LESSON 23 OF 40 – Pastor Pay—It’s About More Than Just Money
Getting the compensation-setting process right must be a priority.
THE BIG IDEA FROM THE BOOK: In Lesson 23, the authors discuss the importance of church boards developing a compensation setting process. This process should be thorough, ongoing, and consider more than just cash compensation. It should also consider the full scope of possible fringe benefits. While potentially uncomfortable to discuss in the beginning, if the process is developed with care and diligence, the end result will benefit the pastor, the board, and the church as a whole.
MY FAVORITE INSIGHTS from Lesson 23, pages 124-128:
One of my favorite insights from this chapter centers around the idea of making sure the compensation is reasonable. The authors make an excellent point in that reasonableness can cut both ways. In other words, compensation can be either unreasonably high OR unreasonably low. In many scenarios, the unreasonableness breaks on the side of being low, not high. Working within the budgetary restraints of the local church, using comparability data is critical to ensure the compensation is reasonable and pastors are being paid a fair salary for the services they provide to the church.
Often, in our organization, we find ourselves working with church boards on a variety of issues. One of the recurring topics discussed is compensation setting. Not knowing how a church should go about setting compensation is often at the core of the conversation. Helping them understand the board’s role and the need to set up a recurring process of evaluation has been an important element of our discussions. Directing them to comparability data and taking into consideration potential fringe benefits are also important parts of the dialogue.
Another area I have discovered in which church boards should educate themselves is the way in which ministers are taxed by the Internal Revenue Service. It has been my experience that once compensation is established, many church boards are woefully unaware of how ministers are taxed with respect to federal, state, and self-employment taxes. This lack of understanding can create significant tax liability to pastors, especially with regard to the self-employment taxation of the minister’s housing allowance or use of the church-owned parsonage.
It is my belief that most boards have a desire to treat their leaders fairly. If a compensation setting process became part of their annual meeting agenda, it would force them to address the issue on an annual basis. While potentially uncomfortable in the beginning, the end result will be one that will ultimately benefit both the pastor and the local church.
THIS WEEK’S QUOTES & COMMENTARY BY KEVIN CONNER:
• Download the ECFA ebook, 8 Essentials of Compensating Ministers.
• Set an annually recurring agenda item to discuss the pastor’s total compensation package.
• Visit the ECFA Knowledge Center and read and share the short chapter, Lesson 23, “Pastor Pay—It’s About More Than Just Money.”• Inspire your board members to enrich their governance competencies at the ECFA Excellence in Governance Forums (eight cities, Fall 2019).
NEXT WEDNESDAY: On July 31, 2019, watch for the commentary by Justin Steinhart on Lesson 24, “How Many Board Members Are Present in Your Boardroom? It’s more than just answering the roll call.”