How Do You Figure Out Fair Pastor Compensation?

Speaker 0 00:00:00 One of the questions that everybody wants to know the answer to is, how much should pastors be paid? Now, there's all kinds of things you can consider and tables to weigh, and things to think about when you're wondering that. But in today's episode, we're gonna boil it down to six factors you need to consider when determining your pastors pay. We hope this conversation helps you reach more people and grow. This is the Reach right podcast. You're listening to the Reach Right podcast, the show dedicated to helping pastors and church leaders reach people the right way. Hosted by me, Thomas Costello, and with me as always as my co-host, Ian Hyatt. We're here to help your church see more visitors and grow. Well. Hey guys, Welcome to The Reach right podcast, episode number 118. I am your host Thomas Costello. And with me as always is my co-host Speaker 3 00:01:08 Ian Hyatt. What's up, Thomas? Speaker 0 00:01:10 Hey, man, not much. I'm excited to talk. Today we're gonna talk about one of those questions that we get the most feedback on, and actually like the most clicks on, Uh, whenever we put out a article or a post or a YouTube video about this topic, we always get lots and lots of feedback and, uh, people looking into it. So the topic today is how do you figure out fair pastor compensation that's we're gonna be talking about here today, um, with good reason. It's funny, every time we do a blog post about pastor compensation or how much pastor should be paid, yeah, our open rates go high, but then our click rates of how many people want to know about this? Yeah, it just goes off the chart. So, And we get a Speaker 3 00:01:50 Lot from church administrators too. Speaker 0 00:01:53 What's that? I'm sorry. Speaker 3 00:01:55 We get a lot of phone calls from church administrators too. Speaker 0 00:01:58 We do get calls from them too. Definitely. Yeah. And it's something that, um, we, we, we see, we see why, obviously everybody wants to know are they paid, right? Are they underpaid, overpaid? We want to figure out those kinds of things. And so today we wanted to take some time to talk about our, basically our formula or our game plan of how we think your church should figure out how much you should be paying your pastors, or if you are a pastor, how much should you be paying your youth pastor or worship pastor? Um, I think if you kind of take some of these things into consideration, they'll probably help you get to the bottom of that question. And, uh, in the end, our motive with this is, I, I think we have this reputation out there that people, maybe people that aren't part of a church, they think of pastors and they think of people that they see on tv, They think of televangelist sometimes and are friends like Joel Ostein or Steven Feick, and they think about multimillion dollar mansions and Lamborghini and all that kind of Speaker 3 00:02:57 Stuff, private jets, Speaker 0 00:02:58 Right? And man, that couldn't be further from the truth. I know that our audience, maybe there's a few people in that camp that are listening to this or watching this, but I think the vast majority of pastors, uh, are nowhere near any kind of that level and Right. Even those that are well paid are not well paid like that, right? They're well paid like in, uh, in comparison to other professionals in their community. Uh, so I think it's a really important conversation for us to have today, but I wanted to start it out by just setting the expectations here. We're coming at this from the perspective that in my experience, pastors are much more likely to be underpaid than they are overpaid. Would you agree with that? Speaker 3 00:03:40 I would totally agree, Speaker 0 00:03:41 Yes. <laugh>, I mean, you talk to pastors all the time, and I get me hear me, right? They're not calling us and complaining about how much they're paid or Speaker 3 00:03:49 Doing like that or divulging their salary amounts. Speaker 0 00:03:51 But when I hear this, I just know that like in the professional world, a lot of these, these pastors that we run into, they could go out and get a job using similar skill sets to what they have in the ministry and make sometimes two, three times as much money as they're making pastoring a church. And so now again, we know that pastoring isn't there to be like a get rich quick kind of thing, or it's not, people don't get into it for the money. But there are some questions I guess that we need to answer before we get into like how you determine this of, you know, what, how do, what is fair compensation? Um, right. So what, what, how do we even figure that out, Speaker 3 00:04:26 Right? Yeah. And what we'll start with are just some general like principles to consider before we get into, you know, six kind of key areas to determine this. There's some general, uh, principles, uh, for us to, I think, a good starting point. So, and