Balancing Personnel Costs

Paying the right amounts without breaking the budget.

Darrell Mims, executive pastor of World Victory Church in Duluth, Georgia, has a simple rule for making decisions about money and staffing: if the money isn’t in the budget, then just say no.

Overspending is obviously the last thing any financial manger wants to do. But how do financial managers help balance the need to build a ministry and keep the costs down? How do financial managers help leadership teams make staffing decisions that follow sound policies and keep the budget out of the red?

Church Finance Today asked financial managers at small and large churches and experts in church finance. They shared a number of helpful insights.

Calculate and evaluate staff costs

Most churches should evaluate staff costs at least once a year at budget time, said Dan Busby, president of the Evangelical Council for Financial Accountability. Churches generally spend between 35 and 60 percent of their budgets on staffing. Church size, local cost of living, and ministry philosophy all play a role in determining the right percentage.

Most churches calculate personnel costs as a percentage of expenses, said CPA Vonna Laue, a Church Finance Today advisor. This helps determine how much of a church’s resources are spent on compensation and benefits. If churches want to calculate the costs as a percentage of income, they should exclude designated giving since it often fluctuates based on other campaigns and projects, Laue said.

Whichever calculation is used, a church should know the percentage first so that it can decide whether to spend more to hire additional staff.

World Victory’s Mims says that the process for hiring starts with a ministry evaluation: can this job be done with a volunteer? If it needs to be a staff role, how many hours of work are needed, and how much should the person be paid? If the leadership decides a new position should be added, Mims looks at what the position will cost and whether that cost fits in the budget. Hiring new staff, said Mims, might mean cutting back on other program expenses.

Make certain compensation is fair

Treasurer Laura Youderian mostly worries about getting the pastor’s salary right—the main staffing cost at River of Life Church in Cincinnati, a small church where many ministry roles are filled by volunteers or part-time staff.

Youderian is also an assistant professor of economics at Xavier University, which shapes how she sees the question of staff compensation. For example, prior to becoming a minister, the church’s pastor had made more money in his previous vocation. That’s something to keep in mind when setting the pastor’s salary, she said. If you set it too low, it could cause a pastor to look for other options.

“I think about his value outside the church,” she said. “Our pay has to be enough for him to not think about doing something different.”

Budget for changes in staff

Libertyville Covenant Church, north of Chicago, recently needed to hire a new organist when the former organist passed away unexpectedly. She’d been a church member, and charged less than the going rate. As a result, the church only budgeted $3,000 per year for an organist. However, the true going rate was $10,000 a year. That left the church without many options, said John Bethancourt, Libertyville Covenant’s treasurer.

The church places a high value on its music program and wanted to get a talented organist, but they couldn’t find a part-time organist. So it was going to cost them.

“Sometimes you’re going to have to pay more to get the right person,” he said.

Complicating matters was the timing—the church was halfway through the budget year. Funds were already allocated. So Bethancourt went back to the church leadership and told them they couldn’t afford to hire an organist every week, unless giving increased. And unless giving grew the next year, there might not be enough to fund an organist in the future.

In the end, several members of the congregation chose to make up the difference in the budget to hire a full-time organist. But the lesson learned is helpful: churches need to research the going rates of a position before hiring someone, let alone budgeting to pay them.

Consider outsourcing

Outsourcing can make sense for churches, especially when it comes to support operations like bookkeeping or building maintenance, said Stan Reiff, a partner with the accounting firm CapinCrouse.

Churches don’t always have in-house expertise to take care of those tasks. And even if they do, those tasks are often time-intensive. Why let a volunteer who is a CPA do the books, when an outside bookkeeper could handle those tasks, he said, leaving the CPA free to do more big-picture thinking.

Case Study: Blending Volunteer Work with Paid Staff and Outsourcing

Matt Self had his hands full when he first became treasurer for Church of the Redeemer in Nashville.

The 15-year-old church of 400 still functioned as a church plant when it came to finances. Self’s predecessor helped count money, complete payroll, and prepare financial reports, with the help of an outside bookkeeper. Along with stretching the limits of what one financial person could do, the arrangement raised internal control concerns because one person handled all of these financial areas.

That left little time for long-term planning. When Self took the volunteer job in 2015, the church’s finances were not organized in a sustainable manner. Also, the church changed a policy that year so that the volunteer serving as treasurer turns over every few years, which could make the transition between volunteers difficult, Self explained.

Self sensed it was time to beef up the church’s policies and procedures and operate more like an established congregation rather than a start-up.

Working with the church’s elders, Self helped transition some of the tasks that the volunteer treasurer had been handling—like writing checks—to the parish administrator.

Then in 2015, the church also decided to add more outsourced bookkeeping from an accounting firm. That firm now prepares the monthly financial reports, which Self then reviews and presents to the board. Without bookkeeping responsibilities, he’s freed to do more planning and budgeting.

“I told [the elders] we were going to spend more money in order to get better service,” Self said. The relatively small amount of money involved—a few thousand extra dollars a year—made it an easy decision.

Increased time for long-range planning has come in handy for Self. The church recently wanted to make one of their staff members—who’d worked on a one-year project—a permanent part of the staff. To pay for that change, the church’s elders wanted to tap into their reserves.

Self had a better idea. He reviewed the church cash flow over the previous three years and saw that the church could add a staff person without dipping into reserves, as long as giving remained consistent. Self had always budgeted conservatively, and had only planned on spending about 90 percent of the money that came in.

For the current budget, the church raised both its planned expenses and projected giving, and asked church members to increase their giving to meet the new budget. If the new giving didn’t meet the goal, the church would still be okay—because the church could afford to pay for the new staff person with the amount of money it usually received on a yearly basis. In a pinch, it could cut back on nonstaff expenses, or tap the reserves as a last resort.

—Bob Smietana

Often you can hire an expert, such as an executive pastor or CFO, on a part-time basis, said Reiff. Hire them for just the time you need, then have a less-expensive staff person or outsourced firm do the rest of the work.

“You should outsource until it is cheaper to bring it in-house,” advised Reiff.

Outsourcing can also provide additional funds for ministry, said Terrence Chavis, a financial consultant and former executive pastor at Concord Church in Dallas. Finding an outside firm that can handle support duties is relatively easy, he said. Finding good ministry staff is harder.

“If we have to choose between hiring a children’s pastor and an accountant, I am going to lean toward hiring the children’s pastor,” he said. “There are plenty of organizations where I can outsource the accounting.”

Find solutions when the budget is tight

Part of a financial manager’s job is saying no to bad decisions, said Chavis. But another part is to find ways to expand the church’s ministry.

Let’s say, for example, a church really does need to create a new position, yet there’s no money to do so. Chavis says a financial manager needs to help the church explore other options.

There are always options, he stressed. Hiring a new full-time staff member may mean cutbacks in other areas, such as programming. He’d also look for other alternatives: could the church hire an intern from a local seminary or college to do a project?

Pastors, he said, are wired to see people’s needs and try to meet them. A financial manager can help a pastor meet those needs in a sustainable way.

“You have to appeal to the sense of meeting the need,” he said. “We can still meet the need, [but] it may not look like what you pictured.”

For more on issues related to personnel costs, check out more resources available on or

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