Negotiating Compensation

“..Those who are taught the word must share in all good things with their teacher.” – Galations 6:6

Tips for Constructive Negotiations

Your church and minister will need to work together after the salary negotiations. Conduct them in a spirit of good will that avoids rancor and ensures a positive outcome.

Educate the decision makers on the components of a compensation package and the approach of basing salaries on national averages. Share your research on compensation comparisons and try to have objective discussions based on facts.

Be an active listener and try to understand the logic of others’ positions. Many negotiations have broken down over minor points because people simply didn’t understand what their negotiating partners wanted or needed. Reflect your understanding of your counterpart’s position. It will help you gain added credibility.

Try not to put your negotiating partners on the defensive. (“You might let your family live in a house like that, but I’d never do it to anyone I loved!”) It prevents people from listening and encourages them to dig in rather than admit wrongdoing or guilt. Instead, state your position in objective terms. (“The parsonage is lovely in the summer. But the uninsulated walls and 40-year-old heating system make it hard to keep the temperature in the winter above 65 degrees.”) Be hard on the problem; be soft on people.

Be realistic in your expectations. You may not be able to achieve all your goals all at once. Expect to give up on some requests and compromise on others.

Be willing to take a leap of faith. Sometimes the other side needs to see a gesture of good will before they will soften their position.

Negotiating Tips for Pastors

As the Pastoral Relations Committee conducts its research, give some thought to your expectations regarding a fair compensation package. Refer to the Compensation Handbook for Church Staff and other findings of the PRC. Make sure the PRC is aware of factors that might justify increases beyond the average salary for a pastor in your situation:

  • Additional experience or degrees you have acquired since your last salary negotiations
  • Performance goals you have met
  • Additional responsibilities you have assumed
  • Your history of past raises, if those have been limited due to budget constraints
  • Begin the session with a prayer. But don’t make the prayer an opening statement of your position! Pray that God’s spirit will lead all present in the discussion (rather than praying that God will open their eyes to the inadequacy of your previous compensation package).
  • Know what you want and what you absolutely need, and prioritize your requests. It is important to have thought through these matters before the negotiation begins. Seeming unprepared diminishes your credibility. (“How important can this be? He didn’t even know what he wanted.”)
  • Whenever possible, point out the positive impact your requests will have on you and the church’s ministry. We are all partners in ministry. Money and ministry are connected.

side bar – h4. Three criteria for successful negotiations

  • They should be efficient, stay on the subject, and not become sidetracked.
  • They should improve, or at very least not damage, the relationship between parties.
  • They should lead to a mutually acceptable win-win agreement.

Advocate for Yourself

While it is hoped that concerned members of the congregation will be committed to providing you with fair and adequate compensation, you as a pastor must also advocate for yourself. Remember that you have a right and responsibility to negotiate your own compensation.

Your advocacy need not be combative, hostile, or demanding. Instead, approach negotiation as a positive activity to be done in a manner that encourages:

  • A fair and adequate compensation plan
  • A decision based on facts: your goals, achievements, education, and responsibilities, plus a comparison to national averages
  • A healthy and candid pastor and church relationship
  • A stronger witness and mission of your church

Don’t leave decisions that affect your compensation to chance. Even well-meaning people need your input. Don’t feel obligated to leave the room when your compensation is discussed. It is important to negotiate face-to-face so that everyone knows why the compensation decision is what it is.

Four common misconceptions when pastors negotiate their salary

“Congregants will dislike me if I request a higher salary.”

People appreciate honesty and would rather know how a pastoral leader is feeling than deal with unexpressed frustration. Ministers cannot have healthy relationships in a church when they carry a burden of undisclosed hostile feelings.

When money issues do emerge, they are usually not the root problem, but a symptom of other issues that should be investigated. People pay more attention to what you do than the salary you request.

“I’m a proclaimer of the gospel, I shouldn’t be preoccupied with such material concerns.”

The scripture acknowledges time and again that church leaders must be cared for and compensated for their labor. Paying a fair wage is one way your congregation acknowledges that it respects its own ordained leaders. While being silent and passive is a negotiating option, it can cause your feelings to emerge in defensive, ways that are counterproductive to doing God’s work.

“My church is poor. It can’t afford to do better.”

To test this theory, check The Compensation Handbook for Church Staff and see what churches like yours are currently paying. Congregants rarely openly discuss their personal finances. Your perception may not align with the reality.
“The church’s mission giving will go down if my salary goes up.”
It is better for a church to support its own ministry than to sacrifice the pastoral leader’s salary for wider mission giving. Your church’s first priority is to appropriately provide for its members and pastoral leaders. They are essential for church growth and effective mission giving. You can also test this theory by checking Compensation Handbook for Church Staff.

“Let the elders who rule well be considered worthy of double honor, especially those who labor in preaching and teaching; for the scripture says, ‘… the laborer deserves to be paid.’” – Timothy 5:17-18

Negotiating Tips for Churches

Church leadership is responsible for paying a fair wage and retaining talented leadership.

The Word of God is specific when it says that laborers are worthy of their hire. This means churches should give the maximum amount of support to their pastors, without jeopardizing the overall financial stability of the church. That is not always easy during difficult economic times. But the right thing isn’t always the easiest. If church finances make it difficult to pay what you should, see the section on “bridging the gap”.

Once the PRC has conducted its research, it should work with the minister to design a fair and viable compensation package. See the previous sections of this guide for tips on optimizing the mix of taxable and tax-advantaged compensation. Also see the sections that follow on how to approach negotiations with a constructive frame of mind.

