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I. INTRODUCTION- UNDERSTANDING COMPENSATION FOR MINISTRY
Church & Pastor: Covenantal Relationship
A covenantal commitment to care, support, and encourage one another is at the center of our identity as members
of the United Church of Christ. These compensation guidelines are intended to strengthen that relationship. It
is common to bring to this process the perspectives of employment which reflect the cultural values of a market
economy. Arriving at appropriate compensation is not a contest between adversaries but a process of decision making
about stewardship in which all parties share a common commitment. Adequate compensation allows those authorized
for ministry to engage fully in the life and mission of the church. Trust and open communication about resources
and needs of all parties is essential to sustain a covenantal relationship.
Clergy and Taxes
Yes, pastors do pay taxes. Pastors are not exempt from paying income tax. They are taxed at the same percentages
as the rest of the population. Pastors are also responsible for paying Social Security Tax. Because pastors are
consider self-employed for Social Security Tax purposes, they sustain the burden of paying the entire tax at the
highest rate (currently15.3% of the salary basis [cash salary + housing]).
Although a properly approved housing allowance (or fair rental value of the parsonage) is not subject to income
tax, it is subject to Social Security Tax. Even when a church agrees to pay half of the pastor's Social Security
Tax, as happens with other types of church and secular employees, that amount itself is considered taxable for
both income and Social Security Taxes.
Because of the complexities inherent in the taxing of clergy, a church should plan a carefully organized compensation
package, one that takes into consideration the sizable financial impact that taxes make upon pastors. The church
should work with the pastor to allocate a salary and benefits package that minimizes tax liability. In this way
a church becomes a well-informed steward of its resources and demonstrates genuine care for its pastor.
II. COMPONENTS OF COMPENSATION
The following elements comprise an adequate and fair compensation package:
A. Base Salary
Salary is determined by considering the responsibilities of the position, levels of education, years of experience,
and the needs of the person. The base salary should be comparable to that of other professions in the community
requiring similar education and experience. The accompanying chart reflects the MINIMUM recommendation as determined
by church membership and the years of experience in ordained ministry.
B. Housing
When a parsonage is provided, the major appliances and all utilities except personal long distance phone calls
will be provided by the church. The parsonage should be well maintained and compare with the average housing in
the church membership and community. Since pastors are considered self-employed, they must pay Social Security
Tax on the value of the parsonage. That value is calculated at 30% of Base Salary. For tax purposes, pastors can
deduct the cost of purchasing furnishings from Base Salary, provided that amount is stipulated by vote of the church
or official board as a portion of the housing allowance before payment at that adjusted salary level begins. Some
congregations offer to contribute to a tax-sheltered equity fund to compensate for a pastor's loss of equity by
living in a parsonage.
When a housing allowance is furnished, it should adequately reflect the average cost of housing within the church
membership and community. The amount of total salary designated for housing again must be established in advance
by vote of the church or official board and reported in writing to the pastor before payment at that salary level
begins. Some congregations provide a loan at low or no interest to assist their pastor in purchasing a home. Such
a written contract must be clear to all parties.
The following chart represents the MINIMUM cash salary based on church membership and total years of ordained ministry.
The chart also contains 30% of the cash salary figure which represents a housing allowance or use of a parsonage.
Annuity payments and disability insurance payments are based on the +30% figure.
2008 CLERGY COMPENSATION MINIMUM GUIDELINES
Church
Membership > 1-150 151-300 301-450 451+
Experience
0-3 years > $26,191+ $27,741+ $29,154+ $29,424+
+ 30% Housing > $34,048+ $36,063+ $37,901+ $38,251+
4-7 years > $27,475+ $29,154+ $30,602+ $30,882+
$35,718+ $37,901+ $39,783+ $40,147+
8-11 years > $28,889+ $30,602+ $32,117+ $32,406+
$37,556+ $39,783+ $41,753+ $42,128+
12-15 years > $30,307+ $32,117+ $33,704+ $34,051+
$39,398+ $41,753+ $43,815+ $44,266+
16-19 years > $33,170+ $33,704+ $35,412+ $35,728+
$43,121+ $43,815+ $46,036+ $46,446+
20- + years > $33,404+ $35,412+ $37,156+ $45,362+
$43,425+ $46,036+ $48,303+ $58,971+
Note: Add a cost-of-living increase each year.
