Pay Raises for Pastors and Church Staff in 2011?

A recent Wall Street Journal headline immediately caught my eye: “Higher Pay Gains Seen for 2011.”

The article goes on to explain the very real chance American workers will receive bigger pay raises this year:

With corporate America sitting on large piles of cash and manufacturers seeing a surge in exports to fast-growing emerging markets, signs are mounting that some of the benefits will start trickling down to employees.

This could mean average wage gains of as much as 3% in 2011, compared with 1.7% in 2010—enough to boost consumer spending, which accounts for more than two-thirds of the economy, but not so much that it would stoke concerns of an inflationary spiral.

In addition, a recent issue of Kiplinger highlights the U.S. economy is on track for GDP growth of 3.5% this year, up from last year’s 2.9%.

While I doubt many churches are sitting on large cash reserves, these headlines make me wonder—will churches give pastors and staff members raises this year? A couple of weeks ago, my church approved 3% raises for the senior pastor and staff (we’re a congregation of about 120 people). Will yours?

It’s a serious question. If you chair a church board, it’s worth a long, hard look. After a multiyear recession, many churches implemented pay freezes to help weather budget challenges. A recent article on ChurchLawAndTax.com illustrates why now is the time to reevaluate:

Mercer, a global human resources consulting firm, surveyed more than 1,100 mid-sized and large employers. Nearly all of them plan to increase base pay salaries for workers in 2011, at an average of 2.9 percent. Only 2 percent of the employers surveyed plan freezes, compared to 13 percent who said the same in 2010 and 31 percent in 2009.

The reason, a Mercer executive said in a prepared statement, is that “employers realize that top-performing employees are loathe to going another year without an increase in pay.”

I realize church giving isn’t simply explained by direct cause-and-effect, in this case the cause being the general economy and the effect being giving. And I still remember what author and researcher Ed Stetzer told us back in early 2009: Giving at evangelical churches tends to be heavily influenced by unemployment rates, and even then, the effects don’t tend to show up until later. Right now, unemployment rates still remain in double-digit percentages for good portions of the country (although Kiplinger also says productivity rates are so tapped that many companies will begin hiring in earnest again soon).

And I recognize that the calling to ministry (at least for most) isn’t predicated on a desire to get rich.

But pouring hours of time in service to a local church needs to result in some tangible fruits—namely, providing for one’s family. With the costs of most goods, including food and gas, on the rise heading into the spring, it’s hard not to imagine high-performing church pastors and staff members (who have faithfully served despite little or no pay increases in recent years) wondering about opportunities elsewhere, especially if a pay freeze remains in effect at their current gig.

What is the salary outlook at your congregation? Did salaries freeze during the economic slump, and are there signs of a coming thaw? Did a freeze never come, leading to incremental annual increases? Or are raises unheard of, regardless of the economic climate?

While you’re thinking about this subject, let me invite you (shameless plug) to complete the National Church Compensation Survey. Your confidential answers will help us produce the 2012-2013 Compensation Handbook for Church Staff, a valuable resource for churches, as well as those employed by churches, who rely on its information about pay and benefits. In honor of your time, you’ll receive a $15 coupon for church management resources at YourChurchResources.com.

Holiday Pushes Back Due Date for Taxes

Haven't started your federal taxes yet?

As February fast draws to a close, you may be encouraged to know that you get an extra three days to work on 2010 filings. From this morning's Richard Hammar's Essential Reminders:

"Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15," reports the IRS.

Online Resource for Church Law and Tax Help

We’re pleased to announce the launch of ChurchLawAndTax.com (formerly ChurchLawToday.com).

We’ve given the site a fresh, new look to serve church leaders like you even better. You’ll find an updated Archives of the Church Law & Tax Report newsletter through 2010 (that's nearly 25 years' worth of past editions) and extensive updates to the Legal Library, a comprehensive, fully searchable reference written by Richard Hammar for pastors, board members, and church leaders. We’ve also revolutionized the Weekly Lessons quiz feature to improve your learning experience.

BONUS:

A new, free Updates section of ChurchLawAndTax.com highlights information pertinent to church leaders and includes:

• A brand new Q&A section with questions from church leaders answered by experts in church legal and tax matters;
• A new Recent Developments section to keep church leaders abreast of current court cases and rulings affecting churches;
• Additional Feature Articles covering a variety of legal trends and developments.

Plus, you’ll discover the new ChurchLawandTax.com is easy to navigate, putting the trustworthy and authoritative content you’ve relied upon for years at your fingertips. Combined with a subscription to Church Law & Tax Report, church leaders now have the most comprehensive, up-to-date sources of church law and tax information available anywhere.

