Getting Past the Awkward: Discussing Pastoral Compensation

One of my favorite follows on Twitter/X is Eric Hoke, who is a bi-vocational church planter who helps pastors enter the labor force after leaving ministry or looking to supplement their income. He often shares pastoral job descriptions or comments from pastors after they’ve gone through difficult discussions with pastoral search committees. According to pastors I’ve listened to and observations made from listening and reading online resources, it’s clear that many churches struggle in their processes when calling or searching for a new pastor.

Why might that be? Aside from pastoral ministry, I’ve had one job outside of the Army. That job had a Human Resources Department, as did the Army. My wife, Robin, has had several jobs outside of the local church, each with their own Human Resources Department. Most churches do not have people specializing in human resources or hiring processes. Many Advent Christian churches have had pastors for a long time and had no need for training in human resources or processes for hiring pastors, secretaries, or directors.

If a church isn’t trained to hire pastors, then it is likely they will lack the skills necessary for hiring them. Mistakes will be made, which can have several undesirable impacts. Consider the church that, after six months, found a candidate, but when the candidate asked how much the church could offer in compensation, they responded with, “We won’t share that information until you accept the call because we don’t want a pastor who is greedy but trusts that God will provide.” That sounds spiritual, but you can’t qualify for a mortgage based on trusting God’s will. Two key components exist when deciding on pastoral compensation: ability and need. First, what is the ability of the congregation to support a pastor? In other words, how much can you afford? Second, what does the potential pastor need to support himself and his family?

What can you afford?

Every church has resources as unique as the people who are members. A church of 50 people might have more resources than a church of 75 because the smaller church has a couple of affluent members who give generously, whereas the church of 75 includes a majority of retirees living on social security. One could have a parsonage, and the other does not. Yet another church might have a healthy endowment that uses the investment income to subsidize ministries. Does your church rent out its facility to a daycare and receive compensation?

When considering a pastor’s compensation, you must be realistic and critically look at your budget. There are times when we can tap into savings to subsidize our ministries and even pastoral pay, however, be realistic as to how long you can do that. Will it negatively impact an emergency fund? How long can you support your proposed compensation if someone moves away? Are you basing your proposal on recent budget trends? If giving has gone down by 5% annually for five years, then are you factoring that into your proposal?

If you have a parsonage, do you have the capital for repairs? Can you afford the utilities and insurance? How about snow removal? If you don’t have a parsonage, then can you afford to pay a housing allowance (preferable to most pastors I speak with)?

What does the pastor need to live?

I can’t tell you how many times I’ve heard from a pastor who interviews with a church to find out that church expects them to work 50-60 hours a week, two week vacation, no retirement, no parsonage, and no availability to work a second job while offering $35k a year. 

Don’t get me wrong, many churches offer $35k and it is an absolute stretch. They are faithful. They will love their pastor. They are committed to $35k because its a step of faith to offer that much. Praise God! However, it is unrealistic in 2023 for anyone to live on $35k a year when they have to pay rent/mortage. 50 hours a week is a normal work week for many pastors, at $35k a year that’s $13.46 an hour, which is below minimum wage here in Massachusetts. At 40 hours per week its $16.83 an hour.

Here’s a sample set of monthly expenses for a pastor who likely took out student loans and is married with children in my area:

Rent/Mortgage (2 bed/1bath) $1,800

Student Loans $250

Car Fuel $350

Car Insurance $200

Home Heating Oil $200

Electric $200

Food/Household Items $400

Cell Phone $100

Internet $100

Total $3600

Based on that simple budget, you are looking at a minimum need of $43,200. This does not include health insurance, life insurance, retirement, entertainment, money for vacation, savings, tithe, etc. Now maybe you think pastors don’t need to save for retirement. You just kind of home things work out in the end. Remember that Jesus admonished the Pharisees for allowing Jews to use Corban to essentially avoid caring for their parents when they needed their children’s assistance in retirement (Mark 7:11).

