ARTICLE

What's Fair Pay for Your Pastor?

Scott A. Arnold

From Action Information,
Volume XVIII, Number 1, January/February, 1991, p. 9.

This article was written in 1991. Please take this into account when reading some of the dollar amounts mentioned in the article.

Paying your pastor is a fundamental part of church life. Traditionally, the pastor's need for financial security has not been a subject open for discussion. It has largely been based on two factors: the first being the budget and the second being exaggerated expectations. Neither of these should be the guiding factor in determining your pastor's financial package. It is grossly unfair for one person, the pastor (and family), to bear the entire brunt of the congregation's financial shifts. Clergy salaries should not be the first place the church goes to save money. Nor should unrealistic expectations set the tone for clergy remuneration. The pastor who is expected by her congregation to be a celebrated scholar, psychoanalyst, administrator, guidance counselor, sacramentalist, storyteller, teacher, and shaman is doomed to failure. She is likely to excel in one or two of these areas, but not in all. Congregations who understand this do not let salaries become a sort of punishment for the pastor's imperfection.

Determining the Pastor's Pay

There are as many formulas for compensating clergy as there are churches-more, because several denominations leave individual churches to fend for themselves in this matter. Many factors must be considered in deciding how much to pay clergy. These include, but are not limited to, the following: denominational salary standards, the cost of living in your area, the standard of living that will be expected of the pastor, housing costs, transportation and automobile expenses, insurance needs (medical, life, home) taxes, social security payments, pension plans, continuing education costs, equity payments, clothing (a pastor's "work clothes" are quite expensive), utility costs, school, medical and dental expenses, entertainment expense.

Notice that the size of the church budget was not one of the areas mentioned above. If you are looking primarily at the size of your budget when setting clergy salaries then you probably ought to reconsider your church's pastor-congregational relationship. Governing boards should meet together before calling a pastor, or with the clergy when they are already on the staff, and ask themselves the following questions: What are our priorities? What values are we promoting in the ways we handle church finances? What is our commitment to quality pastoral care? How much do we expect of our pastor, and how much are we willing to give back in support, time, and stipend? Budgetary woes seem to plague most if not all churches.

Small churches are hardest hit in that they are plagued with high clergy turnover because they cannot offer a sufficient salary to their pastors. The small church ends up spending seventy-five to ninety percent of its budget on maintaining a pastor who most likely will leave in two to three years. The pastor of the small church often-cannot make a reasonable salary nor can the church afford to work towards expansion and growth. This creates a negative spiral in which both pastor and congregation get locked into a fight for financial survival. Alternatives for churches troubled with small budgets include but are not limited to sharing clergy with other churches in a similar plight and training indigenous clergy within the congregation.

A good idea for any church, whether small or large, is to have its clergy and lay leadership come together each year to take an honest look at the pastor's remuneration. Projecting clergy expenses for the coming year is helpful in planning future salary adjustments.

The Salary Package

A simple although sparsely used rule of thumb when setting the clergy package is to find the average living earned by families within your congregation and then offer that to your pastor as his salary package. This might include housing costs but items such as insurance or pension are usually included not as salary but as perks in the labor force. The package should not include those transportation expenses which are merely reimbursements. Continuing education should be offered, but since it benefits the whole congregation, it should not be considered as a part of the salary. In addition, if the pastor does not own her home, an equity fund should be established so that she can be building equity.

Equity: How Can Pastors Own Their Homes?

Far too many clergy are living without the security of owning their own homes. A church-owned home has many advantages for both the church and the pastor, but its chief disadvantage can be the loss of beneficial interest that would otherwise be earned had the pastor owned her home. Consider the following scenario:

Gary is a thirty-one-year-old Lutheran pastor. He has a wife and two-year-old son. He makes $24,000 a year in salary. He receives a car allowance of $2,000 a year. In addition, the church provides full medical and life insurance coverage and makes payments into a denominational pension fund. The church purchased the parsonage in which Gary and his family live in 1967. After paying off a thirty-year mortgage the church will be able to look forward to housing their pastors free of payments for years to come. Gary, however, is not building any equity during his pastorate. He has the comfort and security of a home but will not have the funds to apply toward a new home when he leaves. If the next church does not provide a house but rather pays a housing allowance, Gary will be forced to live in rental property and again will not be building equity. If he spends his entire career in such fashion he may well retire with absolutely no place to live. Social security and denominational pension funds can by no means provide the wherewithal to purchase a house. If each church provides an annuity fund of let's say $3,000 a year, Gary could have enough to make a down payment on a home in seven to ten years.

There are churches that will provide a down payment for a home as well as a housing allowance. This allows the pastor to build annuity in his own home, and the church does not pay into an annual annuity fund. However, many churches cannot afford to make a down payment on a home for their pastor and presently own a parsonage or provide a housing allowance. Obviously, unless the pastor is independently wealthy, his financial status will prevent him from being a homeowner.

Going back to the standard above (a minister should make the average earnings of the congregation), if the average church member owns a home, the pastor should be able to do the same. Most clergy salaries prevent this unless the congregation has agreed to an annual annuity account. This money is the pastor's to do with as he pleases. It does not stay with a congregation when the pastor leaves that congregation, nor should the church receive any interest from it. Placing the money in the pastor's name prevents any future questions about whose money it is and allows the pastor an opportunity to invest the funds for optimum interest.

A Word about Housing Down Payments

There are two primary times when a church might consider helping a pastor buy a house. The first is during a pastoral vacancy and the second is after the minister has served the church for some years. In either case the pastor should have the final decision on the choice of houses. Under no circumstances should a committee or other church member choose the home. Also, it is good to have a written statement clarifying that the pastor is not obligated to pay any portion of this money back to the church at any time. If the church is loaning the money to the pastor, you must be up front and clear that it is a loan and specify what, if any, interest will be expected. If it is a loan, the church would then need to establish an equity account for the pastor since any profit from the later sale of the house will have to be given to the church as payment for its earlier loan.

Transportation Expenses

Pastors generally are quite mobile, traveling to seminars, making pastoral calls, attending retreats, and running errands for the church. It is the church's responsibility either to provide its clergy with a vehicle and gasoline credit card or to reimburse the clergy for their automotive expense. This should include gasoline, routine maintenance, and consideration for the depreciation of the vehicle used for pastoral purposes. Such expenses can easily run between $3,000 and $10,000 a year. It is recommended that the parish pay the monthly car payment, prorated to the amount of time it is used for church purposes, and pay a mileage fee using the current government standards for mileage as a minimum. Another consideration is automobile insurance. A congregation may wish to offset this expense by paying the insurance for one vehicle.

The travel allowance should be negotiated with the prospective pastor and reviewed each year.

Insurance Policies

Medical and life insurance policies can be costly when purchased separately. Some denominations offer group policies at lower rates; others require that individual clergy subscribe to a particular type of policy from one company in order to assure the lowest possible rate. Health and life insurance premiums should be paid by the church. If your denomination, presbytery, diocese, region, or council does not require your pastor to be insured with a certain company, it would be wise to ask prospective pastors about their insurance needs. Once it is determined that the pastor is insured adequately the church may choose to pay the premiums upon his arrival. If he does not have sufficient insurance, help him investigate the costs in updating his family's insurance policies either with their present company or through a firm familiar to you. When purchasing insurance for your pastor, check to see that the policies have reasonable deductible payments and good benefits for the entire family.

At the time this article was written, the Rev. Scott A. Arnold was with St. Peter’s Episcopal Church in Arlington, VA.