A reimbursable plan for the pastor’s salary package can seem like a good idea because it is simple to compute, but can be dangerous in actual practice.

In a reimbursable plan, the available salary for the pastor’s family is used in part to pay for the costs of ministry first, leaving the remainder for the take home salary.  In the not too distant pass this strategy was used to reduce the pastor’s tax burden.  The dangers of this approach are five-fold if the plan is not computed from the proper starting point.

A reimbursable plan would state, “We are providing a salary package of $50,000.”  What that statement does not identify is that from this plan the pastor will be reimbursed for items like health insurance, travel, continuing education, and phone that would normally be considered costs to the employer.  Thus a $50,000 package may actually result in only $20,000 to $25,000 in actual take-home pay.

There are five dangers of these kinds of reimbursable plans.

1. Costs are unfairly shifted from the employer to the employee.  In the United States employers are required to match Social Security contributions. Shouldn’t the church at least do the same?  Health insurance, despite the complications imposed by the federal government, is tied to employment in our country.  Shouldn’t the church do the same?
2. Unrealistic assumptions are at work.  One motivation for these kinds of reimbursable plans is the drive to reduce taxes that are owed.  While everyone should take every legal tax break possible, the net result of these plans is that taxes are reduced because income is reduced.  For many years I listened to my mother-in-law complain about paying extra income taxes every year.  I offered to let her have my reduced tax burden if she would give me her level of income.  She never made that trade!
3. Unbiblical standards are being used.  The Bible calls for fairness and generosity for those who labor hard to teach and preach.  Enough said.
4. Unskilled bookkeepers don’t deal well with the IRS.  Financial reports and W-2s for this type of system must be carefully maintained.  It does little good to have gone through the pain of careful reimbursement if the financial report or the quarterly 941 misstates what was done.  The complications of this system lead to mistakes by both the church and the pastor.
5. These plans are unfocused on the future.  The reimbursable plan deals only with the moment.  Reduced taxable income is reduced available income.  Reduced taxable income is reduced retirement benefits.  A plan that provides easy solutions for the church treasure today may not provide the management systems necessary to maintain credibility in the 21^st century.

The advice from Scripture regarding compensation for pastors and staff ministers has not always been taken seriously.  Congregations and their leaders often want to be fair, or even generous, but information about what is being done in other churches, along with guidelines and suggestions for implementation, have not been readily available.  On the other hand, the very nature of ministry often finds pastors hesitant to ask for adequate salaries.  Indeed, many pastors would find a means to do ministry even without a salary.

This article is part 5 (read part 1, part 2, part 3, or part 4) of a six part series by Dr. Franklin Dumond, Director of Congregational Ministries, on understanding and planning for a pastor’s salary.  Check back over the next few weeks (or subscribe using the box to the right) to learn more about the process and intricacies of paying your pastor.

By Franklin Dumond

The bi-vocational pastor serves the church while also working as a business owner or as an employee in the secular world. This New Testament pattern of tent-making ministry remains a fact of life for many small to mid-sized churches in the 21^st century. Nevertheless, the bi-vocational pastor faces the tension of balancing company time with church time while being fair to both.

A number of variables determine how much time a bi-vocational pastor may give to the church.

• Some bi-vocational pastors are, for all practical purposes, full-time since their business or professional life offers broad discretion in their time usage. They are able to give extended periods of time to the church or to easily and quickly adjust their work schedules to meet the emergency demands of the congregation.
• Many congregations with bi-vocational pastors only offer programs and ministries that are connected to the stated worship times of the church. For many of them the church building is empty most of the time. This generally reduces the time demands placed on the pastor. These pastors work a full time job and still easily meet the limited demands of the church since most of those time demands are ‘church’ times.

National trends for bi-vocational pastor compensation are difficult to determine. In one study when compensation for part-time senior pastors was reported the average compensation came to a salary of $15.13 per hour with benefits worth an additional $6.88 per hour. The total cost to the church then was $22.01 per hour. These bi-vocational pastors worked at least 15 but not more than 29 hours per week in their ministry assignments providing a range of average salaries of $226 to $441 per week.

A similar 2014 study by the Southern Baptist Convention found that bi-vocational pastors averaged $19,527 in direct compensation (salary and housing). This national average may be discovered on a state by state level by using the tables provided at www.compstudy.lifeway.com.

Many bi-vocational pastors work with their churches to designate the bulk of salary as housing in keeping with the IRS guidelines by which housing allowances are not subject to federal income tax but are subject to self-employment tax.

To ensure that expectations and responsibilities are stated fairly it would be wise for the church to state in the terms of their call what the usual time allocations would be for the part-time or bi-vocational minister. This allows the church to know how time is being used and also protects the pastor from being expected to do full-time ministry on a part-time salary and a part-time schedule.

This article is part four (read part 1, part 2 , or part 3) of a six part series by Dr. Franklin Dumond, Director of Congregational Ministries, on understanding and planning for a pastor’s salary.  Check back over the next few weeks (or subscribe using the box to the right) to learn more about the process and intricacies of paying your pastor.

By Franklin Dumond

A prayer on behalf of a pastor was short and direct, “Lord you keep him humble; we’ll keep him poor.”

Even if this prayer was never prayed, the result in the local church has often been the same.  Sometimes this result was unintentional, but the method to determine fairness was the actual culprit.  I have seen four attempts to create fairness when it comes to pastor’s salaries.  Some fit that description better than others, but they are as follows:

1.  What is the average income for the church?  On the surface this seems like the most reasonable approach since it is based on the incomes for the families in the church.  Beneath the surface, however, the fairness may be lost if:

• the salary package does not properly account for benefits that are also given to wage earners in the congregation
• the report from the congregation is incomplete
• the congregation includes a large number of retirees who have a smaller, retirement income that is adequate for their status as mortgage-free home owners
• the pastor is an entry level pastor but the average income is substantially above entry level income.  (Here the fairness to the church is lost since they would be paying more than necessary.  In the other cases, the fairness to the pastor is lost since he is being paid less that should be expected.)

2.  What does it cost to live in our community?  What a church needs to do to make this method work is to find the value of a respectable middle-class home in their area, factor in any student loan debt the pastor may have, loan on a vehicle, etc.  They should then figure out what kind of salary the pastor needs to make to qualify for the mortgage on that home.

3.  What can we afford? While this may be the actual bottom line issue for most churches “What do we choose to afford?” may be the real question.  Church budgets should generally allocate 40-65% of income for employee costs.

4.  What is the professional equivalency in our community?  The suggestion is that a church should look at a secular profession that is most similar to pastoral work and pay accordingly.  Most of the time, this will be a high school classroom teacher.  Local school districts will have salary scales developed based on educational level and tenure.  So when the church looks up the education level of its pastor along with his years of experience in full time ministry, a community-based standard of pay will be in hand.

If the pastor manages a number of staff, then pay him as a building principal would be paid according to the school district salary schedule.

Of all the systems reviewed, this last one seems the most fair to all concerned.  All pastors (not just senior pastors) receive a decent middle-class salary that directly compares to salaries being paid in their community.  All pastors are compensated in accord with their education and experience with proper benefit packages.  Those pastors who pastor larger churches are compensated in line with their expanded responsibilities.

The New Testament calls for fairness in pastoral salaries by insisting that “The worker deserves his wages.” (I Timothy 5:17 NIV)

This article is part three (read part 1 here, and part 2 here, and part 4 here) of a six part series by Dr. Franklin Dumond, Director of Congregational Ministries, on understanding and planning for a pastor’s salary.  Check back over the next few weeks (or subscribe using the box to the right) to learn more about the process and intricacies of paying your pastor.