I'll just kind of, let me ask you, Thomas, uh, on these three things here, we can maybe go about it in a truer false kind of, uh, way to think about it. So true or false, Thomas pastors should be paid a livable wage. Speaker 0 00:04:55 <laugh>. Yes, definitely true. Pastors. Pastors should be, uh, a fair wage is a living wage. Now, Yes, the, the devils and the details on that one, right? Because like, what is a, a livable wage? It really varies. Uh, it varies in general. A lot of times people kind of take a look at what other people in similar kinds of fields would make, but if you're paying your pastor below a livable wage or below the poverty line, um, you probably have to take a look at some other things in your church. Uh, you know, and realistically, your pastor, if that's all you can afford, your pastor is going to be by vocational, so, right. Uh, if it's not a living wage, maybe it should be a part-time wage while they can find some other kind of employment in those ways. So yes, they absolutely should be paid a livable wage. Speaker 3 00:05:40 Okay. What about this, when true or false pastors shouldn't have to worry about providing for their families? Speaker 0 00:05:46 Well, that's a loaded question. I would say it's true with a caveat, like the, the keyword being worry there. Uh, I, I think yes, pastors, I think from a biblical standpoint, we're supposed to worry about nothing. Uh, right. We, we shouldn't worry if the lilies of the field and the birds of the air, they don't worry. Why would we worry? Right? That being said, I know a lot of pastors do struggle with worry about their finances and yeah, feeding their families and doing those things. But I will say it's not just pastors that we worry about that I know sometimes, uh, you know, I have been prone to those things when I was in ministry and when I haven't been in ministry, and I imagine you've, everybody's been there before, right? Yeah. So to think that like, pastors are somehow above that, um, and they shouldn't have those same challenges that the average person in their churches facing about how are we gonna be able to pay our rent or pay for gas, or, uh, especially with the way the economy is right now, and inflation, how are we gonna be able to afford food? Speaker 0 00:06:42 You know, I, I don't want that to be a burden, obviously, to pastors, and I don't think it should be, but I think it should be for everybody. They shouldn't be compensated so extravagant that they don't have to think about those kinds of things. So that's kind of what I'd say there. Speaker 3 00:06:55 Agreed. Agreed. So, okay, last one here. Uh, true or false pastors should be able to save for retirement? Speaker 0 00:07:03 <laugh>. That's a really good one. Um, so many churches think the best retirement plan is God will take care of them, right? Uh, so we Speaker 3 00:07:12 Tomorrow's not, tomorrow's not promised. So, you know, I save That's Speaker 0 00:07:15 True. It's absolutely a healthy plan for any professional, including pastors should involve ways that they can save for their retirement. There's gonna come a time for every person where their impact and their effectiveness in ministry. It will start to diminish over time. And I'm not gonna say when that is for some, it's in our, our, our fifties probably. And for others it's, uh, in their nineties. So it could be anywhere in there, but we just have to come to terms with the fact that we will not be able to do what we do all the days of our lives Yeah. In most cases. And so we wanna be able to plan accordingly. And so for churches that ignore that, that's a big mistake there. So, Yeah. Yeah. Agreed. You should be able to say for retirement, most, Speaker 3 00:07:57 Most pastors would prefer to be retired in their nineties. I, I think most pastors would, but, uh, Speaker 0 00:08:02 I, I would hope so. I do know a lot of guys Speaker 3 00:08:04 They really love preaching, maybe. Yeah. So maybe into their Speaker 0 00:08:08 Nineties. So yeah. At least your role would change, but it's, it's tough to, to do that when you, when you're up and up in years there, it gets pretty challenging with that. So, but with that, I guess maybe we can just kind of jump into the six factors or the six criteria that we think you need to take a look at when you are determining your compensation plan for your pastor there. So, um, we're not gonna get into the specifics of, you know, if you live here and do this, it should be exactly this amount, right? Right. We actually have, uh, some, uh, other posts that we can link to in the description here. Or you can get a detailed breakdown of, hey, uh, in these areas and by this, uh, education level and those things, we'll talk, we'll hit some of these here. We do have some, uh, info on that, uh, that we can link to in the bottom, but why don't you kick us off again with the first Yeah. I guess kind of ranking factor in how we figure out how