Human Resources encompasses a wide range of responsibilities. Churches may have one person or a committee engaged in managing the various facets of employee administration. Staff Benefits is one component of Human Resources that may prove to be time-consuming and confusing. Staff Benefits offerings vary with the uniqueness of your organization. Here we will look at some of these areas and provide information for consideration as relating to Staff Benefits.
Staff, Benefits, and Healthcare
We have found based on statistics that the most common non-salaried benefits offered to pastors and church staff statistically include Health Care Benefits, Life Insurance, Disability Insurance, Paid Vacations, and other supplementary benefits. According to Church Law & Tax, in 2019 Christianity Today collected data from 5,500 Churches and more than 12,000 church staff members. These data indicate trends in the top non-salary benefits offered to staff and pastors.
Benefits offered to staff members include:
- Paid Vacation (67.3%),
- Health Insurance (25.9%),
- Retirement Plan Access and/or Contribution (23.7%),
- Life Insurance (15.1%),
- Disability Insurance (13.7%).
Benefits offered to pastors include:
- Paid Vacation (88.1%),
- Housing Allowance (64.3%),
- Health Insurance (54.2%),
- Retirement Plan Access and/or Contribution (51.9%),
- Auto Allowance (34.4%).
Providing benefits demonstrates that you value your employees and your organization supports healthy employee retention. Offering a Benefit Program is unique to each organization based on any number of church demographics. Demographics may include your church life stage, size of organization, annual giving, the number of employees, and church budget.
Insurance companies and benefits plan options vary from state to state. Many churches work with local insurance brokers that specialize in navigating state regulations. An insurance broker’s role is to consult with their client (without cost) and provide suitable insurance plan options while providing various levels of service. Using an insurance broker can minimize the time spent on research and reduce time navigating the various complexities of insurance. Whether your church organization can offer group insurance or not, most insurance brokers and/or agents specialize in both individual and group healthcare and other insurance-related products.
Alternatively, Medical HealthShare Plans seem to be gaining popularity in recent years due to the increase in healthcare cost. Share plans are member-based programs designed to allow you to share healthcare costs with like-minded or religious organizations. When considering HealthShare options, it is important to understand these programs provide shared coverage for specified benefit coverage and are not considered a medical insurance product. HealthShare Plans are available to employer groups or on an individual basis.
To locate a licensed, qualified insurance specialist in your area, consider visiting your local Department of Insurance. You may also find additional resources on the internet to help start you on the path of learning more about HealthShare programs and the differences between health share and insurance.
Life and Disability Insurance policies provide income protection security for individuals and their families, giving peace of mind in the event of an unforeseen event of death or disability. Knowing your income will continue if you are unable to work is invaluable and helps ease a potential hardship for your employee and/or their family when most needed. Income protection insurance plans are available to groups and individuals. Your organization may consider offering income protection plans on voluntary or non-voluntary basis. Plans may also be purchased on an individual basis. An insurance broker can assist with providing options for group or individual income protection plans.
Having an avenue to save for future retirement is increasingly important to those who work in the secular professions and equally important to pastors and other staff whose calling is to work to build the Kingdom of God. Your organization may have a Retirement Savings Program or your church may be in preparation stages for your pastor and staff’s retirement years. Financial planners recommend saving four to eight times the household’s peak annual earnings to retire at the same standard of living. While 403(b) Retirement Savings Plans appear to be commonly offered by church organizations, we find there may be many options to consider based on organizational or individual goals.
403(b) – These employer-sponsored plans are common retirement plans established for non-profit organizations and are similar to traditional 401k plans. A 403(b) plan is a defined contribution plan and may be designed for the unique needs of your church organization. Your church organization may determine eligibility guidelines, plan participation, and matching contributions. Contribution limits for 403(b) plans are the same as most other types of employer-provided retirement plans.
Simple IRA – A Savings Incentive Match Plan for Employees Individual Retirement Account, commonly known by the abbreviation “SIMPLE IRA”, is a type of tax-deferred employer-provided retirement plan. Specifically, it is a type of Individual Retirement Account set up as an employer-provided plan. Contribution limits for SIMPLE plans are lower than for most other types of employer-provided retirement plans.