C. Vacation and Days Off
A standard work week for pastors is estimated to be approximately 50 hours. Responsibilities often require work
on evenings and Saturdays as well as Sundays. An annual vacation of four weeks, including four Sundays, should
be considered as standard. One day off per week should be strongly encouraged to assure a pastor's continued health
and endurance.
Most church members and families have the opportunity to use weekends for rest and relaxation. Pastors cannot have
weekends for rest and relaxation. Consideration should be given to granting the pastor an additional 2 weekends
off in the course of a year, not counting vacation time. It is understood there would be no change in the pastor's
weekday schedule prior to the weekend off. These weekends would be considered rest and relaxation time for the
pastor and family.
D. Benefits
Benefits are those items other than base salary and housing that are considered part of the compensation package.
They are the congregation's responsibility in providing adequate and just support of their pastor or leader. These
include health and dental benefits, annuity, long term disability, and group life insurance. The Pension Boards
of the United Church of Christ offer the following benefit plans to pastors with standing and lay persons employed
at least 20 hours per week.
1. Health Insurance
The United Church of Christ offers a Health Benefits Plan and a Dental Benefits Plan. These are self-insurance
programs providing comprehensive health and dental benefits that clergy and their families retain if they move
from one state to another. Premiums are based on health care costs in the insured's particular zip code. (In 2007,
annual premiums for single coverage is $420 dental and $5886 health; family coverage (2 adults, 2 children) is
$920 dental and $12,204 health.) Once included in the Plan, clergy and their families are insured for life as long
as premiums are paid. No plan is immune from the national problem of escalating health care costs. Your Conference
office or the Pension Boards will help if you have questions about this plan. The church should pay the entire
premium for family coverage unless only single coverage is needed.
2. Annuity
The Pension Boards of the United Church of Christ administer an annuity fund for pastors and lay workers. This
tax-sheltered fund is very carefully invested to provide maximum benefits at retirement. Annuity payments are calculated
at 14% of the total of base salary plus housing. When a parsonage is used, the value of that housing is calculated
as 30% of the base salary. Thus the annuity payment for a pastor living in a parsonage would equal 14% x 130% of
the base salary. When a housing allowance is paid, annuity is calculated at 14% of the total of base salary plus
actual housing allowance. Additional tax-sheltered payments may be made by agreement of the church, the pastor
and the Pension Boards.
3. Disability and Life Insurance Benefits
Congregations should also provide for disability and life insurance through the UCC Pension Boards Plan. The United
Church of Christ Life Insurance and Disability Income Benefit Plan is designed to support UCC employees in performing
their ministries for the church. The Plan provides benefits in the event of death or disability. The Plan is provided
through a group insurance contract issued by the Metropolitan Life Insurance Company. The cost is 1.5% of the salary
basis. Contact the Conference Office or the Pension Boards for further details.
4. Social Security Reimbursement
Congregations should budget an amount equal to at least an employer's portion, or 7.65% of base salary plus housing,
as a Social Security reimbursement. The Internal Revenue Service considers ordained pastors employees in relation
to the income tax, but self-employed in relation to the Social Security tax. While pastors must pay the self-employed
Social Security tax rate (currently 15.3% of self-employment income), the IRS allows self-employed persons to deduct
one-half that amount before calculating their income taxes as well as Social Security taxes.
E. Sabbatical Leave
Sabbatical leaves encourage longer pastorates and give both pastor and congregation new appreciation and fresh
energy for their covenant in ministry. At the end of each five years of full-time ministry, the pastor shall be
granted three months' sabbatical/education leave with full salary(in addition to vacation) for a program of spiritual
and intellectual refreshment, for a refresher course or courses of study or educational travel mutually agreeable
to both the pastor and official board. During such sabbatical/educational leave, the church should agree to underwrite
the cost of pastoral services. It is understood that the pastor shall remain as pastor for at least one more year
of service following a sabbatical/educational leave or repay the church the salary for the time taken as leave.