My suggestion is based on my own lived reality in our current financial climate, I find it unrealistic to expect a family to live on $35k a year unless you offer a parsonage. If you have a parsonage, then $35k is manageable if the church pays all utilities. But consider that each person’s financial needs are different. If you’re hiring a pastor from a different part of the country, do you think they’ll be at their best if they can’t afford to go see their parents at least once a year? Are you hiring a Pastor with a Master’s Degree? If so, then consider how much their student loan payment is. Can they afford unexpected trips to the emergency room? Several years ago, we had an unexpected trip to the emergency room that cost us $500. We didn’t have it. So the hospital put us on a payment plan. 

Also, consider the median individual and household income in your area. Where I live, the median household income in 2021 for Massachusetts was $89,000, and in my town was $79,000. Since then, housing prices have risen considerably. I say that to say that when a pastoral candidate says they need $65,000 or $80,000, it probably isn’t because they are greedy. It very well might be that, in the current economy, this is the income needed to live. As an example, my house costs $25,500 annually, which only includes the mortgage, taxes, and insurance. When I lived in North Carolina, it was half that.

Why is it important to compensate pastors according to their need?

I’m going to trust that you are familiar with the biblical passages that discuss the importance of paying a worker his wages. I also trust that you’re familiar with the demands of an elder/pastor to oversee God’s people with a clear conscience. Here are two practical considerations:

1. A pastor who has to worry about finances will be distracted.

If you’ve read any book about marriage, you would know that the number one cause of relationship trouble is financial challenges. If a pastor and his wife have to worry about whether or not they can pay for medical treatments, food, or the electric bill, then the situation in their marriage can become troubling. It’s emotionally and spiritually draining to have to worry about basic needs due to financial challenges, which can have psychological and physical ramifications as well.

2. Temptation to leave

A pastor should not leave their congregation unless God calls them elsewhere. It is difficult to measure a pastor’s effectiveness at their local church because of the unique nature of their role. However, compensation is easily measured. If a pastor and his family are struggling financially or with their compensation, they could be more easily enticed by other opportunities. You never want a pastor to leave purely for financial reasons but you also don’t want to make it easier for them to leave for financial reasons either. If a pastor is on the fence as to whether he should stay or go, compensation could be the tipping point.

Healthy Alternatives

Let’s assume your church cannot afford a full time salary for a pastor or, the needs of your selected candidate exceed what your church can afford. What should you do? Please don’t make promises that compensation will increase as tithes increase. That’s an unreasonable expectation for the church and the pastor. Here are two ideas:

1. Consider bi-vocational ministry

There is a drastic increase in the number of pastors serving in bivocational roles. It is my personal choice of ministry for a lot of reasons. For this example, it could simply be the pastor needs additional income to support his family.

2. Consider partnering with another church

When I served in Worcester, MA, our church had five ministry partners who subsidized our budget. These partners made up 70% of our income, which meant we could afford to serve a large immigrant and homeless population. Could there be churches that would assist you by supporting your ministry?

Healthy Compensation Conversations

How should you have these conversations? Here are five principles that can help the conversation be less awkward and more fruitful.

1. Be honest

This isn’t a corporate negotiation. If you can afford $70k but offer $50k because you want to leave yourself room to negotiate then you are creating an unhealthy environment. Instead, if the candidate says they need $65k and your budget is $60k, be honest about that and see what you can work out.

2. Don’t hide anything

If your compensation offer is based on utilizing savings then share that with the candidate. They should know the financial situation of the church before they accept any offer.

3. Assume the best about the other

The candidate should not think they are buying a car. Although give and take might exist at this point it should be for pure reasons.

4. Be realistic

If you’re expecting a pastor who has a family of five that has $50k in student loan debt, and houses have increased at historic rates, they are unlikely to be able to live off the same amount as the outgoing pastor in different circumstances.

