Five things to consider when determining a pastor’s salary.
Financial pressure is one of the main sources of stress among pastors. In this article, we will explore how much you should pay your pastor and some of the guidelines you can use to do it well. This may not eliminate all the financial stress your pastor faces, but it can ensure your church is doing everything they can to help.
In my previous article, I explained that how you pay your pastor is a gospel issue that has impact on the effectiveness of your church and its mission. A church that is not obedient to God cannot expect God’s blessing on their mission. So each church, no matter its size, should do everything in their power to ensure that their pastor is fully supplied (Philippians 4:18). Their pastor should see that they are being generous (Galatians 6:6-8) and not stingy. A church that is cheap with their pastor will suffer the consequences. The pastor will see that he is being treated with contempt and that the church is not properly honoring God. It’s hard to minister in this context without becoming resentful. Here are five things to consider as you plan your pastor’s salary.
1. What is the size of the congregation?
The size of a congregation will be the greatest determining factor for the church’s budget. Large congregations with multiple staff can afford to pay pastors better than a church of forty that is struggling to survive. Because these worlds are so vastly different, we will focus on the larger group – the small church. Ninety percent of churches in the United States have less than 350 people attend each week; 64 percent have less than 200. The average church size in America is 89 adults. Thom Rainer says that it takes a ratio of 76:1 – meaning an average weekly attendance of 76 is the minimum needed to pay one full-time staff member. If these numbers are correct, then a large percentage of American churches will struggle to pay a full-time pastor. So, how does a small church determine how much to pay their pastor?
2. What percentage of the budget will be allocated to staff salary?
Small church expert Karl Vaters says, “While 45 to 55 percent of budget going to staff is healthy for mid-size to larger churches, the range is much wider for small churches. As in zero to one hundred percent.” When we take church size into account, it makes sense that smaller churches will have to spend a larger portion of their budget to pay a full-time pastor. According to the Evangelical Covenant Church, a healthy congregation with a weekly average attendance of 150 people should spend 40 to 50 percent of their total budget on staff salary. If, however, the church only has forty people, they will probably need to spend 55 to 65 percent of their total budget – anything above 60 percent is very risky.
Thom Rainer says that the average staffing costs among all churches has dropped from 54 percent to 49 percent in recent years. Church consultant Tony Morgan says, “Our consulting team generally encourages churches to try to stay in the range of 45 to 55 percent of total budget.” So, what percentage of your total budget should your church spend on staff salary? Whatever amount you determine is generous but not too risky.
3. Is this a livable wage?
When you have determined the percentage of your budget available for the pastor’s pay, you will be able to tell if you can afford a full-time pastor or not. The living wage calculator will help you determine what hourly wage your pastor will need to live in your state and county based on his family size and how many people in the family are working. Use that number to determine a yearly salary – this amount should be the minimum your church will pay (if possible). Remember, this living wage calculator does not include benefits (more on that later).
Now factor in the unique housing situation of your church. Does the church own a parsonage? If so, this will allow you to reduce the percentage of your budget dedicated to staff pay. However, be sure you have budgeted for the upkeep of the building and the tax implications for the pastor. If your pastor has to buy or rent his home, then he qualifies for a ministerial housing allowance. This means that the church can designate a portion of his salary as housing allowance, and whatever he uses as qualified housing expenses will be tax-free. This amount can be whatever percentage of his total salary he will use, but it may be wise to keep it under 50 percent to avoid an audit by the IRS. I do not recommend lowering the amount of pay because of a housing allowance. This tax benefit for pastors is being challenged in the courts, and churches may be forced to rethink their budgets in the near future.
4. Does this budget leave room for inflation?
One of the most overlooked parts of budgeting for a pastor’s pay is the cost of inflation. Fewer than 60 percent of churches give their pastor a cost of living increase each year. Inflation rises between 1 and 4 percent every year – it rarely goes down (that would be deflation). In order to maintain the value of your pastor’s salary, you need to raise it with inflation every year. Otherwise, you will be asking your pastor to live on less value. Consider this example:
A church pays their pastor a salary of $34,000 in 2000. The consumer price index for the Midwest region in January 2000 was almost 165. In January 2019, it was almost 234. That means in 2019, the pastor’s salary should be just over $48,000 to have equal value.
($34,000 x 234) / 165 = $48,218
This means that if the church didn’t keep up with inflation, the pastor’s salary would have almost $14,000 less in perceived value. What was a livable wage becomes sub-standard over time. This example is just an illustration, of course; there are more factors to consider (local economy, housing market, etc.).