much to pay a pastor. Speaker 3 00:09:01 Yeah. Thanks. First one would be cost of living specific to your location. So, you know, again, depending on where you live, looking at the average salary for pastors may not be, you know, uh, helpful. But, um, here is a statistic. The Bureau of Labor statistics states the mean annual salary for a pastor in the US is, uh, between 50 $55,680, uh, down to $30,450. Um, and so it's, it's kind of all over the place. Right. That's a big, big range, if you will. Speaker 0 00:09:36 Yeah. It's huge. So, um, you know, I think you and I are a perfect example of this. So you live in, in, uh, the Austin, Texas area, right. And you guys have seen exploding home prices there and cost of living has gone way up with that and Right. You know, we, we've seen like really high interest rates right now on anybody that's just buying a home. If you wanted to find a pastor to come to Austin and pastor your church, you, the cost of living has, has skyrocketed in the last few years of what it would actually cost them. Now, uh, for me, I live in Hawaii and Austin sounds like it's the cheapest place in the world to me when I hear about the prices there. Right. Cause I, I'm in Honolulu, the average home price here is like, one point for a single family home is like 1.2 million. And it was Speaker 3 00:10:21 A gallon of milk. What was a gallon of gallon Speaker 0 00:10:23 Of milk was like $9 here now. Geez. So, yeah. And before, I'm, I'm from here originally, but I was living in Madison, Wisconsin and pastoring a church there where we bought a much larger, uh, house for like a quarter of the price of an average house here Yeah. In Hawaii. So it's totally different. A gallon of milk there costs a dollar 89. It's milk country. Yeah. But that's just what it is. So this is one of those challenges we really get into, like when I, I'm working with a lot of churches and do some coaching stuff here in Hawaii, and one of the hardest things is how do we find pastors? How do we find talent to come and pastor churches here, when you know, to, to afford a house, you have to be making 150, $200,000 a year Yeah. To afford a 1200 square foot single family home in this kind of an area. Speaker 0 00:11:10 So it's really a tough question because frankly, a lot of churches can't afford to pay their youth pastors that kind of money here. No. I don't know any youth pastors that make that kind of money. Right. And so it really is a, is a big challenge. But all that being said, your cost of living, it has to be something that you take into consideration when you're figuring out, Yeah. Your pastor compensation, uh, pastors in North Dakota, uh, or South Dakota, they can't be paid the same thing as pastors in Orange County. Uh, so it's Right. Uh, just a, a different beast, and there's just more costs involved, and you have to respond accordingly. Speaker 3 00:11:44 That's it. That's good. Once, don't you get the next one. Speaker 0 00:11:46 Awesome. I think you need to take into consideration the job responsibilities of whatever that role in the church would be. So for lead pastors, uh, there's several questions that come to mind. It, uh, typically it's gonna be the lion share of preaching and leading the staff. And, but do you require, um, a lot of counseling time on their part, Right? Is that part of their job, hospital Speaker 3 00:12:08 Visits, whatever? Yeah. Speaker 0 00:12:10 Ho Yeah. Marriage, Uh, are they doing all the weddings and all the funerals that happen at your church? Uh, if they are, uh, then that's gonna be different. Larger churches and smaller churches generally have very different requirements for what their pastor's gonna do. If you're a church of 75 people with one person on staff, just the lead pastor, they don't have to oversee a staff of 14 different people. Right. Or 45 different people. Uh, and that is a different kind of responsibility and usually requires a different kind of compensation level when you're dealing with those kinds of things. Speaker 3 00:12:41 Yeah. That's it. It makes me think of my church. You know, again, we've said, uh, I'm at a, what's considered a mega size church. Uh, my family and I are members that, and, uh, and you know, I don't know what my pastor gets paid, but I do know that literally there are hundreds of people that he is oversee that he's overseeing. Right. Um, so, uh, hundreds of staff. We have different locations, campuses, all of that. So, um, that's a determining factor, I'm sure, for what he gets paid Speaker 0 00:13:09 <laugh>. Yeah. We were just talking to, uh, well, we'll let the cat of the bag, the, uh, communications director at your church, uh, came on board here at, at Reach Wright just this week. Yeah. And, uh, it's, we were talking with her a little bit about, um, just the team. She was overseeing a team of 14 different people, uh, at that church on just communications team. Yeah. Speaker 3 00:13:28 Just as