When Layoffs Loom

Letting church staff go safely, legally—and with grace.

The local church may be a community of faith, but it is also a local employer. Like all employers, churches hire people to fill staff positions. They also face the tough, and sometimes risky, decisions to lay off people.

More congregations than ever faced difficult decisions involving downsizing during the Great Recession. A fall-off in stewardship and severe declines in investment fund values because of the sharp drop in the stock market took tolls on many churches.

Because personnel costs often take up at least a third of a church’s operating budget, and even half or more, the spotlight inevitably shines on staffing as a primary place to reduce costs. Surprisingly, our church budget priorities survey of 827 church leaders in March 2009 showed only 13 percent would consider layoffs, with salary freezes (27 percent), hiring freezes (19 percent), and pay cuts (14 percent) the three likelier options.

A variety of reasons may exist for this outlook. Layoffs may not be necessary in some instances. Or, in other instances, church leaders often put off crucial staffing decisions until finances get out of hand, says Frank Sommerville, a Texas-based attorney experienced in church labor issues. “The attitude regarding church staffing is that ‘the Lord will provide,'” he says, “but (they) seek help way too late in the process, and make it a more expensive and deeper problem to dig out of. Church leaders need to learn the Rule of the Shovel: when in the hole, the first step is to put down the shovel.”

With a national employment rate topping 8 percent—and in some parts of the country, more than 10 percent—the economy seriously affected the staffing of local churches. So church leaders must give serious thought and prayer to this question: If staff reductions become necessary, how can they be done in a pastorally, spiritually sensitive—and legally sound—manner?

Layoffs and The Law

Churches and ministries consider employee layoffs and termination actions usually for four different reasons:

Financial challenge. A church may need to pare back its number of employees due to a decrease in giving or pledges. Endowed funds may have decreased in value, resulting in reduced income that may have supported specific programs. Other church expenses may have increased dramatically for a variety of reasons, including rising energy costs that expand utility bills, or unexpected building repair jobs. Any or all of these financial challenges may bring about a financial crisis that must be faced, and when budget cuts quickly need to be made, staffing levels may be reduced.

Strategic challenge. Through a strategic or long-range planning process, or a pastor’s vision for ministry, the existing staff roster may not fit the new directions or priorities that the congregation chooses to take. Current positions may be eliminated or redefined, and existing employees may be offered an opportunity to retrain, or asked to go.

Pastoral transition. Churches redesign staff positions and reassign responsibilities during a pastoral transition or interim ministry period. A church board may seek a different kind of pastor than the one who retired or left for another ministry. The interim period may allow the church board or interim pastor to make decisions that the previous pastor either chose not to implement or couldn’t make.

Relational or personal challenges. A conflict in the staff, or between a staff member and the direct supervisor, may cause the elimination of a position or the termination of employment. Or the staff person may engage in immoral or inappropriate behavior on or off the job that may require termination of employment for due cause.

As church leaders consider how to address these challenges and employment decisions, there are four ways that an employer and employee can part ways:

  • Through a layoff, or the forced idleness of an employee. The layoff can be temporary. Or it can be permanent because of the elimination of specific positions or entire departments, in which case people become unemployed. The employer can grant a severance package, such as the continuation of pay or benefits for a period of time (though this action is not required). The vacant positions can be eliminated, or reopened at a later time at the discretion of the church.
  • The redefinition of job description/responsibilities. Elizabeth Smotherson, a church business administrator in Castle Rock, Colorado, says a decline in stewardship led to a financial crisis in early 2008 at her church. She was let go. “Once I was laid off, the pastor and board reworked the position and redefined an administrative assistant position. They then hired a full-time administrative assistant to take on most of the work, but at a reduced rate of pay and no benefits.” Similar position redefinition can occur when a children’s and youth ministry sees a decline in participation. Some of the ministry positions may be redefined and combined, resulting in the dismissal of some employees.
  • In some cases, churches may eliminate positions, but not release the people who hold them. The board and staff at Mount View Presbyterian Church in Scottsdale, Arizona, wrestled with staff reductions resulting from a dip in giving and strategic changes in the ministry’s direction. Staffing and programming had grown in years of abundance. Bruce Usher, the chair of the church’s personnel committee, says that when conditions worsened financially in 2008, the budget and funding had to be reduced to match available resources. “First and foremost, we knew that we had no ‘weak links.’ Everyone was doing their job, and we were satisfied with their performance,” he says. “So we had to look at resources allocated to different segments of the congregation—the amounts supporting ordained pastors, the music program, administration, and education. We found some excesses in administration and education, for example. We had seasoned associate pastors as well as seasoned staff that could do the work of the business administrator, and some of the youth ministries.” As a result, several positions were eliminated.
  • For good cause, employees can lose their jobs through termination for a violation of civil laws or judicatory codes. Regardless of which way a church releases an employee, it is vitally important to evaluate the emotional and spiritual ramifications of such a move, as well as the possible legal consequences.

