Compensation: Handle with Care
Compensation: Handle with Care
Failure to correctly document compensation packages can lead to issues at the state and federal levels.

All too often churches approach compensation packages in a haphazard way. They make quick decisions without much forethought and with little or no documentation. These churches are asking for trouble.

Set Reasonable Compensation

When it comes to compensation, churches must guard against excess benefit transactions. Such a transaction takes place when an employee is: (1) paid too much for the services rendered, (2) paid without the proper authority (e.g., the pastor sets his or her own compensation), or (3) receives benefits that are not approved and properly reported for tax purposes. Along with the possibility of severe penalties, excess compensation can jeopardize a church's tax exempt status.

It's essential that churches determine the maximum compensation that can be paid to an employee or minister for services rendered to the church. To prove that the maximum compensation proposed is still reasonable, churches should use outside sources of data. Here are three sources for obtaining outside data: Church Law & Tax's ChurchSalary.com, The Church Network's MinistryPay.com, and independent compensation experts. While many professionals may purport to be compensation experts, keep in mind that attorneys and CPAs are not qualified as compensation experts unless: (1) compensation consulting is their primary service, (2) they have received specialized training, and (3) they have specifically worked in this area for several years.

Log In For Full Access

Interested in becoming a member? Learn more.

Posted: January 28, 2016
View All
from our store
How Churches Spend Their Money: 2019 Executive Report

How Churches Spend Their Money: 2019 Executive Report

This report will give you an inside look at how churches nationwide spend their money.
The 2019 State of Church Compensation Report

The 2019 State of Church Compensation Report

Data and statistics about the state of church compensation in the U.S. for 2019.
Church Compensation

Church Compensation

Learn the many pieces of employee compensation.
Setting a Pastor's Pay

Setting a Pastor's Pay

Richard Hammar explains legal and tax matters for planning a pastor's compensation.

ChurchSalary

ChurchSalary

Experience a whole new way to set compensation. Eliminate the guesswork – get access to detailed compensation reports in just minutes.