Welcome to part 2 of How Much to Pay Your Staff!
I think this is going to be an all-time favorite mini-series because I’m likely going to tell you all that you are underpaid and I am going to see a rash of email forwards to lay elders in my analytics. I’m only half joking. I do think most of you are underpaid. I talk to guys all the time who are making literally half what they should be and their families are paying the price.
A brief caveat. Every one of us, no matter how big or small your budget is, have limited resources. We simply cannot raise our salaries by 100% because a blog said we deserve it. You can only spend the money that you have, so raising your salary and/or the salaries of your team will mean that something has to be cut somewhere else. I have lots of thoughts about how we should be structuring our budgets to allow for the salary ranges I am going to suggest here. I will add some of those thoughts at the end of this series so that you can have some practical steps.
Second, briefer caveat. Before you take this blog to your elders and ask for a raise, make sure they want you to stay. I know that sounds harsh but there’s a chance they like you in your role in part because you are underpaid. If you are paid a market rate, they are going to expect you to perform at market levels. Of course, I’m writing to more than 5000 of you so statistically, not all of you are crushing it. Before you ask for even a moderate raise, make sure the people who are paying you will want to pay you more to keep you around.
OK, all that being said, here is my golden rule of staff salaries: Work backward from lifestyle. I told you last week that national salary averages are useless and I think taking a Principal or High School teacher's salary is an inexact tool. The best way to determine a salary is to start with a description of the person you are looking for (last week’s project) and then describe the lifestyle you would want them to have. So for example:
You are hiring an Executive Pastor. You want someone with 5-10 years of XP experience in a church roughly your size. You want him to be a pastor with a Master’s degree. He is likely going to be in his 40s, married, and have a couple of kids. That’s your first step.
Next, answer some questions about the kind of lifestyle you’d want him to live. Here are some examples:
You get the idea.
I sincerely hope that you wouldn’t want any of your staff members to be living paycheck to paycheck, shopping at bargain grocery stores and to be forced to send their kids to public school. Of course, none of that is necessarily bad and sometimes we are forced into those kinds of situations. All I’m saying is that if you want to hire someone who will have a family but you only have $35,000 to pay them, you are expecting that family to live in relative poverty. Again, your situation may call for that, but keep in mind that you are going to diminish your hiring pool significantly by asking a family to live this way.
As you answer these questions, keep in mind that this person is moving to your city or town today, not 15 years ago when you may have. It's a new economic moment and you have to pay him to live in your city today, paying today’s prices. If you think you are underpaid and will be asking for a raise, use the same process. You may already own a home so your mortgage is set. That’s an advantage but every other bill has gone up considerably in the last couple of years and your salary should reflect that.
Once you’ve answered those questions you should have (1) a demographic profile of the kind of person you are looking for and (2) a description of the lifestyle you’d want that person to have. From there, go to the internet! If you would want your pastor to be able to own a home, start with Redfin or Zillow and get a sense of the median price for the kind of house you’d want him to be able to afford. OK, now go change your underwear. I get it, it's rough out there, but if you don’t address reality, you are either consigning your pastor to a life you wouldn’t want to live or you are not going to find someone at all.
If you want your pastor to be a renter, check Craigslist and do the same thing. That is your baseline because housing is not only the most expensive bill in the budget, but it’s also a good proxy for the rest of the cost of living for your area.
Once you have calculated the average monthly mortgage/rent in your area, multiply by four. Dave Ramsey argues that a mortgage payment should not exceed 25% of take-home pay. With this standard in mind, if housing costs are $2200 per month, a starting place for family income would be $8,800 per month. (This number does not include benefits.) Few quality pastors will accept $60,000 per year when housing will cost them $2,000 per month. They will pursue better opportunities than you are offering.
I know these numbers seem high and I think Ramsey can be a little aggressive with this stuff but it gives you a baseline. In big expensive cities, housing is usually closer to 40% of take-home but 25% to 35% is a healthy range.
I was talking with a church recently who is in the Los Angeles area and they want to hire a Lead Pastor for $85,000. I did a Quick Look at Redfin and found that the cheapest 3-bedroom home in their part of the city was $930,000. LA is crazy, I get it, but they are trying to hire someone who will live within, what, 25 miles? Not going to happen on $85,000 unless they are a single guy or their wife makes a similar salary. Maybe an $85,000 salary sounds great to you, but if you are making that much in Dallas, it translates to $122,000 in Los Angeles.
Long story short, you have to pay your leaders whatever it costs to live where you want them to live and have a reasonable life. Can you afford that? Maybe, maybe not, but that’s what it will take to get the people you need around you in the long run.
Next week, we’ll take it a step further and give you some other things to consider and then we’ll wrap up with a plan to be able to afford the team you need.