“… Respect those who labor among you and have charge of you in the Lord and admonish you; esteem them very highly in love because of their work.” – I Thessalonians 5:12-13
It is helpful to begin by considering the goals of a compensation package.
A church should provide its staff with adequate income so that they can fulfill their roles without undue concern about current and future financial needs. Freedom from financial anxiety lets a pastor focus on his or her service. It also helps your church attract and retain qualified pastoral leadership.
A good compensation package is the fair thing to do. It compensates pastoral leaders for their investment in education, as well as for their talent, experience, and effort. The benefits and insurance components protect both the minister and church from unexpected setbacks. They ensure that pastors receive support, even if they are unable to fully carry out the church’s ministry.
Finally, a compensation package serves a managerial and motivational function. It can reward staff for meeting agreed-upon goals.
A compensation package has three components:
The way you allocate compensation between these three categories has a significant impact on the taxes your staff must pay. Read on as we describe each category in detail.
|COMPENSATION||PAID DIRECTLY TO YOU||PAID ON YOUR BEHALF|
|Cash Salary||$ 15,209||$ 15,209||$ 15,209|
|Social Security Offset||3,825||3,825||3,825|
|Taxable||$ 50,000||$ 50,000||$ 19,034|