Richard Hammar cautions church leaders to review six areas before a layoff to help prevent litigation:

1. Differentiate between employees who are employed at will (who can be dismissed in many circumstances, including economic conditions) from those employees who are covered by a contract (for which good cause is necessary). “Of course, a sharp drop in church income may constitute a good cause,” Hammar says.

2. Make certain that protected classes of workers are not singled out for dismissal, even when this happens inadvertently.

3. Review the church employee manual or handbook to make sure it’s updated and reflects accurate and current information.

4. Determine what accrued vacation or sick pay, or other accumulated benefits, need to be paid to released employees.

5. Exercise caution with severance agreements. “There are a number of tax issues that have to be addressed, including tax reporting withholding, availability of housing allowance, and compliance with the nonqualified deferred compensation regulations under section 49A of the tax code,” Hammar says.

6. Review the applicability of COBRA or other state laws providing insurance options to laid-off employees. “COBRA is a federal law that allows certain employees to be covered under an employer’s group health insurance plan to continue health insurance coverage at their own expense after the termination of their emplouyment,” Hammar says. It is essential for a church to monitor pending changes in federal COBRA requirements for terminations between September 1, 2008, and January 1, 2010.

Emotional Responses

Such decisions certainly have an impact on the morale of those who lose their positions, and on the church board and staff members who remain. “One of the challenges for the board was they thought I’d have no problem landing a job, and that’s what they used to sell the congregation on the elimination of my position,” Smotherson recalls. She needed several months to find a job. She also lost health benefits, a major concern since her husband does not have health insurance at his job.

“But what was equally sad was that we lost our faith community, which we had been a part of for many years,” she says. Now, she and her husband are in much better spiritual shape, and they have found a congregational home. Nevertheless, she grieved over the loss.

Members of a congregation may become angry that certain positions are eliminated, which they believe are important to the ministry. Says Usher: “When we announced the cuts to the members, we had reactions all over the spectrum, from ‘I’m glad you are being responsible,’ to ‘We have to save these positions somehow.'”

Some members pledged increased giving to save certain positions. “We had to thank them, but also remind them that these cuts were strategic for ministry, not simply from a financial shortfall,” he says.

Reflect Christ’s Character

Churches sometimes can avoid the crises of layoffs and terminations when leaders think and act strategically about mission and ministry priorities, and address financial problems early.

Sommerville says he believes that hiring the best people is a great discipline for the church as an employer. “Some churches are loaded with mediocre employees—whether out of compassion or grace or heart motivations,” he says. “Hire not only on the basis of Christian beliefs, but also on the person’s skills and the values of the church’s ministry. You want your core team to survive in the economic downturn, and when things get better, you will not have to replace them, since hiring will be more expensive.”

When layoffs do occur, they can challenge both the humanity and holiness of the body of Christ. Secular businesses can teach church leaders a few lessons in best practices when dealing with layoffs.

“I keep trying to get organizations to handle labor actions humbly and graciously, informed by the Golden Rule,” says John Challenger, chief executive officer of Challenger, Gray & Christmas, Inc., a Chicago-based global outplacement firm. Instead of taking drastic and short-sighted measures to dismiss employees, Challenger says, churches and other organizations need to consider the welfare of the worker.

“Be sure to keep all workers informed of any pending decisions, and get them involved in various ways to solve the employment problems,” he says.

Church leaders also should be prepared to offer sufficient severance packages that will help employees stay afloat financially, Challenger says.

“Also, be prepared to offer outplacement services, such as career counseling, résumé assistance, and retraining for new types of work,” he says. “You want people to have a good exit strategy so that they are well-situated for another, better job.”

Most of all, a church needs to reflect the character and nature of Christ should layoffs or terminations become necessary.

Challenger says he believes a layoff truly reveal the values and standards of an organization.

“When layoffs occur,” he says, “a humane organization will care for the well-being of all of its members.”

John R. Throop is a consultant and trainer in church and nonprofit management, specializing in human resources management. He is adjunct professor in human resurces management at Eureka College in Illinois. He also has been ordained as an Episcopal minister for 27 years.

