How much should a pastor be paid? Though the final answer is subjective, here are six guidelines. Rather than focusing on one or two of these, make sure to consider each. None is exhaustive, but all are helpful.
1. THE FOUR TIMES RULE
Determine the starting place for a fair ministry salary by calculating average monthly mortgage/rent in your area and multiplying by four. Financial guru, Dave Ramsey, argues that a mortgage payment should not exceed 25% of take-home pay. With this standard in mind, if housing costs are $1,800 per month, a starting place for a salary would be $7,200 per month. (This number does not include benefits.) Few quality pastors will accept $40,000 per year when housing will cost them $2,000 per month. They will simply pursue better opportunities than you are offering. Before you start arguing with me, keep reading the next five guidelines.
2. COMPENSATION SURVEYS
Step 2 in determining ministry compensation is to learn the going rate for what pastors are being paid. There are several different salary surveys that break down pastoral compensation by ministry position, church size, region, etc. Here are a few of the better compensation surveys:
In building a ministry compensation strategy, make sure to consider comparable salaries in your community. Though this is more art than science, consider comparing the lead pastor to a high school principal. Both are likely to have master’s degrees, and both oversee complex organizations that require unique and diverse skill sets.
4. WHAT CONTEXT ALLOWS
The fourth consideration in pastoral compensation is what the local context allows. Helpful questions may include:
What is the economy of the city?
What is the median household income?
What is the demographic of the church?
What do salaries look like in your city?
The answers to these questions will be different in Tucson than they are in Louisville or New York City.
5. REPLACEMENT VALUE
If you consider only one of these six criteria, replacement value is the most important of the six. Above all else, fair compensation must be determined by replacement value. If a person in a role vacates the position, what will it cost to replace him with a person of comparable gifting and experience? Most of the time when replacement value is considered, competent pastors are underpaid.
There may be times when a pastor is so valuable to a congregation that his special needs trump the other guidelines. A (pastor) friend of mine has four children, two of whom are special needs. He not only needs the best health care money can buy, he also needs a house with hallways wide enough to accommodate two wheelchairs. He has a specific and unique need. He is so valuable to his church that they have decided to pay him what he needs to take care of his family, even though that may be more than the going rate for a pastor in his area.
A wise church will carefully and generously care for those who lead the church. The Scripture clearly teaches us to pay our pastors. Walking through these six steps will set you well on the way to a solid strategy for compensation.