Now is also a good time to agree upon severance compensation. The church and minister can discuss the matter objectively, free of passions that may arise when actual departure is imminent. Here are two possible formulas:

  • One to two weeks of pay for each year of service – up to a maximum of 26 weeks
  • Half a month of salary for each year of service (e.g., 5 years of service = 2.5 months of severance pay)

Once a compensation package is agreed upon, present it to the finance committee and/or to the congregation. Then incorporate it into your church’s annual budget.

Three common misconceptions when churches negotiate pastors’ salary

“We can pay less because the pastor’s spouse is a high earner.”

Nowhere else in the working world are employee salaries reduced to account for spousal earnings. Your minister’s efforts are worth no less when his or her spouse earns a good income. A fair wage should be based on national averages reported in The Compensation Handbook for Church Staff and adjusted only for your church’s environment and the pastor’s qualifications.

“We can pay less because the pastor has modest needs.”

Pastors who live modestly may still need to care for family members. They may have plans for travel or unpaid service during retirement. A church has no right to pay a less-than-fair wage simply because it does not know how the pastor will spend the money.

“We’ll just offer a total compensation amount and let the pastor decide how to allocate it.”

A common mistake that distorts the actual amount a pastor will have for living expenses is to propose a single large figure that covers salary, benefits, and expenses. This forces the pastor to choose between accepting lower take-home pay, waiving essential benefits, or paying expenses out of pocket.

As you have seen earlier, the various forms of compensation serve different purposes and have different tax implications. It takes considerable thought to develop an optimal mix. It is unfair to make ministers do this on their own.

Report compensation changes to MMBB

Once a compensation change is approved, report the change and its effective date to MMBB within one month. A member’s retirement income, disability, and death benefits are all based on reported compensation. Failure to report changes could result in lower benefits to your minister and his/her family.

To report the change, complete MMBB’s Compensation Change Request (Form A-18), which you can obtain by calling (800) 986-6222. Submit the completed form to:

Attn: Billing Department

MMBB
475 Riverside Drive, Suite 1700

New York, New York 10115
Or fax (Attn: Billing) to (800) 986-6782
You can also email your change notice to billing@MMBB.org

Recommended Timetable for Negotiating Compensation
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Jan & Feb – to set pastoral goals for the year June – Give pastor feedback on progress toward goals Sept – PRC gathers data in preparation for negotiating compensation Nov & Dec – Agree on compensation, incorporate into church budget for coming year, report to MMBB

“The Lord commanded that those who proclaim the gospel should get their living by the gospel.” – Corinthians 9:14

You’ll find additional resources for successful negotiation at the end of this guide.

Bridging the Gap

It may happen that your church determines a fair wage – based on its situation and the minister’s qualifications – but church finances are such that it cannot afford to pay that. Here are some suggestions of creative ways to “bridge the gap.”

Increase the proportion of tax-advantaged compensation

Without increasing the total compensation amount, your church may be able to increase the minister’s take-home pay. Consider shifting compensation to such tax-advantaged forms as retirement plan contributions, a housing allowance, or an increased expense allowance.

Realize that each side has multiple interests

You’ve seen that compensation takes many forms. Take time to understand the other side’s multiple interests and you may find other ways to help tip the balance. For example, you might say, “Our church cannot afford the annual increase you requested. But since one of your problems is cash flow early in the year until you’ve paid your medical insurance deductible, can we restructure your salary schedule so that 60% is paid during the first half of the year?” Or, “In lieu of the higher salary increase, how about the lower amount, plus covering medical deductibles?”

Supplement the minister’s salary with other forms of compensation

Cash is not the only solution. You can enrich your compensation package by adding such non-cash elements as:

  • A paid sabbatical
  • Church payment of the minister’s continuing education
  • More paid leave

The dollar value of the package won’t necessarily be a lot higher. But it may be a better arrangement overall.

Agree on a catch-up schedule

If you’re confident that your church is only experiencing a temporary setback, consider specifying – in writing – how you will make it up to your pastor with future salary increases. Just be sure that you can follow through on this promise. Failing to deliver in the future will add feelings of betrayal on top of a salary grievance. (If at any point the amount paid exceeds what was reported to MMBB, contact MMBB to make up back payments of Comprehensive Plan premiums.)

Reconsider the pastor’s responsibilities

If your church cannot compensate the minister fairly for all the work he or she is doing, you may want to consider reducing the minister’s responsibilities. Many smaller churches are able to manage with a part-time or bi-vocational pastor. Or they reduce the pastor’s workload by providing lay assistance with certain tasks.

=h4. Myth: “Part-time pastors aren’t real pastors.”

Churches concerned that they can only afford a part-time pastor should realize that this is a perfectly viable option. Christian ministry has a long and rich history of implementation by part-time leadership. The early Christian church grew out of multi-vocational leaders.

While multi-vocational ministry can be fulfilling and challenging, it is best to begin by setting clear guidelines:

  1. Write a letter of understanding that clearly describes:
    • Ministry expectations and the number of days per week for service
    • Supplemental pay when circumstances require service beyond the agreed-upon days per week
    • Financial arrangements
    • Accommodations, if there is no parsonage
  2. Do not change the arrangements mid-stream without mutual agreement.
  3. Ensure that there is a clear plan for growth.

No pastor or church should settle for a non-growth environment. Even if the possibility of a full-time position seems remote, establish a vision and mission for further development. If your church does not really want to change, then the pastor should be told this before responding to a call. .