Congregations can prepare for that expense by adding annually to an escrow account for that purpose. Lay persons
also can be prepared to lead worship and carry responsibilities for visitation, community leadership, and other
regular pastoral duties.
F. Cafeteria Plan Considerations
It is possible to reduce the pastor's taxable income by designating a portion of the salary for such items as incurred
medical expenses and child care expenses. An official action by the appropriate church board allocates a fund from
which the pastor can draw for reimbursement of appropriate expenses. The unused portion of the fund is "lost"
to the pastor. It cannot be paid as salary or as a hedge against setting aside an unrealistic amount. Be sure to
ask for competent professional advice to insure compliance with current tax regulations.
III. REIMBURSABLE EXPENSES
Reimbursable expenses are those costs, reimbursable to the pastor or lay minister, which are incurred in the performance
of duties. They are not part of the person's compensation. They are "business" expenses for which the
congregation is responsible. The IRS considers the following to be reimbursable expenses:
A. Travel
The Internal Revenue Services establishes annually a maximum allowable rate for deducting business travel mileage.
In 2007 the rate is 48.5 cents per mile. The rate includes the full costs of auto depreciation, insurance, maintenance
and operation as a per mile cost. It is recommended that churches reimburse pastors for actual mileage logged in
the performance of the ministry at the IRS allowable rate or other negotiated rate. It is not recommended that
a monthly flat rate travel allowance be paid.
B. Continuing Education
Congregations should expect a pastor or leader to be committed to continued professional growth and development,
since both truly benefit from it. Continuing education leave of two weeks each year is recommended, with an amount
budgeted to cover a major portion of the expenses for tuition, travel, housing and meals that might be involved.
The appropriate church board should be involved in approving a mutually beneficial experience.
C. Other Professional Expenses
The church may budget an amount for annual professional expenses such as:
Professional journals, books or periodicals
Hosting or entertaining church leaders, members or guests
Dues to professional organizations such as the Academy of Parish Clergy or the Association of United Church Educators
D. Conference and Association Involvement
Pastors are expected to attend official Conference and Association meetings to maintain their ministerial standing.
A pastor should be encouraged also to serve in wider ministry settings - in the Association, camp, Conference,
or national settings. Such service, in appropriate amounts, should be considered part of the congregation's and
person's ministry. The Conference asks congregations to encourage their pastors to offer one week's service per
year at Kamp Kaleo as a counselor or director. Such wider service is neither time off nor vacation. Expenses not
reimbursed by the wider ministry setting should be reimbursed by the local church.
E. Pulpit Supply
During periods of scheduled absence of the pastor, such as the Sundays of scheduled vacation, Conference Annual
Meeting, continuing education, sick leave or other approved personal leave, the payment of pulpit supply preachers
is the responsibility of the church. See Section V, "Other Staff and Specialized Ministry" for suggestions
of compensation for this service.
F. Worker's Compensation Insurance
Worker's compensation is required by law in Nebraska. The United Church Insurance Program offers this coverage
at competitive rates.
G. Malpractice Insurance
In today's litigious society, churches should also carry malpractice insurance to protect both the pastor and church
in the event of a lawsuit. Congregations insured through the UCC Conference's Insurance Program have that coverage.
IV. OTHER SUPPORT
Congregations are wise to anticipate special situations or needs of their pastors, commissioned or licensed ministers,
or other employees. Such special situations include illness, personal emergencies, the birth of a child, etc. Personnel
policies regarding such needs can avoid confusion and avert tensions in the relationship. If the church has no
personnel policies for pastors or other employees, a beginning point could be consideration of the Nebraska Conference
Personnel Policies.
A. Sick Leave
In developing sick leave policy, the congregation might begin by considering the Conference policy, which allows
one day per month for a maximum of 12 days per year, not cumulative. If an extended illness occurs, the official
church board could be empowered to arrange for full salary up to 12 weeks. In case of long term disability, the
congregation is expected to sustain full salary and benefits through the first 90 days of confirmed disability,
after which disability insurance benefits apply.
