Creating a Strategic Compensation Plan for Ministry Staff
Is your ministry’s compensation plan fair, consistent, and truly aligned with your mission, vision, and values? Compensation is one of the most important—and often one of the most uncomfortable—topics for church leaders. It is a key area where we have the opportunity to love and serve our people well, but it requires a level of intentionality to ensure good stewardship of congregational funds.
As a ministry, you are entrusted with tithes and offerings, and you may not be able to compete with the marketplace. However, this is not an excuse to underpay. It is a call to create a strategic and intentional plan to compensate the roles that fulfill your ministry’s mission. If you are currently relying on "feeling" rather than research, or if compensation discussions turn into a "chaotic mess", then it is time to build a documented strategy.
The Compensation Guardrails: Philosophy and Plan
To prevent arbitrary salaries and potential unintended discriminatory practices, every ministry needs to establish two critical guardrails:
Compensation Philosophy (The “Why”)
This is the foundation that reflects your values and goals for compensating staff and must support your church's overall strategic plan.
Compensation Plan (The “How”)
This document executes the philosophy, detailing specific pay structures, bonus strategies, benefits, and performance metrics.
You must document these items, discuss them, and be comfortable revising them as your organization changes. Compensation is simply not a “set it and forget it” process.
The Three-Step Compensation Audit
How does an employer know they are on the right track? We recommend a three-step process to audit your existing plan and build a compliant, competitive strategy.
Step 1: The Compliance Review (Non-Negotiable)
Before you talk strategy, you must ensure compliance. A critical area for ministries is FLSA classification (Fair Labor Standards Act). With very few exceptions, to be exempt from FLSA, an employee must meet all three requirements: be paid at least the current minimum salary threshold, be paid on a salary basis, and perform exempt job duties. (NOTE: Employment practices insurance does not cover FLSA misclassification. This is why we encourage: when in doubt, classify a position as non-exempt.)
Step 2: The Market Analysis (Research, Not Feeling)
Once you are compliant, you can dig into strategy. You need to know how your compensation figures compare to similar organizations in your area.
Research is Key: Do not guess what a position is worth. You must research salary data to create accurate hiring and pay ranges.
Data Sources: You can use free resources like local public school or police department salary scales, or the MIT’s Living Wage Calculator. Many ministries also utilize compensation audits from specialized HR service providers to ensure the data is accurate for their sector.
Step 3: Structure Review and Adjustment
Be honest about where your organization stands.
Titles vs. Scope: Does a position's title truly correspond with the scope and responsibilities? Sometimes a "Director" is actually better categorized as a "Coordinator" or even a "Top-Level Assistant," which directly impacts the appropriate pay range.
Tiers: Creating tiers within levels of leadership (i.e., Director I, Director II, Director III) provides clarity and structure, helping employees understand their growth path.
Compensating Long-Tenured Staff
You may find a long-tenured pastor or staff member has topped out of your established pay range. In these cases, you should utilize a bonus structure. We recommend developing a bonus structure to recognize their significant, long-term contributions without altering your overall documented personnel budget and salary ranges.
If your ministry simply cannot afford to be near the top market ranges , be honest and realistic with your team. Look for other ways to serve your staff well, such as more paid time off or supplemental benefits like short-term and long-term disability or life insurance.
To get the full details on FLSA compliance, the seven-year benchmark for COLA (Cost of Living Adjustments), and best practices for documenting merit increases, watch the complete webinar.