the communications. That's Speaker 0 00:13:30 The communications team right there. So that's, that's bigger than like 95% of churches in the United States. Right. They don't have a staff of 14 people. Uh, so you could imagine the, the weight and the responsibility and the, just the, the type of work that's needed, uh, at a church that is a, a megachurch or a very large church. So you have to take that into consideration. Speaker 3 00:13:49 Definitely. Next thing would be education and experience specific to your candidate. Um, so, you know, there's gonna be, this is gonna vary. You're gonna have pastors that were, you know, saved radically when they were on the streets, You know, maybe they dropped outta high school. Right. And then you got the, you know, people getting their masters in divinity and you have, you know, all of these varying education levels mm-hmm. <affirmative>. So something to definitely take into, um, consideration. Speaker 0 00:14:18 Yeah, no, it definitely is. Um, you know, I, I think sometimes we put a little bit too much weight, if anything on this, Right. Um, I've, I wish I could cite the source on this, but I've seen studies that seem to show that there is diminishing returns on education after a college degree for passers. Uh, that tends to happen there. That, um, you know, that as you get into doc doctrinal and, uh, master's level of study in theology, right? Uh, it doesn't necessarily, uh, kind of correspond with growing churches more. Uh, so, uh, there is some data that shows that out there. But, um, that being said, I think you do need to honor education and it is something that we should be celebrating. Uh, but I know a lot of pastors get caught up in this and they would, they think, Hey, if I just finally had that master's degree, then I could finally do the kind of ministry that I wanted to do, or Right. Speaker 0 00:15:11 That kind of thinking. I don't think that's healthy. But if you're on a church council or a church board, I do think you have to figure that out. A lot of times if, if people do have masters or doctorate degrees, uh, in theology or ministry related studies, they probably take it on some debt to get there. And so you do need to figure that out, especially if you're hiring a younger pastor, uh, who has some of this background, uh, consider kind of what that might look like or what they might have invested to get those degrees. And you might wanna take that into consideration. Speaker 3 00:15:38 Yeah. That's good. Why don't you tackle the next one? Speaker 0 00:15:40 Awesome. Next one is, I think you need to consider the cultural and denominational standards, kind of like what typically happens in churches like yours. Uh, and this is kind of broad, you know, this isn't gonna be for every denomination. Some have more than others, obviously, that I would imagine that Catholic priests, uh, are typically paid differently from Evangelical or Baptist church pastors would be so sure. Uh, it is something we need to take that into consideration. Uh, I think this would be more with mainline churches. So I think that you need to probably take a look at what are other Episcopal churches paying their pastors? Right. And, and are we in line with that? You can't really compare, uh, you know, a, uh, evangelical megachurch, uh, with a country UMC church in some of those ways. So yeah, you want to kind of take some of those denominational backgrounds into consideration. Speaker 3 00:16:30 That's good. That's good. Next one, considering benefits and perks offered in the pastor compensation package. So there's different benefits. I know we kind of mentioned, you know, retirement, but there's also things like, is there a housing allowance? You know, I know that, um, um, certain pastors have, um, a why, why is the term escaping me when there's a house on the premises? Come on, help me out. What's Speaker 0 00:16:54 A, a parsonage. Speaker 3 00:16:55 A parsonage? Why did I forget that? I've heard that word thousands of times and said it thousands of times. So that could be that, um, you know, paid sabbaticals, all of that stuff, vacation, health insurance, all of that stuff, Uh, definitely is gonna be, those are gonna be key factors. Speaker 0 00:17:11 Yeah. Let me level with you, um, as a business owner, uh, and you know, you, uh, you kind of know this as well, Ian, that Right. Uh, benefits are an enormous expense for, uh, for a business. And I, I think it's well worth it. We try to be very here at reach, Right. We try to be very generous with our benefits. And so, yeah. But it's not to say that sometimes we just look at kind of what is the base pay rate, right? Like as an employer, we probably are investing 25, maybe 30% on top of whatever the base pay rate rate is in all of the benefits. And that's 401K matching and health insurance, dental insurance, vision insurance, uh, some of the other, uh, things that we offer to our employees