B. Maternity/Paternity Leave
A period of maternity/paternity leave, with pay, is an important way for congregations to support a pastor and
family. The Nebraska Conference Personnel Policies allow for up to four weeks of leave during which salary and
all benefits are maintained. These guidelines should also apply to adoptive parents. Details of the leave should
be negotiated and clearly expressed to all parties to avoid misunderstandings.
C. Emergency or Personal Leave Days
It may be helpful to identify a number of personal leave days to be used in cases of special family crises or celebrations.
V. OTHER STAFF AND SPECIALIZED MINISTRY
No ordained pastor should be expected to serve full time for less than the minimum compensation guidelines outlined
above. While compensation for Commissioned or Licensed Pastors may not meet the same guidelines as for ordained
pastors, it yet must be fair and adequate compensation for the responsibilities involved.
A. Associate Pastors
Associate Pastor compensation will vary also with responsibilities, experience, and training. While it is common
for an associate pastor's base salary and housing to be less than a senior pastor's, it ought not be less than
75% of the senior pastor's base salary and housing. In any case, it should meet at least the minimum guidelines
above. Full benefits should be offered.
B. Interim and Intentional Interim Pastors
An interim pastor is a pastor specially trained to serve churches experiencing the transition between their former
pastor's departure and the calling of a new pastor. Because this "interim" period is such an important
time for a congregation to work on issues of change and development, an interim pastor needs special skills and
training. A full-time interim pastor should receive compensation that meets the above guidelines and be at least
equal to the pay received by the previous pastor.
An "intentional interim pastor" is a pastor contracted to serve a church during a stipulated transition
period in order to help that congregation meet particular goals before calling a new, permanent pastor. An intentional
interim pastor helps the church identify those important goals and set objectives for the interim period, which
may be one to two years. Compensation for this specialist in interim ministry should be at least at the same level
as the last full time pastor's but may need to be higher to adequately compensate for the interim's unique skills
or to stretch the congregation toward more adequate compensation for a newly called pastor. Compensation for less
than full-time, non-resident interim pastors is $135 per day minimum, plus travel, food and lodging.
C. Regular Supply and Pulpit Supply Pastors
A congregation desiring full or part time pastoral leadership during an interim or sabbatical period, but which
is not intending to deal with particular changes or developments during that period, may contract for the services
of a regular supply pastor. A regular supply pastor would assist the congregation in maintaining their ministries
and programs. Compensation for regular supply pastors should meet the above guidelines, using the part time formula
when the contract involves less than full time service.
Where a congregation needs only worship leadership, a pulpit supply pastor may be contracted for one or more consecutive
weeks. Compensation of a minimum of $75 to $100 per worship service, plus travel expenses, is a fairly standard
amount for that limited service.
D. Commissioned Ministers
Commissioned ministers are lay persons normally with a college degree plus specialized training in a specific area
of ministry not requiring ordination, such as Christian education, music ministry, administration, outdoor ministry,
etc. Compensation should again reflect experience, education and special training. Full time service should include
all the benefits recommended above in II. D, pages 4-5.
E. Licensed Ministers
Licensed Ministers are lay persons who have received special training to preach and lead worship in settings where
an ordained pastor is not available or is inaccessible. Compensation should address fairly the minister's needs
in relation to the amount of time and responsibilities required by the position. Full-time licensed lay ministers
should be compensated at the MINIMUM rate of 80% of recommended guidelines for ordained clergy and considering
also average compensation and benefits received in the community.
F. Part-time Employment Guidelines
Congregations who call pastors to less than full time service can determine the recommended equivalent base salary
using the same chart on page 3 by calculating base salary as a percentage of the standard 50 hour work week. Pastors
employed 25 hours or more per week should receive housing and all benefits (listed above). Pastors and lay ministers
employed less than 25 hours per week may negotiate for housing and benefits proportionate to the percentage of
a full work week. Formula: Hours divided by 50 times full-time salary = part-time salary.
