Staff Management
Compensating Your Church Staff
By Ken Godevenos, MBA, CCP, CHRP

The topic of compensation is difficult for most organizations at the best of times, but when it comes to churches, the problem seems to magnify itself. Some people think church staff members are overpaid, others think they're not paid enough. Senior pastors and boards have difficulty annually allocating the dollars they have budgeted for salaries. This article in our Staff Management series is intended to provide both senior church administrators and boards some helpful suggestions as to how to compensate church employees.

While I approach this topic from a Human Resources perspective, I cannot deny that the primary motivation for most church workers is, and should be, service to God. While this may permit them to work for wages far below those that their secular industry colleagues may earn, it does not allow us to avoid paying them as appropriately as possible.

Nothing works better than a policy

In secular organizations, unhappy employees are sometimes those who do not understand how and why management arrives at their compensation. Likewise, unhappy managers are often ones that cannot understand why their staff is never happy with their compensation. Assuming that most church organizations do not pay in the top quartile of the compensation range in their community, the issue of compensation communication and understanding becomes even more critical to employee satisfaction.

Over the years, I have found that the number one cause of employee dissatisfaction with compensation is the fact that an organization cannot readily identify a compensation policy and then communicate it effectively to its employees and other stakeholders. Once that position is communicated and explained, satisfaction scores increase. What, then, do I mean by a “policy?”

Every organization needs to establish a methodology by which to compensate its staff. This approach, which enables you to determine each annual salary for any given employee, should remain fairly constant from job to job and from year to year. Let me explain. To do this on a basis that is perceived as equitable, you will have to consider jobs rather than employees in the beginning. That is, establish a salary range for a given job with at least a minimum and a maximum for the position. This way, any given incumbent in that job will be paid somewhere in that range. The exact amount could depend on a number of things, primarily experience and performance.

Checkpoint: If you do not have a compensation policy, determine to establish one as soon as possible in order to provide consistent direction to your compensation decisions and thus maintain and/or improve employee morale as they perceive an equitable approach to how they are all paid.

Market pricing or internal equity

When it comes to deciding the number of salary ranges, ask whether your philosophy emphasizes the payment of jobs based on what the market (we'll define that in a precise way later) is paying for each. Or, alternatively, does your organization value internal equity? That is, are jobs of equal "worth" basically paid from the same salary range within the organization although individuals in the job may be paid differently based on service and/or performance?

If you opt for the former (paying what the market pays), be sure of two things. First, be fairly certain you can find data in your market for each and every job. Second, make sure that each year you get the latest data in order to maintain the relationship between what you pay and what the market pays.

If you opt for the latter (paying on an internal equity basis), you will need some sort of mechanism for determining what jobs are of relatively equal value to the organization. Most organizations use a "job evaluation plan.” Second, go to your market for salary data on at least some benchmark or key jobs in order to establish your pay structure, or schedule and then pay the remaining jobs from that schedule.

Checkpoint: Some jurisdictions require jobs of similar value to be compensated the same, while others don't. Some employers believe that this kind of "pay equity" approach makes a lot of sense and is well worth the effort. I agree that using an "equal pay for work of equal value" goes a long way to keeping morale positive. The job evaluation plan does not need to be elaborate or complex. Usually, it measures the various demands involved in carrying out the job and considers the skill, effort and responsibility required, as well as the working conditions under which the job is performed. A simple approach would be take those factors into consideration and simply group all your jobs into what you deem to be the appropriate number of salary grades. Assistance is available from anyone with compensation experience.

Determine your "market"

Regardless of which approach you use, determine what organizations will be included in your search for "market data.” Will you strictly stick to other churches or will you include local or state charitable or other non-profit organizations? What about going beyond that to other local for-profit organizations? Normally, organizations include in their "market" organizations likely to be sources of employees for their own organizations or destinations of those employees who leave. Sometimes these organizations vary depending on the type and level of job for which you are collecting data.

Other salary data sources might include surveys conducted by your denomination or various para-church organizations. These usually come with predetermined “markets,” but sometimes some customization of the data or the ability to be selective in the data relied on is available.

Checkpoint: Once you have focused in on appropriate data, use it to establish a series of salary ranges for the various jobs or job groupings that you have determined to be appropriate. Each range will include a minimum (usually 70%-80% of the mid-point or full job rate), the job rate itself (usually the salary to be paid to an incumbent who is performing the job fully competent), and the maximum (usually 120%-130% of the job rate). Sometimes these salary ranges are constructed in such a way that there is a consistent relationship between the job rate of one level or salary range and the next. This is not always necessary for a small number of ranges. Remember that all jobs in a given range (based on their perceived value) should be paid off that same salary range.

Establishing the salary ranges

Using the data that you have gathered, set your salary ranges to match the average of what the other organizations in your "market' or "survey" show. Alternatively, if you want to attract and maintain the best, you may wish to pay near the top quartile of your "market"--that is, as well or better than 75% of the survey participants. Or, if you can't afford to do so, you may need to pay somewhere below the average.

Some philosophical considerations

Over the years, I have come across churches that use several non-traditional approaches to determining salaries or compensation. These include using the congregation's salaries, to the extent known or assumed, as the basis for establishing the senior pastor's salary. Then, using that as a base, they set the salary of the other positions. Others use census or other demographic data to determine the average salary of the community and use it as the rationale for establishing salaries.

