors may take time off regular duties for a sabbatical, book writing, or missions work. Since this impacts the pastor’s well-being and ministry work, this paid leave is often covered.
Reimbursements
Pastoring may involve many unique scenarios. One example is travel, which can range from local hospital visits to international conferences. Whether buying gas or plane tickets, costs for these experiences can add up quickly. Therefore, it’s standard practice to reimburse pastors for any costs directly related to their job responsibilities.
The IRS requires a church to pass a formal resolution for an accountability plan. Most importantly, this plan should outline what expenses can be covered and the guidelines for reimbursement. Examples of such items might be:
- Travel expenses – automobile or airfare
- Continuing education – degrees, courses, certificates
- Hospitality – hosting speakers and special guests
- Conference travel – for speaking or attending
- Subscriptions and books – study materials, periodicals, software
- Professional fees – pastors associations, leadership groups, local professional organizations
- Technology and phone – cellphone, computer, printer, along with standard office supplies
Goals of a Pastor Compensation Package
So, maybe you’re ready to discuss the pastor’s compensation package. This conversation can be a win-win. But, because money can be a loaded subject, it’s vital to keep the big picture in mind.
For the Pastor
Pastors don’t enter the ministry to get rich (well, hopefully not). A pastor’s desire should be to serve, preach the gospel, and love people. In turn, pastors should be paid fairly.
When Jesus sends the disciples out to heal and preach, He said, “the worker deserves his wages.” (Luke 10:7) In addition, Paul echoes this thought in 1 Timothy 5:18.
When a pastor enters full-time ministry, the hope is to earn a living and adequately provide for their family. Additionally, good benefits will eliminate anxiety about caring for their children, healthcare, or other needs.
A pastor’s salary should honor their role and sacrifice to serve the church. In short, salary is a reflection of their investment in education, and a reflection of their competence and effort.
For the Church
At the same time, setting the right level of compensation benefits the church. For one, it motivates the pastor to meet goals and expectations. It ensures they adhere to a standard of accountability.
A fair and equitable comp package can help a church attract and retain competent leaders. Barna’s pastor’s poll shows that 38% of pastors have contemplated quitting within the past year. Moreover, the pastors who considered leaving full-time ministry were more likely to be unhealthy in the well-being categories. And financial well-being is one of those categories!
Finally, it’s ideal for churches and leaders to be in a long-lasting partnership. This allows deeper bonds of trust and more intimate relationships to form.
To sum it up: Pastors care for the church, but the church also supports the pastor.
Developing Your Church’s Compensation Structure
Who sets up the pastor’s compensation package and determines pay increases? Of course, it will vary from church to church, but the pastor shouldn’t be ultimately responsible for the decision.
Although the pastor may provide direction for many policies, an independent group or Human Resources representative should deal with sensitive matters like hiring, firing, and compensation packages. Naturally, not all churches have full-time HR staff departments, and that’s ok.
Depending on the church structure and size, compensation packages may be determined by denominational leadership, a committee, a board, or some combination of staff and congregational leaders. Ideally, group members should have professional experience, be impartial, fair, and without conflict of interest. Likewise, their decisions should be consistent and based on agreed-upon standards. This isn’t an area where emotions or personality should dominate.
Setting Church Salary Ranges
Your salary ranges depend on the church’s budget and organizational structure. Take some time to work through the following steps. They will help you determine the lead pastor’s salary and your overall compensation structure.
- Clarify your overall budget. Then, determine what amount can be allocated to salaries.
- Update your organizational chart with current and desired positions. Next, rank these roles based on the most mission-critical. Which are necessary for executing church priorities?
- Define relationships and job roles (or job descriptions) within the organization. The number of people someone manages and their range of responsibilities may affect their pay rate.
- Establish a salary range for each role or tier in the organization. Pay tiers could include senior pastors, executive pastors, and associate or ministry pastors. Next, continue to define roles like directors, coordinators, administrative assistants, etc. Overlap in salary structure should be minimal.
- Establish criteria for pay raises. This could include longevity, merit, or other standards.
Writing the perfect pastor job description is key. This helps you get the right pastoral candidates for your team.