Example 1:
The congregation considers the position to be half time, or 25 hours per week. According to the pastor's experience
and church size the chart on page 3 indicates the recommended minimum base salary is $26,191. The recommended salary
for the part time position would be determined:
25 hours per week divided by 50 equals .5 times $26,191 = $13,096.00
Example 2:
The congregation wishes to add an additional part time position to the existing full time pastor position. The
new responsibilities would require an estimated 30 hours per week. According to the pastor's experience and church
size the chart on page 3 indicates the recommended minimum base salary is $32,117. The recommended salary for the
part time position would be determined:
30 hours per week divided by 50 equals .6 times $32,117 = $19,270.20
VI. WORKING TOGETHER FOR EFFECTIVE MINISTRY
The covenant that binds a pastor and congregation in mutual ministry and mission needs to be nurtured, strengthened,
and sometimes renewed. Here are some specific ways that can be done.
A. Pastoral Relations Committee
A small committee of three to seven persons is given the specific job of nurturing the pastor and spouse. The committee
should also nurture the relationship between the pastor and the congregation and work at clarifying the role of
the pastor. Such care can build the trust and communication necessary to deal effectively with inevitable tensions
or conflicts that arise. Guidelines for such a Committee can be found in the booklet, "The Pastoral Relations
Committee," available from United Church Resources or the Nebraska Conference office.
B. Annual Review of Compensation
An important task for a Pastoral Relations Committee is an annual review of the pastor's compensation. The review
should be an open and caring conversation allowing the pastor to express changing needs or expectations. An annual
increase of base salary reflecting any increase in the cost of living should be considered. Compensation does reflect
the congregation's intentions to take seriously their own calling. Additional salary increases reflecting meritorious
service or increased responsibilities affirms the mutual covenant between pastor and congregation. Increases in
pastoral compensation should be advocated by a member of the Pastoral Relations Committee. A pastor ought not be
put in a position of defending her/his own compensation.
C. Performance Review
Any planned review of pastoral performance needs to be done at a time sufficiently distant from annual compensation
review to avoid linking the two. Performance review should be undertaken only when its purpose is clear and only
if there are not immediate tensions in the relationship between pastor and congregation. Such purposes might be
to clarify congregational goals and objectives, to assess the pastor's use of time in relation to those objectives,
to identify unmet needs, or to identify skills that need further development. Review of the congregation's performance
is as important as review of the pastor's. After all, the ministry and mission belong to both. Deficiencies in
performance by one party can seriously impede effectiveness by the other. Instruments for "Local Church Evaluation"
and "Clergy Evaluation" are available from United Church Resources.
HOW THE PASTOR'S COMPENSATION MIGHT APPEAR IN A LOCAL CHURCH BUDGET
This sample church line item budget illustrates how compensation can be presented to communicate clearly the components
of compensation, its distinction from reimbursable expenses, and the scope of the church's responsibilities in
adequately supporting the ministry. This example uses the figure of $26,191 as the base salary.
PASTORAL SERVICES:
COMPENSATION (sample)
Parsonage Provided Housing Allowance
Base Cash Salary ........................................ $ 26,191 $26,191
Parsonage Value (30% of Base Salary)......... 7,857
Housing Allowance ................................................................................ 8,000
Social Security Reimbursement ........................... 2,546...........................2,616
Total Cash Compensation ....................$36,594 $ 36,807
BENEFITS
Health Insurance for 2 adults (approx.) $ 11,572
Annuity (14% of base salary plus housing allowance) 4,628
Life Ins. & Long Term Disability Plan . . . . . . 496
Total Benefits $16,696
EXPENSES SUPPORTING THE MINISTRY
Travel IRS rate (48.5 cents/mile in 2007) $ 6,539
Continuing Education 600
Professional Expenses 400
Meeting Expenses (Conf., Association, other) 400
Pulpit Supply Preachers 600
Worker's Compensation Insurance ......................... 340
Total Expenses Supporting the Ministry $ 8,879
Parsonage Expense To Church
Utilities................................. $3,500
Insurance............................. 500
Maintenance....................... 2,000
Furnishings.......................... 2,000
Total Parsonage $8,000
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