Before You Cut Staff

Eight tips to save money before turning to pink slips
Paul Clark

Before churches consider downsizing staff, do all that you can first to reduce operating costs. Since reductions in force don’t always yield the dollars that organizations think they will, the following list will help you turn over every rock possible before you make the decision to hand out pink slips. Termination meetings are painful for everyone involved, and a church executive’s nightmare, so I know you want to do everything you can to avoid one.

Prior to joining Fairhaven Church, I worked for General Electric’s Aircraft Engine Group for 14 years. I understand the trauma that layoffs cause because GE was notorious for reductions in force. Layoffs can create fear, which is toxic to any organization. A creative effort to identify any solutions that can mitigate the need for reducing staff is well worth the effort. Perhaps one of these eight tips might work for you:

1. Consider reducing hours instead of personnel. Squeezing a handful of positions’ hours might create enough resources to offset the need to cut a staff member. Or reduce all positions, or all non-exempt positions, by some margin. Many staff members would rather make minor concessions spread equally across the board than to see a staff member let go.

2. Freeze existing salaries. Most churches are considering salary freezes this year, given the economic downturn and the potential impact on giving. It won’t surprise anyone, especially in light of daily announcements of layoffs. Again, many staff members would willingly forgo a raise rather than see a team member dismissed. In one church, staff members were given several extra days off to be used at their discretion as at least some compensation in light of frozen salaries.

3. Don’t fill vacant positions. One obvious way to reduce personnel costs is to suspend hiring. Clerical, custodial, and ministry support positions (such as a technology specialist) are some positions that might be covered through volunteers, at least in the short term.

4. Ask for furloughs. Consider asking employees to take an unpaid furlough for an agreed-upon length of time during a period when ministry is slow. You might be surprised at some who would welcome the break, perhaps to care for children, aging parents, or just because the extra income is not a necessity.

5. Shift staff around. Move employees from jobs slated for downsizing to open positions. This assumes you can provide training to give the employee a reasonable chance for success; if so, it helps keep talented people on board, provides the longevity that creates stability within the organization, and retains the potential for expansion if the environment changes in the future.

6. Use job sharing. Allowing two part-time employees to share a full-time position potentially reduces benefits costs. We’ve done this for both clerical and accounting positions with great success. Additionally, if a position must be cut, ask whether another employee would be willing to share their position, allowing the affected employee to at least retain a part-time position. In today’s workforce, flexibility is a prime motivator, and so sharing a position can be very attractive.

7. “Lend” your employees out. Check to see whether another local church might be willing to share an employee as a means of cutting costs. At Fairhaven, we are currently sharing one of our graphic designers with a church a mile away. It allows this person to reach full-time hours, and allows both churches to have the benefits of a talented designer. The same could work for an accountant or custodian.

8. Restrict overtime. Overtime is mandatory for hourly and non-exempt workers who exceed 40 hours in a week, so manage employee schedules carefully to avoid those extra costs.

Fairhaven, a Christian and Missionary Alliance church, used some of these strategies in early 2008, when indicators suggested a tough year ahead. It also educated staff and volunteers on energy use, which lowered utility bills by 30 percent to 40 percent, and renegotiated leases on office equipment, which netted better prices and newer machinery. The changes shaved $180,000 from the operating budget.

Paul Clark is executive pastor at Fairhaven Church in Dayton, Ohio. You can read more from him at http://www.paulclark.org.

Are You Prepared to Dismiss Someone?

A checklist to use before you let someone go.
Jeff Hanna

A church rarely expects it will have to let an employee go, but the need may arise, either because of poor performance or because of economic pressures. Below is a general checklist to review before starting the process of ending someone’s employment with your church.


Do we make it a policy to document all issues concerning personnel?
Do we have a personnel manual that all employees must read and sign?
Are we aware there are differences as to how we can and should dismiss clergy versus non-clergy employees?
Do we have a system that documents performance and warnings in writing as part of the employee’s records?
Do we, as a church, have an attorney that we can seek advice from regarding employment, dismissal, and other legal matters?
Do we always have a clear plan that we will execute regarding the dismissal of an employee?
Do we assess the potential for physical harm, and have we taken steps to protect church leaders and other staff?
Do we utilize a second person present anytime we must fire an employee?
Do we utilize a signed severance letter stating the actions necessary on the part of dismissed employee?
Do we always escort the dismissed employee as they collect their belongings and walk out of the building?
Do we make it a point to immediately collect the employee’s keys and any other church-owned property they have in their possession?
Do we consider the best approach to notify other staff and the congregation as to details surrounding the dismissal, and have those details been reviewed by the church attorney?
Are we consistent across the board in our written warning and dismissal policies?
Do we make sure we incorporate prayer into the entire process?

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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