In 2008 MMBB surveyed churches that provide MMBB benefits about their compensation levels and practices. This report documents the process and findings as part of MMBB's ongoing commitment to providing up to date information on this topic.

Executive Summary

Report of Findings

• Introduction
• Method and Process
• Demographics - Who responded to the survey?
• Compensation practices consistent with MMBB recommendations
• What did we learn about levels of compensation for lead pastors?
• Compensation and Church Finances
• What does the data tell us about compensation increases?
• Compensation Comparisons
• Conclusion
  

Executive Summary

In 2007 MMBB initiated a study of churches providing MMBB benefits to learn more about their compensation levels and practices.  MMBB’s objective was to gain information independent of MMBB’s plan administration, reinforce MMBB’s longstanding position as a trusted source of knowledge on clergy compensation matters and improve MMBB’s ability to advocate on these issues.

In 2008 a survey was developed with the help of consultants from Hanna Resource Group (HRG) and two focus groups of pastors and lay leaders.  The final version of the survey requested demographic information on the churches; information on the lead pastor’s tenure, experience and education; compensation and benefit levels for all employees; and contact information (optional).

The survey was mailed in April 2008 to all 3,240 churches currently contributing to MMBB benefits on behalf of their employees.  The 18.8% response rate is considerably higher than the industry standard of 5% for surveys of this type.

The majority of responding congregations have no more than 100 weekly worshippers and a history reaching back at least 100 years.  Most of the churches have fewer than four employees, most of whom are part time. 

The overall average total compensation for lead pastors is $50,768, but the largest single group of pastors earned between $40,000 and $49,999.  (Total compensation includes cash salary, housing allowance and Social Security Offset.) 

Of the churches responding, the current lead pastor has been with the church for an average of nine years and, on average, has 24 years of ministry experience; 85% of those lead pastors have completed a master of divinity degree or doctorate.  Those with comparable work in the nonprofit world receive compensation that is, on average, 1 times higher than the average lead pastor in this study. 

The average percentage of the churches’ annual operating expenses that supports the lead pastor is 17.8%. In churches with congregations of less than 100, the average annual compensation for the lead pastor is 28.5% of the average operating expenses.

Nearly four out of five churches responding to the survey (79%) report that they review and adjust the pastor’s salary annually based on—in order of frequency—cost of living, a general evaluation of the pastor and comparisons with other professionals, such as school superintendents. Churches responding reported they increased pastoral compensation by an average of 4.99% in their last fiscal year. 

Nearly four out of five (79%) churches in this survey reported they give salary increases on an annual basis; 53% of churches had already done so at the time of the survey in 2008. Most churches use a concept of “total compensation” when calculating increases.  Not only do the majority of churches include the Social Security Offset in the pastor’s compensation, one third also include it in the basis for salary increases. 

The Midwest and the Northeast had the highest number of responding churches; these churches also have the smallest worshipping congregations, lowest total operating expenses and the lowest lead pastor compensation levels. Churches reporting from the South and West regions have larger worshipping congregations, larger total operating expenses and higher lead pastor compensation levels. 

The compensation practices described above reflect the recommendations MMBB makes in its seminars and written materials.  This provides at least partial evidence that MMBB’s educational efforts have been successful.

Back to top

Introduction

In 2007 MMBB initiated a compensation study of the churches currently providing MMBB benefits.  By learning more about the compensation ranges and practices among these churches MMBB intended:

• To test the accuracy of the compensation information that MMBB provides to its members and employers;
• To reinforce MMBB’s reputation as a trusted source of knowledge about church compensation practices;
• To understand compensation trends within MMBB’s membership as a crucial factor in the planning of future MMBB benefits; and
• To better educate churches about compensation practices so that they can better accomplish their mission.

Back to top

Method and Process

Planning began in the fall of 2007, when MMBB engaged Hanna Resource Group (HRG) to assist in the development, delivery and analysis of the compensation survey.  In the spring of 2008, MMBB tested a draft of the survey in two focus groups with pastors and lay leaders from 17 churches across the country.  On the basis of this feedback, MMBB finalized the survey tool which requested information on:

• Church size, operating budget, location and key employment practices;
• The lead pastor’s tenure with the church, total years of ministry experience and highest level of education attained;
• Compensation information on the lead pastor, associate/assistant pastor and other church employees; and
• Name of church and contact information, which was optional.

