More than 100,000 churches nationwide could be affected by mandatory salary requirements put in place by the Biden administration. The move will likely put a squeeze on many budgets and a new study is revealing where salaries and benefits are right now.
According to the annual State of the Church Compensation Survey by ChurchSalary, the average church increased its staff salaries and benefits more than they expected in 2024.
In 2023, churches predicted they would increase personnel budgets by 4.5%, but the average actual increase turned out to be 4.9%. The greatest increase was seen in the cost of benefits.
Aaron Hill, who leads ChurchSalary, said churches reported the cost of benefits like health insurance increasing by 5.2% on average, but one-third of the participating churches reported an increase of over 6%. This is less than the 8.5% jump in health care costs expected in 2024, according to a CNN report.
When it comes to benefit spending increases, 59% of churches reported increases in their health care benefit spending, while 34% said they increased retirement contributions for staff.
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More than 50% of participating churches kept the same size staff as 2023, but 16% of responding churches decreased their staff size. Only 7.6% had expected to decrease their staff size when they were asked about their plans the year before.
The churches that reported a decrease in staff size gave various reasons: 48% said it was due to decreased giving, and 30% cited decreased attendance. Some churches (10%) attributed their cuts to new priorities or different ministry goals, while 7% named increased costs associated with utilities, facility maintenance or loans as the reason for their staff cuts.
When asked about plans for 2025, 65% of churches expect to maintain the same staffing level who will be working the same number of hours. A healthy percentage (27%) think they will increase the size of their staff, but that is down from 32% of churches who expected to increase their staff size in 2024.
ChurchSalary is predicting that these figures are too optimistic. “We are confident that 2025 will look a lot like 2024, with a fair amount of churches who plan to ‘stay the same’ being forced to decrease the size of their staff,” its survey summary stated.
Nearly half of participating churches also plan to provide a 3.3% cost of living adjustment to staff in their 2025 budgets. They also expect the cost of benefits to increase by another 4.5% in the upcoming year.
Matt Steen, co-founder of Chemistry Staffing, said during a webinar presented by ChurchSalary, that one of the budget drivers is the cost of replacing pastors. Steen said he is seeing the beginning of a surge of retirements in the upcoming years with the “graying of the pulpit” and the thinning of bench depth for replacement candidates.
Members of the rising generation are not training for ministry as much as previous generations, Steen said, adding that churches should expect they’ll have to increase compensation substantially to be competitive for the best candidates.
“It may be sticker shock,” Steen said, “as churches are underpaying pastors currently.”
Some of the drivers for increased costs that churches need to consider are the costs to relocate, including housing costs and mortgage interest rates; inflation; and growing seminary debt loads.
Steen tells churches they should set aside twice the senior pastor’s current salary as a succession fund to pay for a search firm, travel expenses, moving costs, and a gift for the departing pastor.
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Church Law & Tax division leader Matt Branaugh pointed out that, on April 23, the federal Department of Labor released a new minimum salary requirement for exempt employees that took effect on July 1. Another increase is scheduled for Jan. 1, 2025.
The minimum annual salary for exempt employees increased from $35,568 to $43,888 on July 1, then is moving to $58,656 on Jan. 1, 2025. Automatic increases every three years are scheduled to begin on July 1, 2027.
The Department of Labor changes on July 1 reportedly affected the classification of staff in 17.4% of churches, and the January increase will affect 28.7% of respondents. Nearly 20% of respondents are uncertain whether the changes will impact their staff.
Attorney Dustin Hill with My Church Law Firm said the ministerial exception still applies to many church employees, even those who are not ordained. However, he advised that churches make sure they have job duties well documented to show that employees are engaged in ministerial work.
Churches may have nonministerial employees to whom these minimum salary requirements apply, and those should be carefully evaluated for compliance, Dustin Hill said.
Over 1,000 churches participated in the annual church compensation survey, Aaron Hill said, but not all completed every section of the survey.
In May, Gloo, a technology company that describes itself as helping “build a more connected ministry,” acquired Church Law & Tax and ChurchSalary from Christianity Today.
This story has been republished with permission from MinistryWatch.