How can your church develop a solid budgeting plan that helps demonstrate your commitment to your pastor and staff?
By Seth Hawkins and Mark Dance
Pastors carry the responsibility for the health of your church—which includes financial health. Pastors and church leaders are also responsible for the welfare of staff and their families—including their own.
In leading their people to prepare a generous and responsible budget for next year, pastors walk the tightrope of equipping their leaders for stewardship without over-reaching, since pastors do not want to be perceived as self-serving. Let us help you this year by giving you a resource you can share with the leaders preparing next year’s budget.
So, how can your church develop a solid budgeting plan that helps demonstrate your commitment to your pastor and staff?
1. Follow or establish written policies and procedures
This helps reduce confusion or unfair comparisons by forming a standard for future and current budgets. Ensure your budget policies clarify ministry-related expenses, employee benefits, personal income, and spending policies. In other words, do your homework (kudos for reading articles like this).
2. Assess the compensation needs of your ministers and staff
This year’s Southern Baptist Convention (SBC) Church Compensation Survey, conducted by GuideStone®, Lifeway, and Baptist state conventions, noted that senior pastor pay has remained flat since 2018, despite the impact of inflation. This means pastors have less buying power, making them feel as if they are earning significantly less than they were four years ago. Additionally, the impact of runaway inflation is an undeniable consideration.Senior pastor pay has remained flat since 2018, despite the impact of inflation. This means pastors feel as if they are earning significantly less than they were four years ago. Click To Tweet
Compensation includes personal income and housing allowance as well as health, life, and disability coverage and retirement plan contributions.
The 2022 SBC Church Compensation Survey provides a benchmark of what SBC churches are doing. While these results are descriptive of what others are doing, they may not be prescriptive in your environment.
What do other professionals in your location make? Consider others with an education similar to your pastor’s with similar responsibility—business owners, accountants, lawyers, school principals, and bankers are all places to start.
3. Provide for ministry-related expenses
Remember to include non-income expenses like travel, hospitality, professional development, and even personal vehicle use for ministry purposes. An Accountable Reimbursement Plan (ARP) helps ensure that these expenses are not included in a minister’s or employee’s personal income (and thus become subject to income tax).
4. Provide competitive employee benefits
A strong employee benefit plan includes retirement contributions and medical, life, and disability coverage for ministers and other employees. Budgeting for these benefits is a tangible way to show your church staff you care—which can help attract quality new employees and reduce turnover.
Places like GuideStone work diligently to provide best-in-class retirement plans specifically for pastors and other church staff. These medical plans cover a variety of budgets with access to some of the largest medical networks in the nation. But the responsibility of budgeting for and implementing those benefits is squarely on the shoulders of local church leaders.
5. Complete a compensation planning summary
Once you’ve completed the other pieces of the compensation plan, review it to identify areas of inadequate support, and see if you can find the means elsewhere.
In a salary-and-benefits approach, the church pays for any medical, life, and disability insurance and makes contributions to a retirement plan. Churches set aside money for housing allowances for ministers for tax purposes. Churches also make a Self-Employed Contributions Act (SECA) offset available to help pastors, who must pay both the employee and employer part of Social Security. Finally, churches calculate the cash salary.
Even if raising the total compensation isn’t an option, using this approach, many churches could raise their pastor’s pay without costing a dime more than their current outlay. Many churches pay their pastors the wrong way, using an outdated approach that offers them a lump sum. Sadly, too many churches don’t pay their pastor his worth. Others may pay well but do so in a way that saddles their pastor with higher taxes than would otherwise be legally owed. That means less money for his family and their needs.Many churches could raise their pastor’s pay without costing a dime more than their current outlay. Click To Tweet
Working diligently to enhance financial security and resilience for those who serve the Lord in vocational ministry helps ensure that every servant of Christ finishes well.
If you’re a church leader, deacon, finance, or personnel committee member, let us close with this thought: No pastor entered the ministry to get rich. Your pastor serves your church because of the call of God on his life. Would you be a part of showing him that he and his family are important to you by seeking to pay him well and pay him properly as you finalize next year’s budget?
That investment in your pastor will pay dividends for years to come.
Seth provides leadership to GuideStone’s Retirement Solution’s Team that serves institutional clients. Seth spent the majority of his formative years overseas where his parents served as church planters. It was this experience that fueled his passion for serving those who serve the Lord.
For permission to republish this article, please email Marissa Postell Sullivan.