Paper surveys were mailed in mid-April to all 3,240 churches currently contributing to MMBB benefits on behalf of their employees.  Recipients could respond by mailing in their completed survey or by completing the online version.  The response rate of 18.8% is considerably higher than the industry standard of 5% for surveys of this type.

For purposes of data analysis, survey respondents were grouped into geographic regions—Northeast, Midwest, South and West—corresponding to regions established by the U.S. Census Bureau (Illustration 1).  A comparison showed that the overall response rate in each state varied little from the proportionate number of churches in that state contributing to MMBB plans. Based on the high response rate and the correlation of responses with the MMBB church populations in specific states, the survey responses are considered a representative sample of MMBB employers.

ILLUSTRATION 1

MMBB staff reviewed all responses.  When critical pieces of information—such as compensation for the lead pastor—were not included in a survey, that survey was not included in the final results; 15 surveys were discarded for that reason.  If other, less critical, information was missing, such as education level or tenure at the church, those surveys were included.  Where data was missing, analysis was done from a slightly smaller sample.

Back to top

Demographics - Who responded to the survey?

• 51% of the churches responding report fewer than 100 people attending worship weekly.
• 50% of the churches employ less than four people; in many cases, the lead pastor is the only full- time employee.
• 69% of the churches were founded more than 100 years ago.
• 60% of the churches stated that they are located in a small city or small town.
• 77% of the churches describe their membership as growing or stable.
• Total operating expenses for all responding churches in the previous fiscal year averaged $284,157.

Back to top

Compensation practices consistent with MMBB recommendations

For years MMBB's seminars and written materials have recommended certain compensation practices. Chart 1 gives evidence that churches are adopting these practices.

CHART 1 - MMBB Recommendations

Based on this evidence, MMBB's effort to promote fair and effective compensation practices in churches is having a positive impact. MMBB will continue to develop its role as a knowledgeable partner with the churches it serves.

Back to top

What did we learn about levels of compensation for lead pastors?

The overall average total compensation for lead pastors is $50,768. As Chart 2 indicates, however, most pastors in the survey earned less than $50,000, with the largest single group earning between $40,000 and $49,999.

CHART 2 - Annual Compensation for Lead Pastors in Responding Churches

Total compensation includes cash salary, housing allowance and Social Security Offset. Each component of total compensation is examined separately below.

Cash salary is defined as the employee's salary excluding any portion designated for housing costs. Chart 3a shows that the actual cash compensation of lead pastors in our survey averaged $31,076.

For ministers who do not live in parsonages, the housing allowance refers to the portion of the minister's compensation that represents the cost to the minister of providing a home. The housing allowance is generally excluded from gross income for federal income taxes (but not for calculating Social Security/Medicare taxes). This survey did not distinguish between pastors living in parsonages and those living in their own homes. As a result, the housing allowance reported in Chart 3a includes housing costs in both categories. On average, the housing allowance accounted for an additional $18,512 of reported total compensation.

Unlike other employees, the Internal Revenue Service (IRS) considers ministers to be self-employed. This means that ministers are responsible for paying the full cost of Social Security -- the employee share that all employees pay, as well as the share paid by the employer. The Social Security offset is an amount paid to a minister to help pay his or her full Social Security and Medicare tax as a self-employed person. The average Social Security offset of $3,873 reflects a rate consistent with MMBB's recommendation for an average total compensation of $50,768. Over 64% of the churches responding provide a Social Security/Medicare tax offset for their lead pastor.

CHART 3a - Regional Results

Compared with similar professionals, compensation for pastors covered in the survey is low. MMBB has regularly encouraged church leaders to look at other professionals in their community -- such as school superintendents or principals -- to determine an appropriate level of compensation for their pastor. Based on a June 2006 national compensation survey from the U.S. Bureau of Labor Statistics, the average annual compensation for elementary and secondary school administrators was $79,126. Adjusted for inflation, this average is estimated to have been $81,106 in 2007. Clearly, the average difference of $30,338, and between the average ministers' compensation and that of school administrators in Chart 3b, is striking.

