By Grace Thornton
The Alabama Baptist
For more than half of Alabama Baptist pastors, the salary they get for filling the pulpit isn’t their sole income. About 1,500 of the state’s 2,928 pastors work a second job during the week.
But for those who do make their living entirely from their church, the going can get tough when it comes to money, said Larry Byrd of Nowlin and Associates Wealth Management.
For many “it is very difficult to go to their committee and ask for a raise,” even if they are unable to support their families, said Byrd, a member of First Baptist Church, Birmingham. “It can also be uncomfortable to ask a church for the freedom to get a second job to supplement their income. They are caught between a rock and a hard place.”
It’s not an uncommon story for pastors, according to Christian Messemer, a certified financial planner and a doctoral candidate at Southwestern Baptist Theological Seminary in Fort Worth, Texas.
He said he is regularly asked to look over compensation packages that churches have offered to potential pastors.
“Without fail, when I begin to do the math, it quickly becomes apparent that the numbers will not work,” Messemer said.
For him, the problem boils down to one major issue — the way churches look at their pastor’s compensation structure.
More times than not, when the potential pastor went back and talked to the committee again, the committee told him they did not realize the true cost for the benefits and other taxes paid for by an employer that most W-2 employees take for granted.
Those benefits are what human resource professionals call “total compensation,” he wrote.
Messemer recently outlined this issue in “A Shift Toward Total Compensation” and offered three ways for pastors and churches to look differently at the way they do salaries in order to avoid financial crisis.
1. As a church, consider total compensation for your pastor rather than a gross wage model.
Gross wage is what an employee is paid prior to personal deductions for taxes, insurance and retirement. A total compensation model would include gross wages but also benefits from the employer such as health insurance, life insurance and retirement contributions.
Often, Messemer said, churches will pay the pastor a salary and leave him to deal with his own insurance and retirement. So, for example, if he is paid $35,000 and then has to pay his own taxes and insurance premiums, he would make far less than an employee in the workforce who made $35,000 in gross wages plus $15,000 in employer-paid benefits.
“The decision to sacrifice financially for the church is nothing new for [Southern Baptist Convention] pastors,” Messemer wrote. “For years SBC ministers have focused not on asset accumulation but on properly stewarding the Word of God, knowing that their ‘other’ retirement program — the rewards given to a good and faithful servant — remains secure.”
While this is noble and sacrificial, the consequences are only just beginning to show up as pastors in the Baby Boomer generation retire, he wrote.
“For these men and their families, their financial sacrifice for the Kingdom continues into retirement, turning their golden years into a financial nightmare,” Messemer wrote.
2. Remember to factor in the importance of a cost of living adjustment.
A cost of living adjustment, or COLA, is not to be confused with a performance-based raise, Messemer pointed out — rather, it simply helps a pastor keep the “buying power” of his original salary rather than letting it erode with inflation.
Yearly adjustment
“Many pastors are familiar with this situation,” he wrote. “Without a yearly adjustment, the ever-increasing prices in goods and services place a continuous strain upon the family’s budget.”
At first they try to cut all they can — eating out, name-brand merchandise and family activities might all fall by the wayside, Messemer wrote. But as the years go by, even those cuts aren’t enough.
“The addition of a COLA to a pastor’s compensation package provides financial flexibility to pastors by taking into account the ever-increasing price levels of goods and services,” he wrote.
3. If your church can’t pay enough, consider freeing up some of your pastor’s time to get a second job.
The reality is — a pastor needs a COLA, social security and insurance to survive, Messemer wrote. But the reality also might be that the church is unable to supply those things.
If that’s the case, the pastor and the church may need to “work together to realize the weaknesses of the pastor’s compensation package and to develop a plan which will allow the pastor to continue his service to the local church while providing the opportunity for the pastor to seek additional opportunities that will fill in the gaps produced by the church’s plan,” Messemer wrote.
This could mean getting an additional full- or part-time job that has benefits. Or it could mean getting an additional job without benefits, but taking their pastor’s salary in the form of medical insurance and a housing allowance instead of gross wages, Messemer wrote.
“Despite the church’s inability to provide in total for the pastor’s financial need, churches can be great partners as they work with the pastor to structure his compensation package in the most beneficial way,” he wrote.
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For Christian Messemer’s report, “A Shift Toward Total Compensation,” which includes worksheets and other resources, visit guidestone.org.
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Tips for navigating compensation topics as pastor, committee member
Church leaders urged to be wise managers of Lord’s money, educated on tax laws
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