Factors Influencing Pastor Compensation
So, now it’s time to dive into the pastor’s salary specifically. The starting point for setting your pastor’s salary is often what they were paid in their previous role. Or, it might be based on what your church paid the last pastor.
However, you should consider other factors influencing pastors’ salaries in today’s church. Here are a few of them.
Role
The title “Pastor” applies to multiple positions. The senior or lead pastor often serves in the traditional pastor role, which includes preaching and leading weekend services. The pastor also provides leadership, vision, and oversees the organization.
But the lead pastor role may look different depending on your church. For example, some churches divide leadership and teaching responsibilities among various leaders. After defining your organization chart and roles (outlined in the previous section), job responsibilities should be clear and these help determine baseline salaries.
Pastor roles can include:
- Senior/Lead Pastor
- Executive Pastor
- Associate Pastor
- Adult Pastors (Adult Ministry & Education)
- Worship/Music Pastors
- Youth Pastors
- Children’s Pastors
Experience
Experience is a key factor for salary in any field. General experience includes how long someone has been in the workforce or ministry. But on top of that, certain roles require specific skill sets. Experience may need to include counseling, teaching, or leadership.
Education
Not all churches require higher education or a seminary degree to become a pastor. On the other hand, some may require ordination, in-house training, or certification. Churches should be clear and consistent with all standards.
Hiring committees can outline the expectations for educational requirements and whether they allow accommodations. For example, they may allow a pastor to complete education after being hired. In other cases, a certain amount of experience may substitute for a degree.
Responsibility
Churches may hire pastors primarily to teach, provide executive leadership, oversee a specific ministry area, or all of the above. Responsibilities can vary widely. So, consider the number of people a pastor is supervising, including staff and volunteers.
Responsibility can be challenging to measure at times. Most importantly, consider the weight and impact of ministry responsibilities, not just the number of tasks.
Location and Cost of Living
Geographical location will impact your pastors’ salaries. Keep this in mind if you’re comparing your salaries to churches across the country. Clearly, the pastor of a rural midwestern church will have a different cost of living than someone pastoring an urban church on the west coast. First, make sure you’re comparing apples to apples.
Age of the Church
If your church is brand new, the pastor’s salary may start on the lower end of the pay scale. However, that largely depends on whether you’re part of a church plant or completely independent.
The parent church will typically subsidize the pastor’s salary if you’re planting as a campus. If you’re starting a church entirely independently, on the other hand, the pastors’ salary will begin on the lower end. Salaries can increase over time as the church grows.
When Should You Increase Pastor Compensation?
After considering all the factors above, you may have a good idea of what the pastor compensation package should look like. But remember that over time, you may need to adjust.
Although you may have to lower a pastor’s salary in rare instances like a demotion or budget crisis, it’s more common to give raises. Here are some factors for increasing a pastor’s salary.
Inflation
Inflation is the general rise in the prices of goods and services in an economy. It’s also defined as the decreased purchasing power of money. So, when it comes to pay rates, employers may increase salaries by 1-3% annually because of inflation. This standard increase allows everyone to maintain expenses related to the cost of living.
Longevity
Another standard practice is to increase the pastor’s salary over time. So, a longevity increase could cover inflation or may be given at less frequent intervals.
Merit
Merit increases provide a huge boost to employee morale. In the marketplace, merit increases are usually tied to performance and meeting goals. Ministries may have goals or tie a merit increase to attitude and other soft skills.
Skills and Education
Finally, a pay increase may be awarded to a pastor who pursues more education. Of course, the course or certification should apply to their job duties to be considered for a pay raise.
Comparing Pastor Compensation
You can find information on pastor and church staff salaries in several locations. Start with: The Ultimate Church Compensation and Salary Guide. This post provides a thorough overview of church staff compensation.
In addition, job sites allow you to search for the pastor role in your area. Examples include
Other ministry-specific resources and databases can provide more specific information about church staff salaries. include the Compensation Handbook for Church Staff and The Lifeway Compensation Study.
To Sum Up
In conclusion, pastor compensation levels are a crucial topic. This subject is easier to settle with proper research, prior planning, and fair standards. Finally, remember that compensation is an ongoing discussion and may be readjusted over time.
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