SEP-IRA – Is a Simplified Employee Pension Plan. This type of plan allows employers to contribute to traditional IRAs (SEP-IRAs) set up for employees. A business of any size—even a self-employed individual—can establish a SEP. Contribution limits are higher and must be uniform for all employees.
Individual Retirement Accounts – IRAs are designed for the Individual and have two types: Traditional or Roth IRA. Both have tax advantages for long-term saving and investments. A Traditional IRA offers an upfront tax break— contributions may be deductible in the year they are made to the account. When you pull money out of a traditional IRA in retirement, you owe income taxes. Roth contributions are not tax-deductible, and tax is upfront, but withdrawals at retirement are tax-free. For more information, please see Traditional vs. Roth Comparison.
A pastor may consider opting out of paying into Social Security and Medicare based on their personal circumstances. However, your organization may consider encouraging your pastors to evaluate whether this is the best option for their personal long-term financial goals. Social Security and Medicare insurance provides supplements to survivors, as well as Disability and Medical insurance. While paying into Social Security and Medicare insurance is not for every pastor, pastors should have other coverages in place to ensure they are well covered. As always, it may be best to speak with a tax advisor.
Wages and Time Off
Developing an effective and livable compensation strategy is as unique as your church culture. There are key factors your organization may consider in assessing and setting fair livable wages for your pastors and staff. The following are some areas for consideration:
- The specific position and expectation for the pastoral or staff member.
- Will the position be part-time or full time? Is the position being filled with a bi-vocational employee? What are the employee’s years of experience or education?
- Will the pastoral position be classified as a W-2 employee or self-employed?
- You may research your market for what is considered fair wages for job responsibilities in your area for similar size organizations and develop direct wage pay ranges for each job classification.
- You may evaluate your organization’s budget, considering church growth, need for additional employees, future wage increases, potential reduction of staff, and potential impact of budget.
Setting a livable wage takes time for evaluation, research, and prayer. The result will be a desirable and equitable wage for those that serve your organization. The internet is a good resource to research salaries for pastors and other positions based on your organization’s geographical location.
While general staff are considered employees of the organization, there may be uncertainty when it comes to pastors, who are often classified as “self-employed”. Incorrectly classifying someone as an independent contractor instead of an employee can have a costly outcome if audited by the government. When in question, it is best to consult a qualified advisor.
If you have had a corporate or secular job, you more than likely were offered paid time off based on tenure. Vacation time, and overall time off programs, are valuable ways to support staff well-being. Responsibilities of church staff and pastors often continues beyond the end of the workday and Sunday service. As rewarding and beautiful as the calling is, staff and pastors (more than ever) require time to rejuvenate, rest, renew, and spend time with family.
Your organization’s culture and size may have a direct impact on the vacation time offered to your staff and pastors. As you review your vacation policy or are in the process of developing one, you may consider having a specific policy detailing number of days, weeks, and weekends offered, indicating how the time accumulates, and explaining how time off may be scheduled.
More than ever, pastors need time to rejuvenate both physically and spiritually. But what is the difference between a Vacation and Sabbatical? Vacation is freedom from business activity while a sabbatical is an extended period of leave taken by an employee to carry out projects not otherwise associated with the employee’s job. During the sabbatical, the employer may pay some or all of the wages that would have been otherwise earned during this time, and in some cases, may include other incurred expenses.
There are numerous opinions regarding the use of sabbaticals. Your organization may or may not offer sabbatical time off — this often depends on the size and needs of your ministry. If your organization is considering reviewing your current sabbatical plan or offering one for the first time, you may consider the following:
- If your church has never offered your pastor sabbatical time off, consider starting small. This will allow the congregation and pastors to adjust to the additional offering.
- It’s generally beneficial to develop a specific policy detailing the amount of time offered as well as the intent of the sabbatical. For example: If specifically aimed at reinvigorating and renewing the mind and heart of the pastor, for purposeful travel, writing, etc.
- You will need to plan for suitable ministry coverage for the time the pastor will be away.
Offering sabbatical time is a good opportunity to encourage your pastors to take time to refresh, enrich their relationship with the Lord, focus on study, recharge, and enlarge their vision, and at the same time allows you to show love and appreciation for these faithful servants.