Increasing Pastor Pay Doesn’t Need to Cost Your Church (But it Will Protect Your Church’s Future) – California Southern Baptist Convention

Increasing Pastor Pay Doesn’t Need to Cost Your Church (But it Will Protect Your Church’s Future)

Published Jul 11, 2023

Pastors earn their living by sacrificially serving and supporting the church in obedience to God’s calling on their lives. When their time leading a faith community comes to an end, who will take care of pastors? Who will be there to support them financially?

These questions are becoming more concerning as today’s pastors are facing an often-capped salary, which has implications both in our current era of high inflation and down the road as pastors pursuing a dignified retirement may be met with a painful reality.

Churches love and care for their pastors and don’t intend to leave their financial needs unmet. However, outdated ministerial pay practices are unintentionally communicating a different narrative. Churches need to revisit the current lump-sum compensation approach and consider alternative salary-and-benefits packages that better sustain pastors, allowing financial security at the end of their vocational service to become attainable.

Since 2018, the Consumer Price Index (CPI) has increased by 17.6%, causing individuals around the country to struggle under the weight of rising inflation — and pastors are not immune. Despite this increased financial burden, income for full-time senior Southern Baptist pastors has been stuck at the same level since 2018, and their pay package — which includes compensation, retirement, and insurance benefits — has fallen 2.1% in the same period.

This reality has left 41% of Protestant pastors worried about their family’s financial security, according to a study by Lifeway Research published in August 2022. By re-examining the compensation model, churches can provide a solution — and it doesn’t need to cost the congregation an extra dime.

For pastors who are compensated with a “lump sum” payment, churches set aside a total bucket of money that the pastor is then responsible to delegate for housing, insurance, retirement, and taxes.

This approach is counter to the majority of Americans’ experiences in the workforce. Whether in the private or nonprofit sectors, institutions designate benefits and withhold taxes on the front end of employees’ paychecks with input from the employee. This process is beneficial because it clearly shapes an employee’s base salary to ensure it supports his or her daily needs.

When compensation is given as a lump sum to a pastor instead, salary increases become difficult to identify and navigate, leaving even cost-of-living adjustments (COLAs) by the wayside. It also leaves pastors vulnerable to a higher tax bracket on their income — meaning that less money can go toward caring for their family and personal needs.

Replacing the lump-sum approach with a comprehensive salary and benefits package is better stewardship of the church’s resources and helps enhance the well-being of its pastors. In doing so, the church is providing clarity for the base salary, benefits, and housing allowance tax exclusion, while enabling the church to more easily understand the true amount of his “take-home pay.” This allows the church to thoughtfully consider pay increases appropriate to support the pastor’s family.

Simply making the switch could also raise a pastor’s income without the congregation increasing its contributions. This is because pastors can better avoid unnecessary taxes when navigating benefits after receiving their lump-sum pay. The net effect is a take-home pay raise — even though the church’s total outlay may not change. (For more information on best practices for setting church compensation, GuideStone makes free compensation planning resources available for churches.)

Growing up as a pastor’s kid (PK) and missionary’s kid (MK), I spent many of my formative years living overseas, where my parents served as church planters. I have seen firsthand how often financial burdens can serve as roadblocks to a pastor’s effectiveness and tenure in ministry. These experiences fuel my passion to enhance the financial security and resilience of those in ministry. With this in mind, today’s current economic environment is a critical time for churches to modernize their compensation for pastors.

While church leaders do not follow the call into ministry to store up earthly treasures, empowering them with financial stability has a direct impact on their ability to answer this calling, and allows them to devote themselves to their community with resilience and focus. Providing a clear salary with a benefits package enables the church to support its pastor in both serving well and finishing well.