5. How much will be allocated toward benefits?
Most denominations recommend that benefits be calculated separately from salary. Do not calculate a living wage and reduce it by taking the cost of benefits from that amount. Most churches who can afford to pay benefits offer health insurance and/or retirement. Check with your denomination about the plans that they offer. My denomination offers a pension plan that performs very well compared to most, but it requires that the church contribute a minimum of 6 percent of the pastor’s total salary. As a general rule in 2019, most churches should plan on between $10,000 and $20,000 in benefits expenses per employee (remember, that’s on top of salary). This is out of reach for many small churches. In this case, they would do better to raise the pastor’s salary rather than paying for benefits that are not much benefit.
When these five factors are considered, the church will have a good picture of what it can pay. For most small churches, this means they will not be able to pay their pastor the double honor that he may deserve (1 Timothy 5:17-18).
What if we can’t afford to pay a pastor enough to fully supply his needs?
If a church can’t afford to pay a full-time pastor’s salary and benefits, they may consider some creative options. These options are less than ideal and may affect the church’s ability to fulfill its mission. They require making some hard choices and asking the pastor to make serious sacrifices. Additionally, not all pastors have a personality that will work with these options. So if your church has to choose one of these options, make sure you honor your pastor in many other ways.
Ask your pastor to raise his own support.
Both Jesus and Paul had ministries that were supported by others (Luke 8:2-3; Philippians 4:18). The God Ask by Steve Shadrach and Friend Raising by Betty J. Barnett are great resources for how to make this work in today’s culture. Please recognize that if your pastor has to raise his own support, this will take a substantial amount of time every week. This time should be considered part of his work for the church, not something he should do in his spare time. I have heard of churches that expect a pastor to raise his own financial support from both within and outside the congregation. They offer no guaranteed salary, but the people of the church give toward his financial needs. In one church, they placed a black box at the back of the sanctuary and the pastor had the only key. No one knew how much the pastor received (FYI, I don’t recommend this).
Acts 18:3 describes Paul as a tentmaker, so it seems some of his income came from working in the marketplace. Today, tentmaking is often used to describe someone who gets all their income from a marketplace job so they can minister at no cost to the church. Whether all or part of his income must come from another job, the bivocational pastor will need the congregation to fill in some gaps. He simply cannot do everything a full-time pastor can do. Additionally, many bivocational pastors have two part-time jobs that offer no benefits and no vacation. The church would be wise to find ways to give their pastor extra time off, maybe even take up a special collection or raise funds to send the pastor and his family on a vacation every year. Every bivocational pastor that I know is seriously overworked. If your pastor is bivocational, be sure he is getting sabbath rest and time alone with God for his own spiritual nourishment. If not, your church is likely doing damage to your pastor and his family. Many bivocational pastors would disagree with me, but I’ve seen too many burn out to believe this is healthy.
Join with another church.
Many churches today are merging with another church in their area so that the combined congregation can support a full-time pastor. In some cases, this is one church with two separate memberships because they represent two denominations under one roof. Other churches have become satellite campuses of a larger church. This allows the pastor to do the preaching and shepherding of the campus church while much of the administration and programs are handled by the large church. It can be a great partnership when carefully planned.
What are some ways we can honor our pastor that won’t cost the church much?
- Encourage the congregation to give the pastor gifts (gift cards, produce from their garden, a used car that’s still in good condition, use of a family cabin, etc.).
- Give your pastor extra vacation time. I believe a pastor should have a minimum of four weeks vacation and two to four weeks of study leave. Pulpit supply is cheaper than finding a new pastor. A burned-out pastor will cost the church far more than paid time off.
- Send your pastor on a retreat. There are many free or low cost options for pastors and their families. Do some research and find one that will work. Be sure to give them something for food and gas if they aren’t paid well.
- Give your pastor a regular sabbatical. It can be surprisingly inexpensive to send your pastor away for three to six months. You can even send your pastor on a sabbatical for free!
Can you think of other creative ways to honor your pastor?
What do you need to do to make sure your pastor is fully supplied?
Below are some articles to help you in your research.
Top Resources for Budgeting Your Pastor’s Pay
- How Much Should You Pay Your Pastors? by Patrick Traylor
- 9 Principles for Creating an Annual Budget in a Small Church by Karl Vaters
- Evangelical Covenant Church Budget Guidelines (PDF)
- 5 Church Salary Tips for Small Churches
- The Money Series: How Much Should Churches Spend on Their Staff? by Tony Morgan
- Six Surprises About Church Staff Salaries and Budgets by Thom Rainer
- Small Town, Small Church, Small Salary A New Initiative to Improve the Financial Health of Pastors and Churches
- Compensation resources from Church Law and Tax
- Get your personalized salary and compensation report from Church Law and Tax
- 2018 Southern Baptist Convention Compensation Study
- Church Compensation Survey Reports from the Evangelical Council for Financial Accountability