Friday, September 28, 2018

Hey Fletch … Our church has been giving annual raises every year for a long, long time. They are 3.5% for every staff person. The thinking is that everyone is doing hard work and deserves the same raise. This doesn’t sit well with me. What do you think?

Fletch—The sentiment in giving 3.5% raises every year is sweet. However, it doesn’t make economic sense or improve the morale of key staff. It assumes that everyone was hired at a fair wage. It also doesn’t take into account people who are star players who implement your church’s vision.

A better method is to determine what the inflation number is each year. For 2018 it is about 2%. To keep salaries with the same buying power, a 2% raise may be merited for many staff. If you don’t keep up with inflation, then over four years your staff can lose 10% or more of their effective wages. 

With a 3.5% raise pool and with 2% cost of living increases, you would have significant funds for merit increases for selected staff. Calculate what 1.5% of your raise pool comes to and how you might invest those funds in key staff.