Church Staff Salary Guide for 2025: Pastor Pay & Trends Tithely

Ministers occupy a unique, some may say weird, carve out in U.S. employment law. This is because ministers may fall under a category known as the “ministerial exception”. This legal doctrine recognizes the special, constitutionally protected relationship between a ministry and its ministerial staff. These pressures underscore the importance of thoughtful church financial management and strategic planning to ensure sustainability while providing fair and meaningful compensation for church staff.

Managing housing allowances

MinistryWorks is one of the most popular church payroll services for ministries that need a separate payroll specialist only working with churches. This church payroll software is made for ministry and clergy tax law. It can run payroll, pay employees using direct deposits and checks, and handle federal, state, and local taxes. A 501(c)(3) nonprofit organization is defined by the Internal Revenue Service (IRS) as a type of tax-exempt organization that is operated for charitable, religious, educational, or scientific purposes. This status allows organizations, including churches, to avoid paying federal income taxes and enables them to receive tax-deductible contributions from donors.

Investigating Compensation Structure in Religious Organizations

Our full-service payroll for churches also helps save money by helping you accurately track your employees’ Bookkeeping for Consultants time. We offer a variety of time and attendance options (including biometric and web-based), making it easier than ever to track and analyze church employee payroll and hours. At the least, look for digital church payroll services that can help you stay accurate, up-to-date, and on track as you process each paycheck. This resource will dive into the often overwhelming world of payroll for churches. We’ll explore the salary options for clergy, key tax forms, steps to set up church payroll, and the question of when it makes sense to outsource the whole kit and caboodle.

HR Support and Benefits Management

If no agreement exists, the minister is personally responsible for paying estimated income taxes. For income tax purposes, facts and circumstances determine whether you’re considered an employee or a self-employed person under common-law rules. For more information about the common-law rules, see Publication 15-A, Employer’s Supplemental Tax Guide.

• We’ve bundled everything you need into a single, all-inclusive, and competitive price – no additional or hidden add-on charges.
• This is because their payments qualify them as self-employed in terms of social security but a church employee in terms of their income tax.
• We know industry best practices, adhere to essential regulations, and partner with you to achieve your desired outcome.
• Get weekly updates on church tech, happenings at Tithe.ly, free resources for your church and more.
• The software program supports automated billing, bank reconciliation, ACH payment processing, and other features.

Conclusion: Balancing Tax Obligations and Religious Freedom

However, even if you use a payroll service, you need to know how to properly set up your payroll as your organization will be held responsible for any penalties that may incur from incorrect filings. If you only have a minister employee you may be able to handle it without one of the above mentioned services…especially if their compensation is designated all housing allowance. A minister who is furnished a parsonage may exclude from gross income the fair rental value of the parsonage, including utilities. However, the amount excluded can’t be more than reasonable compensation for the minister’s services. How do you balance your church staff salary guide fairly while keeping the lights on for Sunday services? Start by evaluating your financial resources and setting aside a realistic salary portion, ensuring room for church staff benefits like health insurance or retirement plans.

The services you perform in the exercise of your ministry are generally covered by Social Security and Medicare under the self-employment tax system, regardless of your status under the common law. The fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. The minister must include the amount of the fair rental value of a parsonage or the housing allowance for social security coverage purposes.

• Horizon understands the importance of accurate time tracking and attendance management for your team’s employees.
• If your payroll contact person does not have an accurate and up-to-date knowledge of standard tax law and clergy tax law, your payroll can become nothing more than an exercise in wrongdoing.
• They don’t have to file any paperwork with the IRS to receive their tax exemption.
• That’s why we offer robust time-tracking solutions designed to streamline these processes.
• OnPay is the best church payroll software for administrators who are looking for powerful system permissions to delegate HR and payroll tasks.
• First, as the chart below indicates, very few churches (5%) spent less on benefits.

Church Employees, Social Security, and Medicare

– Be the first to get notified on new clergy tax, church payroll and HR updates. Churches also need to submit copies of all Form W-2 and 1099-MISC statements to the IRS, along with a Form W-3 or Form 1096, respectively. This can be a lot of paperwork, and this is why efficient payroll for religious organizations is so important. Yet one step deeper, and the complexities of tax exemption for the church become a labyrinthine process with twists and turns that wind across federal, local, and state levels. If a church classifies a worker as an independent contractor but the IRS reclassifies that worker as an employee, the church may be liable for substantial fines. This type of error church payroll highlights the importance of having an HR partner who understands payroll tax complexities.

Support for contractors and staff

PeopleWorX specializes in payroll and HR solutions for nonprofit organizations, including churches. From clergy tax compliance to automated payroll systems, we’ll simplify the process so you can focus on fixed assets your mission. Payroll is a very important aspect of every church, so choosing the best payroll services is imperative. Running payroll is not only about ensuring employees get compensated, but also about making sure their hours are accurate, staying compliant with clergy tax law and supporting you throughout the process.

Don’t Risk a Tax Audit

Children’s ministry directors earn around $32,480 annually and U.S. church custodians typically earn around $15.89 per hour. As for a church audio visual technician in the U.S., the average hourly pay is $25.73. Regional expectations matter too – churches in wealthier areas feel they have to pay more, while others make every dollar count, reinforcing that location matters.

• You don’t want your church having legal issues or even facing fines because of errors made that one of our professionals could have easily avoided.
• Generally, revenue from the sale of this advertising is unrelated trade or business income and is taxable.
• As the chart below shows, despite planning to do the opposite last September, 8.8% of churches were either forced (or decided) to decrease the size of their staff in 2024.
• From food banks to housing assistance programs, religious organizations often step in where government services may fall short.
• These guides work well for helping you get started on a brand new strategy.
• Inflation and economic shifts have created new challenges for churches when it comes to church employee wages.
• While secular jobs saw an average salary increase of 3.5% in 2024, church staff salaries grew by 5% annually (ChurchSalary).

According to the 85 to 130 churches who provided this level of data, the median impact of both the July and January increases was/will be 3 employees. While 3 employees may seem small, the median impact relative to each church’s current number of exempt employees will amount to between 11% (July) and 16% (Jan). As churches look ahead to 2025, 74% anticipate they will spend more on salaries/wages, 40% plan to spend more on benefits, and 72% expect they will need to spend more overall on payroll. Across the board, data captured in this year’s survey projects a 2 to 5% shift away from “same” or “decreased” spending. There is simply no way to escape the increased cost of benefits or the pressure to pay staff higher wages. All of this is a delayed response to the roughly 20% shift in expenses that COVID brought to the economy (2019 versus 2023).