This article “How Much Should We Pay Our Pastor? An Introduction to the Pastoral Compensation Tool” originally appeared as a feature article on OPC.org and has been updated with additional information regarding housing allowance and cost of living adjustments.
By John Fikkert
One of the hardest and most sensitive issues a church can face is how much to pay its minister for his labors. Scripture makes it clear that those who proclaim the gospel should earn their living by the gospel (1 Corinthians 9:14), and by extension this means that the church is responsible for supporting its pastor and ensuring he is “free from worldly care and employment,” (see the OPC Form of Government chs. 22 and 23).
For some OP churches, budgets are limited and they are stretched as far as they can be to support the pastor. For other OP churches, it is sometimes unclear what the compensation target should be, and how much is too little or too much. It might even happen that a church can be forgetful of the changes that need to be made to a minister’s compensation in the years which follow after approving the initial call, as family size grows and health insurance premiums continue to increase.
One additional comment before introducing the pastoral compensation tool is to point out the importance of providing adequate benefits in addition to salary. To illustrate, I live in Pella, Iowa where there are two large manufacturers, Pella Windows and Vermeer Manufacturing. An 18 year-old high school graduate will be paid around $17-20 per hour, and if he or she works 50-55 hours per week (which is common), he or she can expect to make around $50,000 or more per year in wages. As a church member, that same employee, along with others at the church, might expect the pastor to make a little more than they do, perhaps in the $70-80,000 per year range. That expectation, however, does not adequately account for the church providing both salary and benefits to their pastor. For instance, in addition to an hourly wage, the factory also provides one half of the contribution to Social Security and Medicare ($3,550 on $50k per year), plus health insurance, life insurance, disability insurance, dental insurance, and an employer contribution to their 401(k) program. Realistically the true cost of that factory worker to their company in wages plus benefits could easily reach $80,000 or more. When our church member is asked how much he or she makes, he or she replies ‘about $50,000.’ When he or she sees the pastor’s total package with salary and benefits, they might think ‘Wow, that’s a lot of money,’ not realizing that the church as an employer must also provide benefits. Thus, for pastoral compensation, a church needs to consider not just salary but also adequate benefits for a pastor to support his family.
The OPC’s Committee on Ministerial Care has provided an online tool to help churches and sessions as they consider pastoral compensation. Besides making it easier to include benefit line items, the tool also makes it easier to account for years of experience and family size. The tool factors in a 3% increase in salary per year of experience. As for family size, the pastoral compensation tool takes the federal poverty guidelines and multiplies them by 1.5. Without going into an extended explanation of the federal poverty guidelines, the basic math states that for every additional member in the household, income needs to increase by $4480 in order to stay above the poverty line. Multiplying that number by 1.5 ($6720 per family member) means that the pastoral compensation tool recommends an amount above poverty level to ensure the minister is well supported (1 Timothy 5:17-18), since poverty guidelines do not envision a person saving money, taking vacations, or having children in Christian or home school. At the risk of sharing too many numbers, the resulting salary in order to maintain a family of six at 1.5 times the federal poverty rate would require $52,740 in salary, without taking into account years of experience or benefits.
Additional features of the online tool include a calculation for housing allowance, health insurance, Social Security and Medicare contribution, and a retirement contribution (the Committee on Ministerial Care recommends 10% of a pastor’s salary and housing allowance as a retirement contribution). It is worth reminding as these additional line items are considered that housing allowance provides a significant income tax savings for ministers that can help lower their budget needs and save churches money as well (For more information, check out our video with Doug Hoogerhyde).
One piece of feedback often received by the Committee on Ministerial Care is that the online compensation tool does not seem at face value to account for cost of living changes across various areas of the country. In the committee’s research, however, two of the primary factors for regional cost of living adjustments are housing costs and health insurance. By making these separate line items in the tool, churches should be able to adjust for those costs in their region without needing to make significant additional adjustments.
While the pastoral compensation tool provides detailed line items and specific numbers with which to work, it is not intended to be the definitive answer for every situation. Churches, sessions, and presbyteries review calls in the context of specific local circumstances that could greatly impact what might be adequate for pastoral compensation. A family of seven living in Los Angeles will need more to make ends meet than a couple nearing retirement who live in South Dakota, have their house paid off, and no longer have children in the home.
One of the challenges the pastoral compensation tool hopefully highlights is just how expensive it can be to provide adequately for a pastor with a young family. For obvious reasons, churches love to call pastors with young families but do not always remember how much it might cost to provide that family with appropriate salary and benefits (especially when factoring in health insurance and the federal poverty guidelines for a family). More than one young seminary graduate with a family finds himself in a difficult place economically, persuading himself that an initial call might work if the church budget grows in the next few years. To make ends meet, he must choose inferior health insurance, cannot afford to make even a minimal retirement contribution, and pays only the monthly minimum on his student debt.
To be clear, there is no one-size-fits-all approach to pastoral compensation. How much should we pay our pastor? While a definitive answer may be elusive, I would invite you to explore the pastoral compensation tool and prayerfully consider how it might impact your view on what it means to provide adequate compensation for a pastor.