Pastor, Church & Law

Introduction: Compensation and Benefits

§ 8.06

Compensation and Benefits

Overview

Churches need to be aware of several legal and tax issues related to the wages and benefits they provide for their employees. Here are the critical points you need to know:

Workers compensation —Workers compensation laws were enacted in all 50 states to give injured workers a quicker, less costly, and more certain recovery than was possible by suing an employer directly for negligence. In exchange for such benefits, employees give up the right to sue an employer directly if they’ve gotten sick or been injured on the job.

Workers compensation laws only cover injuries and illnesses suffered by employees on the job. The term employee generally is defined very broadly to effectuate the objectives of the workers compensation law. As a result, persons whom a church may deem self employed for income tax purposes may be deemed employees for purposes of the workers compensation law.

Generally, a church is not subject to any penalties if it knowingly hires and compensates a person who is receiving workers compensation benefits. It is the employee, and not the employer, who may be required to return benefits paid while he or she is earning wages from a job.

If you have not procured workers compensation insurance, your church may be exposed to uninsured risk for injuries sustained by employees in the course of their employment. Even if your church has general liability insurance, this ordinarily will not cover a workers compensation related claim.

Fair Labor Standards Act —The federal Fair Labor Standards Act (FLSA) generally requires covered employers to pay their employees at least the federal minimum wage, plus overtime premium pay of one and a half times the regular rate of pay for all hours worked over 40 hours in a workweek. However, the FLSA includes a number of exemptions from the minimum wage and overtime requirements. These exemptions have created considerable confusion over the years regarding who is, and who is not, exempt. This chapter explains the application of the FLSA, and its exemptions, to church staff.

There are several legal and tax issues associated with the compensation and benefits a church pays to its employees. This chapter will address workers compensation, the minimum wage, and overtime pay. Several other issues are addressed in other books by Richard Hammar, as summarized in Table 8-2.

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