When I left Hickory Grove I was clear with them. I would not be able to purchase the house I bought in 2019 in the year I left, which was 2022. It had risen in price by $150,000! So when they considered the compensation for their next pastor they should understand his financial needs would likely be greater than mine.

5. Understand the context

I’ve heard from a few pastors that when they’ve shared with a search committee that group expected them to work full time (50-60 hours) for $30,000 and no parsonage. They were not allowed to have a second job and the committee preferred their spouse to stay at home with the kids and run the women’s ministry. Why? It’s what they paid their former pastor of 30 years.

This is 2023 not 1970. Everything is more expensive. When I graduated High School in 2006 gas was way less than $2.00 per gallon. Many pastors get Masters degrees that cost in upwards of $30,000 using student loans.

Additionally, if you ask many older pastors, they’ll readily admit the challenges they face today are far different from the ones they were trained for in the 1970s-90s. Pastors need to be more adaptable, flexible, and think outside the box than ever before. If you don’t believe me, read Will Mancini’s Canoeing the Mountains. Your calling someone to do a difficult job goes well beyond Sunday mornings.

What should be considered when discussing compensation?

There are so many items that could be included in one’s compensation package. Here are several items that I think are important, but I’m probably missing something.

1. Salary

This is your typical taxable income. My compensation has always been broken down by taxable and non-table wages. This is like your non-housing related expenses.

2. Housing

Please check with an accountant familiar with clergy taxes. From personal expenses my housing allowance included utilities, mortgage, property taxes, insurance, furnishings, internet, and repairs.

3. Health Insurance

A requirement in the United States. Even if your church doesn’t have to legally offer health insurance, consider a stipend to help your pastor pay for services on the exchange.

4. Paid Time Off

Don’t make your pastor “earn” their time off. If they need four weeks, then give them four weeks. My greatest regret in ministry is not fighting for more time off. When I was in the Army I received 30 days of leave. I never took more than two weeks per year because I wanted to save my days in case of an emergency. When I pastored Hickory Grove I did the same thing. I only receieved two weeks, so I waited to take vacation so that I could save my days in case of an emergency. COVID hit in 2020 and my mother passed away in April of that year. I hadn’t seen her in almost two years. That’s not the church’s fault, it’s mine. Had I pushed for more time off I would have felt the freedom to spend more time visiting my family back in Massachusetts. 

5. Regular Days Off

Sunday isn’t a day off so when can your pastor take that day? I preferred Fridays and Saturdays because I wanted to give my best rest to my family. When we had a church event on one of those days I simply took a flex day the next week.

6. Sabbaticals

Sabbaticals are super important or not important at all depending on who you speak to. A sabbatical is a scheduled time where Pastor steps away from the church for rest, recuperation, and rejuvination. It’s often practiced for three months overy 7th year.

7. Education

Do you want to provide you pastor the opportunity to further their education?

8. Retreats & Conventions

One way to assist your pastor to rest and feel rejuvenated is to encourage them to go to conferences or retreats.

9. Expenses

Will you provide an expense account so the pastor can purchase books and materials like commentaries? If so, it shouldn’t be part of their compensation but a line item in your budget. However, this can be a great source of encouragement to your pastor.

10. Retirement

ACGC has a great pension plan that your pastor can pay into. You could match what they contribute, which would be an excellent benefit for your pastor.

Conclusion

You might disagree with some of my suggestions above. That’s perfectly fine. I’d just like to share information with you that can assist you and your church in the process of discussing compensation with potential pastoral candidates. One item that continues to come up is the cost of training pastors. If you have individuals in your church who sense a call to ministry or you think could benefit from exploring a call, I encourage you to visit mtiprogram.com. At the Ministry Training Institute, we seek to train leaders in their local context for their local context. It’s cost-effective at as low as $50 a month, so our pastors won’t have as much student loan debt! You can also reach out to me at ereynolds@mtiprogram.com.