Do We Pay Pastors Too Much? Understanding Pastoral Compensation Packages (Part 2 of 2)

Most church budgets tend to be very simple.  Most financial packages of Pastors tend to be very complex.  As a result, there can become much confusion.


Let me give you an example.  At a previous call I was hired at a compensation packaged of $42,000.  Underneath the church budget and in the motion to call me as a pastor it said, "Associate Pastor....$42,000."  This sounds like a lot of money doesn't it?  Who wouldn't want a $42,000 salary?  Oops, I didn't say salary did I!  It was a compensation "package."  See how easy it is to assume that the $42,000 was pure salary?  The reason for the mistake is that pastoral salaries tend to be very complex and it is easy for the average parishioner to make an apples to apples comparison between a pastoral compensation "package" and a secular "salary" position.  So why can't we make an apples to apples comparison? 

Pastors are "dual status," they are considered "employees of the church" for calculating income taxes and "self-employed" for the purpose of calculating FICA/SECA .  To complicate things even more, most church budgets that I have seen, list one figure for the whole pastoral compensation package.  Parishioners are typically interested in the bottom line.  What makes this budget figure complicated is that it is often misleading, as already shown above. The compensation package is often perceived as salary and parishioners fail to realize the costs of: health insurance, pension, disability insurance, self-employment taxes, etc.  In other words, parishioners many times fail to realize that the pastoral compensation package is a figure that contains not just salary but money allocated for benefits too.  This is different from secular jobs because the secular workforce typically separates salary and benefits into two categories.  (i.e. I make $42,000 a year plus a nice benefit package.)


Let me give you a more detailed example using a $42,000 pastoral compensation package.

• From the $42,000 package the pastor needs to subtract health insurance.  

$42,000 - $9,000 Health = $33,000

• Don't forget the pension plan and disability insurance.

$33,000 - $3,300 Pension & Disability = $29,700

• Now subtract half of the self-employment tax because Pastors are dual-status.

$29,700 - $2,228 taxes = $27,472

• Therefore, an apples to apples comparison to a secular work force job would be:

A $42,000 pastoral compensation package is the same as a $27,472 "before tax" salary with a nice benefits package. 

So are Pastors getting paid too much?  In order to answer this, we first have to understand how pastoral compensation packages work.  Once we understand the pastoral compensation package, we can then assess the Pastor's salary.  However, we need to assess the Pastor's salary in regards to the previous posting in this series as well as job performance and national averages published in clergy compensation reports such as this one from the CLBA. 

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Disclaimer/Note: For the record I am very happy with my compensation at Sidney Lutheran Brethren Church and I believe that I am treated very well. A wonderful thank you to my board and church family for your financial support and love.