The Business of Church

The Business of Church

There is a distinctly business-like aspect to overseeing a church: churches have assets to manage, employees to pay, and members who rightfully demand accountability for their financial contributions. The business side of church leadership is a biblical concept; Jesus taught at length about money matters and His traveling band of apostles had financial affairs, managed by a treasurer.

Unfortunately, few seminaries offer significant training in church administration to the men and women who are called to lead churches, and even fewer secular universities (none, perhaps?) offer courses on church leadership in their business programs. The result is that churches are often jointly led by two types of people: pastors trained in spiritual leadership and lay persons trained in business leadership. Their perspectives are often at odds with each other; bringing both into a single, clear focus is crucial to a healthy church.

One of the most important—and delicate—aspects of church business is compensation. Far more than a mere salary agreement between church and pastor, the area of staff compensation raises two significant questions: how much to pay, and how much to say. Yet scripture is at best vague on the first question (Deut. 25:4, 1 Cor. 9:7-12, 1 Tim. 5:17-18) and virtually silent on the second. In this arena, church leaders can learn much from the business world—both for-profit and non-profit. I would like to suggest four principles to consider.

Set standards for compensation

Churches generally have two classes of staff: “ministerial staff” (all pastors and anyone primarily responsible for the various ministries of the church) and “support staff” (everyone else: administrative assistants, custodians, bookkeepers and so on). Setting appropriate standards will be different for each of these groups.

A good place to start for ministerial staff is by purchasing a thorough compensation report, such as The Compensation Handbook for Church Staff, available from Church Law Today. Match the positions at your church to comparable positions listed in the report, then tie your compensation to a benchmark in the report. One church I served used a target range of 90-105% of the average salary for comparable positions. For example, if the average salary for an Executive Pastor was $65,000, we wanted to pay our Executive Pastor between $58,500 and $68,250.

The hardest part of this is figuring out what is truly comparable, since both the position and the church setting have significant variables. The setting includes attendance, demographics, geography, budget, denomination, and more. Position descriptions also vary greatly, especially with pastors who have combined roles such as worship and administration. Once you have identified these comparisons, keep clear records of them so the process can be repeated on an ongoing basis without needing to start over from the beginning. I would recommend reviewing the same report every year, or at least every other year; it doesn’t take long for compensation to veer away from the benchmarks.

For support staff, look to the prevailing wages in your local area as a standard. What are comparable-size businesses paying administrative assistants and custodians? What are local non-profits paying? What are other churches paying? (A call to a temporary staffing agency could make your work much easier.) Define a set of common job titles and a series of pay grades, then assign a salary range to each pay grade. Kempsville Presbyterian Church has a Salary Administration Plan that includes a good example. As with ministerial staff, these titles and salary ranges should be reviewed and adjusted every year or two.

Be equitable in pay

Setting standards for compensation is an important first step, but those standards need to be applied equitably and consistently throughout the church. Identify one central person—a Business Administrator, Executive Pastor, or other fairly senior staff person—to be involved in all decisions about pay rates. This individual should work with department managers to set appropriate pay rates that fall within the established standards for each position. A key goal is to ensure reasonable equity between comparable employees in comparable positions.

Compensation should not be a function of job title, but of duties and responsibilities. One Administrative Assistant may mainly answer phones and type letters, while another manages the membership database, prepares PowerPoint presentations, and produces the weekly bulletin or newsletter. All else being equal, (which it never is!) should these two be paid the same? Probably not. In fact, these two positions should not even have the same title, unless they are something like Administrative Assistant I and II. Positions with similar titles should have comparable duties. Any pay differences should be due to significant and clearly-identifiable distinctions between the employees or the positions, not on any factor that is essentially irrelevant to the position—especially gender.

A church I served had a man and a woman whose job descriptions, qualifications, ministries, and budgets were virtually identical; they had even earned the same degree from the same seminary at the same time. But because of the church’s stance on women in ministry, she was a “Director” while he was a “Pastor,” and we were paying him about 10% more. When this discrepancy was brought to the board’s attention, we wisely decided that this wasn’t about doctrine, but about job function. Even though we didn’t change her title, we did increase her salary to match his.

Set guidelines for disclosure of compensation

Churches, like other non-profit organizations, must be accountable to the people whose contributions keep the church running financially. But walking the tightrope between disclosure and confidentiality requires a delicate balance. Unfortunately, churches are not immune to lawsuits, and the slightest misstep in public disclosure of compensation can lead to one. The main goal in disclosing compensation should be to provide reasonable accountability while still maintaining appropriate confidentiality. Achieving this goal begins in the budget preparation process.

Churches with only a few staff (less than 10-20) should generally group all personnel costs into one budget area, with separate lines for salary, insurance, retirement, and other benefits and allowances. Larger churches that want to allocate personnel costs to specific departments should group all compensation and benefits under one line item for each department. However, any department that has only one or two staff should be combined with other departments. For example, if you have separate budget areas for Children, High School, and College, you might combine them under a master budget heading of Youth.

In addition, have a policy regarding how, when, and why compensation for individual staff members may be disclosed—and follow that policy religiously (if you’re not going to follow a policy, then don’t have one. From a legal standpoint, one of the worst things you can do is not follow your own policy). Disclosure of salary information should be at the discretion of the board/elders and delegated to the Business Administrator (or Executive Pastor or another senior staff member). If a congregation member wants to see compensation, they should make an appointment with the Business Administrator during normal office hours and should sign an agreement acknowledging the confidentiality of the information. The Business Administrator can use this appointment to help the individual understand the compensation standards and structure, as well as why confidentiality is important.

Communicate, communicate, communicate

Why is it that churches can do such a great job of communicating the gospel to those outside, yet struggle mightily to clearly communicate what’s happening within? Especially in the financial arena, the more open church leaders are, the more trusting churchgoers will generally be. Use the annual meeting to communicate your values for the business side of church, as well as for the more “spiritual” side. If you haven’t thought about what those values are, start now!

There is significant debate today over whether a church should be run like a business. Regardless of your position on that question, recognize that churches can learn sound operating principles from the business world. At the same time, keep business in its place; remember, it was the apostles’ treasurer who betrayed Jesus, and from a human perspective, that was largely because he put financial concerns ahead of spiritual. The church that ignores the reality of its business side will eventually find itself in trouble legally, financially, or both; the church that overemphasizes its business side will eventually cease to meet the spiritual needs of its members and the community. Between these extremes is the healthy church whose sound operating principles serve and facilitate its spiritual ministry.

By | 2016-10-12T11:01:38+00:00 December 5th, 2012|Budgets, Church vs. Business, Compensation, Finance Policy|

About the Author:

Randy Ehle grew up as an MK in the United States, Canada, and Germany. After a tour in the US Air Force, he worked on the support staff of a 3,400-member church while earning a degree in International Business from San Diego State University. He has spent the past 12 years in the financial industry and is now preparing to study toward a Master of Divinity degree at Western Seminary in Portland, Oregon. He served on the Business Committee of a large church for three years, followed by three years on the church Board.