A Guiding Philosophy for Compensating Church Employees

I have a philosophy that guides my thinking in relation to church employee compensation and benefits. Before I share it, notice that I included all church employees, not just pastors. This applies to any and every employee a church may hire. Here is my guiding philosophy for church employees:

The church of Jesus Christ should attempt to treat its employees as well as, if not better than, the best secular employers of our day.

I can hear the cynic respond, “Of course you’d say that! You’ve got a dog in the fight.” Well, you are correct. I do have a dog in the fight, but this philosophy is not driven by my own current employment status, but rather by my belief that the church is to be a city on a hill - a light in a very dark world - in every single aspect of its life and dealings before this broken world. And this can be nowhere more vividly and practically displayed than in the realm of employee care.

I grew up in circles where pastors and Christian workers of all types were viewed as having, effectively, taken a vow of poverty as a condition of their employment. I can think of dozens of faithful, Christian school teachers, for example, who were paid poverty-level wages (or likely below) in exchange for their service.

Even for pastors, too many churches act as if it is okay to give little, if any, thought to truly being a blessing to those whose responsibility it is to shepherd their souls.

This just should not be!

While my philosophy may be an ideal that few, if any, churches or ministries ever fully attain, it should at least be the guiding force behind every decision that is made.

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How to Determine Projected Giving for Next Year's Budget?

One of the hardest aspects of creating an operating budget for the upcoming fiscal year is determining how much giving the church should project/expect next year. I know that, in our case, this is something we wrestle with each and every year.

Over time, we have developed five questions to help us make this crucial determination:

1. What is the total YTD actual giving for the current fiscal year?
2. Based on current average weekly giving, what is the projected annual giving for the current fiscal year?
3. How does the projected annual giving for the current fiscal year match up to the prior year's projection?
4. Does recent giving (rolling 3 month and 6 month totals) appear to be trending up, down, or steady?
5. How does YTD actual giving for the current fiscal year compare to the same time period in the prior fiscal year?

What is the total YTD actual giving for the current fiscal year? This allows us to see where we're at today.

Based on current average weekly giving, what is the projected annual giving for the current fiscal year? This is where we take whatever we've received YTD and divide it by the current number of weeks in the fiscal year. For example, if we have received $200,000 YTD and there have been 40 weeks of giving, then our average weekly giving is $5,000. With 12 remaining weeks of giving left in the year, our projected annual giving for the current fiscal year would be $260,000 ($200,000 actual + $5,000 times 12 weeks = $260,000).

How does the projected annual giving for the current fiscal year match up to the prior year's projection? If, last year, we projected that we would receive $250,000 in giving this year, and our projection for EOY is $260,000, then we are on track. If, however, we projected $300,000, then where did our projection go wrong? What happened? This step acts as a quality control feature in our overall thinking and planning.

Does recent giving (rolling 3 month and 6 month totals) appear to be trending up, down, or steady? So, at this point, we compare three numbers. First, we determine our YTD average weekly giving. Second, we take the the last 26 weeks of giving and determine the average weekly giving from that time period. Finally, we take the last 13 weeks of giving and determine the average weekly giving from that time period. After comparing those three numbers, do we find an increase in giving, a decrease in giving, or no change in giving? This gives us an idea of what to expect going forward.

How does YTD actual giving for the current fiscal year compare to the same time period in the prior fiscal year? Are we seeing more or less giving than we were 12 months ago at this same time? Again, this gives us a sense on what to expect going forward.

If, after reviewing these factors, the projected giving for the upcoming fiscal year is less than the current year’s projections, then we have to adjust our budget accordingly.

On the other hand, If, after reviewing these factors, the projected giving for the upcoming fiscal year is greater than the current year’s projections . . . then we have to determine how much extra to project. This is the particularly tricky part.

In general, we have tried to tie increases in projected giving to any actual increases in annual giving over the previous 5 year period.

For example, If the projected giving for the current year is $260,000, AND if, after reviewing the factors listed above, we believe that the projected giving for the upcoming fiscal year should be greater than the current year’s projections, AND if the average year-over-year increase in actual giving for the past five years equals 3%, THEN the projection for the upcoming year’s giving should equal 103% of the current year’s projections, i.e. $267,800. 

As you can see, this is about 50% art and 50% science. It's our attempt to be both conservative and factual in making this very important projection.

How does your church make this projection? Leave a comment below, or follow me on Facebook and leave a comment there.

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BENEFITTING FROM OBAMACARE

Over the past three years, our church has saved over $100,000 in health insurance premiums by using the provisions of the Affordable Care Act (a.k.a Obamacare) to our advantage - $100,000 that we have used to hire additional staff, send one of our members into foreign missions, and pay down our church's mortgage!

Written for both pastors and church decision makers, Benefitting from Obamacare is the story of how we did that, the challenges we faced, the things we had to consider, and what we have experienced since.

Church Budgets: When to Begin Preparing

It's September. Do you know what that means? It means that I'm on the verge of beginning another loosing season of Fantasy Football.

But apart from that, it also means that our church's annual budget season is upon us. At our church, our fiscal year matches the calendar year . . . which means that we are only four months away from needing to have a new, approved annual budget. In order to have our budget ready to go on January 1, we begin the process on September 1.

Now, we didn't pick that date arbitrarily. We arrived at it by "reverse engineering" our budget process. Let me explain.

Since we know we need to have an approved budget ready to go on January 1, and since our annual church budget must be approved by our members, we know that we have to have them vote on it during our Q4 Members' Meeting - normally held on either the first or second Sunday of December (depending on how the calendar looks in a given year).

In order to have them vote on it at that meeting, we must make it publicly available for review at least two weeks prior. This means that we normally have to have it completely finished and ready to go by mid-November.

Since our Elder board has to approve it before it is made public to our members, the Elder board wants to have a month to review, discuss, and tweak it . . . which means they need to have the first draft from our finance committee by mid-October.

In order for our finance committee to have it's recommended draft budget to the Elder board by mid-October, they need two things. First, they need to receive YTD budget reports along with a few specific, year-end financial projections from our financial secretary and Executive Pastor by the last week of September. Second, they need next-year's budget requests from all of the various ministry leaders within our church by the last week of September as well.

And, over time, we've learned that both of those things take a few weeks to get. So, to make sure everything works as it is supposed to, we begin preparing our new budget on September 1.

Obviously, that process is specific to our church and our setup, but regardless of how your church operates, I think there's wisdom in "reverse engineering" your budget process so that you can begin in a timely manner and complete your budget without too much stress.

Leave a comment below to share how your church handles this. Or, follow me on Facebook and leave a comment there.