Whatever is used, it is important to know why you have selected the wages you did and that your selection makes sense to your constituents. In your deliberations, do not forget to consider what Scripture may have to say about how you approach this matter. Verses that come to mind are Luke 10:7 and I Timothy 5:8 "…worker is worthy of his wages." Another is Romans 4:4--"Now when a man works, his wages are not credited to him as a gift, but as an obligation." Finally, James 5:4, "The wages you failed to pay the workmen who mowed your fields are crying out against you." We often forget that our many of our church workers are working in the ministry when they could have more lucrative positions in private industry.

Checkpoint: A good question to ask ourselves, especially if we are laypersons involved in the setting of church employee compensation, is whether or not we would do what we expect of these employees for the wages they are being paid.

Establishing the compensation of an individual employee

Note: This section is only applicable if you believe that an employee should be rewarded in his/her compensation based on his/her performance, and that different employees can and should be paid differently based on the same criteria. (If not, skip this section, since you will only be paying employees based on their years of service in the job. Simply start a junior employ at the minimum and progress him/her over the years to job rate and perhaps on to maximum in some consistent form.)

Assuming you believe in rewarding for performance, each incumbent's individual salary should fall within the appropriate range for his/her job. Exactly where on that range will depend, as mentioned earlier, on his/her experience and/or performance. Again, those new to the job will start at or near the bottom of the range but annual progression will be based on their performance during the previous year. Those who have performed excellently should move considerably faster up the range than those who only perform at average or with normal progression. In addition, once employees have moved up to the job rate, those performing beyond the expectations of the full job could be moved past the job rate towards maximum, saving the very extreme end of the range for "superstars.” The amount of movement allowed each year would depend on the salary increase budget the organization has available.

Checkpoint: The determination of an employee's performance should be based on a formal performance assessment each year. (Performance management and measurement will be covered later in this Staff Management series.)

Annual adjustments to salary ranges and wages

In addition to individual employee salary movement through the range, the range itself requires adjustment periodically in order to reflect movement in the community or "market" based on your organization's periodic salary surveys, or in the absence of repeated surveys, the increase in inflation.

Checkpoint: Usually, organizations conduct their own surveys every two or three years and adjust salary ranges at that time. In between, they may adjust them either for inflation or based on an average general salary increase reported by local consulting firms. (Surveys provided by denominations or church-related associations may be provided to participants on a more regular basis than this.)

Allowances, perquisites, and/or indirect compensation

Ministerial or clergy staffs are often recipients of additional benefits that must be taken into account when comparing compensation with jobs in other organizations. Some examples: housing allowance or the use of an actual manse, car allowance, and expense accounts. Some of these must be assessed and the equivalent dollar value added to the comparison. This is especially true if you believe in internal equity and some jobs in your organization don't have access to the same allowances. In addition, don't forget any major perquisites (even some things like free golf, miscellaneous gifts from others, use of adherents' condos or other recreational assets, etc.).

Checkpoint: When conducting salary surveys or using already published ones, make sure that you inquire or take into consideration how other organizations deal with these. Make the necessary adjustments in your comparisons.

Employee benefits

A good benefits package for your employees usually costs a considerable percentage of one's base salary and should also be considered in comparing "total" compensation. This topic is examined in more detail later in this series. Here we simply point out that this is an important component of compensation and comparisons must take the absence or presence of benefits into consideration. You may want to consider what other "market" organizations do in terms of vacation, sick leave, various directly related work allowances such as mileage paid for use of one's own car, provision of health and dental benefits, bereavement and other leaves, etc.

Checkpoint: One more point. When conducting surveys in your "market" or using published survey data, consider the value of benefits and either match the predominant practices on various provisions or adjust salary to compensate for them.

A few pitfalls to avoid

No matter how effectively you pursue and apply some of the ideas we've presented, you will still find that some employees are not satisfied, or some of your congregation feels you are overpaying--or surprisingly, underpaying--some of the staff. Here are a few pitfalls to avoid:

• Failure to communicate and defend your compensation policy, at least in general terms to the congregation, or in specific terms to your staff, when the issue arises;
• Failure to review your "market" periodically and to adjust salary ranges regularly so that you fall considerably behind and find it unaffordable to catch up;
• Failure to understand the content of salary surveys used and to use all data appropriately; and
• Failure to ask experts either in your congregation or others available to you for advice and guidance in setting up and administering your compensation policy and program.

Checkpoint: Establishing a compensation policy and implementing it need not be a complex process, but it does require some logical application of tested processes. The best thing that a church could do is to establish a Human Resources Subcommittee of the Board with knowledgeable members to provide directly or through access to others, the necessary guidance and direction in this regard.

Making sure that employee compensation attracts, retains, and above all, motivates staff in your organization is one of the senior manager's (whether a pastor’s, administrator’s or a board-member’s) most critical administrative responsibilities. Every church should be able to say something like, "We base our compensation on comparisons with such and such a community or market, and we strive to pay at the average (or whatever) of that market for any given job.” You owe it to yourself to do it right.

In our next column, we will consider a critical component of total compensation when we look at providing staff security through benefits.In our next column, we will provide some thoughts on actually making the right staff selections, including how we rank candidates. Two columns from now we discuss the topic of "Compensating Your Church Staff".

Ken Godevenos is the president of Accord Resolution Services Inc. He has more than 26 years of experience in Human Resources and has served on and/or chaired several church boards. Godevenos, an independent HR consultant specializing in compensation, can be contacted at (416) 449-7282, by fax at (416) 449-2922, or by e-mail at kgod@accordconsulting.com. Visit Accord's Web site at www.accordconsulting.com. Commentary or opinions submitted by readers may be included in future columns of Staff Management with their permission.