CHART 3b - Overall Pay Comparison

A lead pastor's level of education and length of service are positively related to higher compensation. Lead pastors tend to have relatively long tenures and advanced degrees. In the responding churches, the current lead pastor has been with his or her church for an average of nine years and on average has 24 years of ministry experience. Survey results also showed that 85% of lead pastors have completed a master of divinity or doctoral degree. Those with comparable education working in the nonprofit world, as seen in the statistics cited earlier, are likely to receive compensation 1 times that of the average lead pastor in this study.

Back to top

Compensation and Church Finances

Churches spend an average of 17.8% of their annual operating expenses to support the lead -- often the only -- pastor. This varies greatly by church size. Chart 4 shows that as the size of the congregation and operating budget decreases, the lead pastor's compensation as a percentage of the church's annual operating expenses increases. The largest group of responding churches, with congregations of less than 100, used 28.5% of their operating expenses to compensate the lead pastor. Compare this with a total compensation representing 7.1% of average operating expenses paid to lead pastors in churches with 501 or more worshipers per week. For a small church, the lead pastor may be the glue that holds the congregation together. Yet having a qualified and skilled minister may create monetary burdens that are not sustainable in the long term.

CHART 4 - Variation By Size

Back to top

What does the data tell us about compensation increases?

Nearly four out of five churches responding to the survey (79%) report that they review and adjust the pastor's salary annually. How a church evaluates the minister to determine his or her compensation adjustment can determine whether a minister will catch up with employees in other professions or fall farther behind. To get at this question, the survey asked about the factors used to determine compensation increases for church staff, including the pastor. Respondents were asked to select one or more choices from a list of factors. They could also write in a factor or indicate "no factors." The responses are as follows:

• 73% list cost-of-living adjustment;
• 53% use a general evaluation;
• 11% compare other professionals, such as school superintendents; and
• 29% said none of the above or other.

The comment most often given for "other" was, "Whatever we can afford."

Churches responding to the survey reported increasing compensation an average of 4.99% in 2007. This exceeded the average pay increase of 3.8% for all U.S. employees in 2007, as reported in the U.S. Compensation Planning Survey published by Mercer Human Resource Consulting.

Nearly four out of five (79%) churches responding to this survey reported they give salary increases on an annual basis; 53% of churches had given increases in 2008. At the other end of the spectrum, 4% of churches surveyed had not given an increase since 2004. Though 7% indicated that they "never" gave increases, a portion of those noted that their pastor was new to the church. This may indicate that the percentage of churches who never give increases is inflated.

The data suggests that churches are giving their pastors healthy, above average annual increases. Because pastoral compensation generally starts low, however, the increase does not bring them up to the level of those working in similar jobs. Even with substantial percentage increases, lead pastors' compensations lag behind professionals with similar education and experience.

The survey asked about the extent to which the increase for the church's lead pastor is based upon "total compensation:"

• 36% of churches base their increase on salary, housing and Social Security Offset;
• 28% of churches base increases on salary and housing only;
• 27% of churches base increases on salary only; and
• 9% of churches responded with "other."

MMBB strongly recommends that churches provide a Social Security Offset (SSO) for their ministers. The survey found that not only do the majority of churches include the SSO in the pastor's compensation, one third of the respondents also include this amount in the basis for salary increases. This positive result shows that the message is being heard and put into action.

Back to top

Compensation Comparisons

The geographical data detailed in Chart 5 reveals a large variance in the compensation of lead pastors by region. While the Midwest and the Northeast regions have the highest number of churches responding, these churches also have the smallest worshipping congregations, lowest total operating expenses and lowest lead pastor compensation level. The churches reporting from the South and West regions have larger worshipping congregations, higher total operating expenses and higher lead pastor compensation level.

CHART 5 - Regional Comparison

Back to top

Conclusion

Three major findings from the 2008 compensation survey results are:

• The average compensation for lead pastors is significantly lower than that for similar professionals with comparable education.
• Churches are adopting fair and effective ways of calculating total compensation and evaluating lead pastors on an annual basis. These practices are generally consistent with MMBB's recommendations.
• There are significant variations by region, size of church and characteristics of the lead pastor, deserving of further study.

The 2008 compensation survey results enable MMBB to fulfill the objectives of its study. We now have a rich database of information on both clergy compensation and church demographics. The findings in this report represent a solid first step towards better information and information sharing in partnership with our churches.

Back to top