here. So, uh, you do need to figure that out. You do need to, to take that into consideration whenever you're presenting a compensation package. Speaker 0 00:18:02 Just kind of a, a rule, a a rule of thumb that I've picked up is you wanna present it as a, a full package. Like, so it's, right. It's not just, Hey, here's what the base pay is gonna be, and then we have some benefits, like Right, Right. Get into the details on that, because, you know, we, for every employee, if they're on our health insurance in 401k and using that, that's thousands of dollars that they are getting of compensation Yeah. That they would otherwise have to pay for. So you do wanna make sure that you kind of figure that in and factoring how much you're giving in those areas. Speaker 3 00:18:30 That's good. That's good. Bring us home. I think you're, you're excited about this last one here. You were like, Oh Speaker 0 00:18:35 Man, you know me. I love talking about you Speaker 3 00:18:36 Were like, I wanted Speaker 0 00:18:36 And macroeconomics, Speaker 3 00:18:38 And you were like, Ian, I'm taking that one. So go ahead. Yeah, you Speaker 0 00:18:40 Gotta take in the consideration the rate of inflation. Um, I think that this should be at least an annual conversation. Really any church out there, you should be evaluating how much you're paying your staff every single year. At a minimum, you should, if not more. Yeah. You should be thinking about this and looking at that. So, uh, inflation print numbers are up over 8% a few months in a row here now, uh, meaning that you're losing 8% of the value or the purchasing power of your compensation every single year. So if you haven't changed your pastor's compensation in a few years, and this 8% rate persists, they're gonna be like taking a 30% pay cut in about three and a half years, right? Yeah. So, or less than three and a half years, because that compounds the way that all works. Yeah. So it's a 30% pay cut in about three years, honestly. Speaker 0 00:19:30 So, geez. Uh, it's, it's a big deal. Uh, the purchasing power of money is always going down, but the rate at which that goes down is always changing. So you do need to take that into consideration. There are lots of studies out there where you could look at what the inflation rate is. At a minimum, if someone is doing an adequate job and keeping up, you need to match what the inflation rate is. Yeah. Uh, if they're doing a good job, you should exceed what the inflation rate is every single year. You should evaluate that. Yeah. So now sometimes we get into the temptation of, Hey, we, we, we hired our last youth pastor, uh, we paid him $1,500, We hired him back in 2008. Uh, and so yeah, I think, uh, $1,500 a month, that's another good, uh, amount to pay this, uh, this new guy part-time work. Well, it's a totally different world. Cost of living is, is much higher. Inflation has been skyrocketing. So you do need to pay more and more, most circumstances there. So just the advice here is to take that into consideration. Anything to add to that? Speaker 3 00:20:28 No, just gotta fill the gas tank too, you know, And, uh, yeah, it's, uh, I think, I think you covered all of that. I think it's just these we hope are helpful as far as, you know, things to consider. Again, um, you know, we're, we're not here to come up with that number exactly, but hopefully this guide you to, uh, resources Speaker 0 00:20:46 Closer to that <laugh>. Yeah, absolutely. And we do have some resources. Again, we'll have those linked in the description here on this video. Yeah. Whether you're watching it on the, uh, on our website or on YouTube or you're listening, you can look in the show notes there and you'll see some of those links there. But we do have some detailed documents with research that shows what pastors are being paid all over the country in different size, churches, different denominations, uh, based on the size of the church. All of that information is all in there, so. Yep. Um, I guess we'll leave it at that for this week. Yeah. We wanna thank you guys so much for being a part of our reach, Right. Family. If this video or audio, uh, uh, podcast has been helpful to you, it would mean so much to us if you would rate Yeah. Review, subscribe, do all those kinds of things. It helps us to get the word out there about this podcast. And we wanna thank you again for being a part of our reach Right family, and we'll catch you next week. Speaker 1 00:21:35 See you. Speaker 0 00:21:38 Thanks for listening to the Reach Right podcast. We hope this episode will help you reach people the right way. Looking for more resources for your church, check us out [email protected]. If this episode has been helpful to you, it would mean the world to us if you would rate, review and subscribe on iTunes or wherever you get your podcasts. Thanks again for listening, and we'll see you next week Speaker 2 00:22:07 To get Speaker 1 00:22:14 You.