Help for Pastors During Tax Season

The "The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010," passed by Congress and signed by President Obama in mid-December, triggered a domino-like effect of changes for tax-filers--so much so that even the Internal Revenue Service delayed its efforts to process returns (it finally began doing so on Monday).

For pastors, the tax-filing process already is a cumbersome one. As Richard Hammar notes in the upcoming edition of Church Law & Tax Report, there are at least 20 common tax-filing mistakes that clergy make each year, either because they filed their own returns and didn't understand how various laws applied or because they used a tax professional who didn't understand the unique complexities that apply to clergy. Among the mistakes frequently made:

Error No. 1: Reporting Social Security taxes as an employee.

Error No. 4: Failure to report the personal use of a church-provided car as taxable income.

Error No. 10: Ineligible ministers exempt themselves from Social Security.

With December's "Tax Relief Act," the possibility for confusion only grows. Among other things, numerous tax breaks that were set to expire instead received extensions.

But there's help--and hope--for pastors and the tax professionals who serve them.

Aside from Rich's feature article in the next Church Law & Tax Report, he also provides a second article--complete with updates and analysis--on the Act.

And at 12 p.m. CST next Wednesday (February 23), Rich will present a live, one-hour webinar with the Evangelical Council for Financial Accountability's Dan Busby on "Clergy Tax Issues for 2010 Returns." Rich and Dan will cover these key changes and take participant questions, too.

Evangelicals and Money: Stingy, Generous, or Just Right?

Last week, we pointed to research data highlighted by our sister magazine Christianity Today regarding average tithing levels among Christians. This week, we point to a series of short quotes obtained by Christianity Today from a variety of evangelical voices based on this question: Are American evangelicals stingy with their giving?

Of the eight responses, here are two—one answering an emphatic "yes," the other an emphatic "no":

"For Christians in the richest nation in history to be giving only 2.43 percent of their income to their churches is not just stinginess, it is biblical disobedience—blatant sin. We have become so seduced by the pervasive consumerism and materialism of our culture that we hardly notice the ghastly disjunction between our incredible wealth and the agonizing poverty in the world. Over the last 40 years, American Christians (as we have grown progressively richer) have given a smaller and smaller percent of our growing income to the ministries of our churches. Such behavior flatly contradicts what the Bible teaches about God, justice, and wealth. We should be giving not 2.4 percent but 10 percent, 15 percent, even 25 to 35 percent or more to kingdom work. Most of us could give 20 percent and not be close to poverty."

—Ron Sider, author, Rich Christians in an Age of Hunger

"Barna Group's research shows evangelicals to be among the most generous Americans. While not immune from the bad economy, evangelicals still consistently give more of their income to more places than virtually any other demographic or faith group. Evangelicals also easily qualify as the nation's most consistent tithers. And those who tithe are simply much more resilient in their giving—and distinctly more generous—than others. The problem is that evangelical Christians are also quite rare: just one out of every 12 Americans holds the theological underpinnings of evangelical belief and commitment. (We define evangelicals not based upon denominational affiliation or a respondent's self-labeling as evangelical, but based on a basic battery of questions assessing a person's theological views.)"

—David Kinnaman, president, Barna Group

Read all of the responses from Brian Kluth, Christian Smith, Arthur Brooks, and others, then head over to our "2011 State of the Plate" survey to tell us how giving went for your church in 2010.

Ten Steps to Tax Reporting

Looking for a helpful—and easy—way to remember federal payroll tax reporting requirements as a church? Check out this handy, printer-friendly PDF we've prepared titled "Ten Steps to Tax Reporting."

Here's a sneak peek:

10) Complete Forms 1099-MISC and 1096. Must be issued to any nonemployee who is paid compensation of at least $600 during any year.

9) Determine the amount of income tax to withhold from each employee’s wages. The amount of federal income tax the employer should withhold from an employee’s wages may be computed in a number of ways—the most common are the wage bracket method and the percentage method.

Read the remaining eight by downloading the PDF.

When Tithe Doesn't Mean Tenth

Our sister publication Christianity Today magazine published some interesting new data from church giving research in its February issue.

Specifically, the average percentage of income given to churches appears on the decline, measuring 2.43 percent in 2008 (compared to 2.59 percent in 1985 and 3.11 percent in 1968). The magazine smartly includes additional data on all religious giving (not just to churches), which helps paint a more representative picture of the many ways that Christians give.

We're watching this subject particularly close this week as we launch the survey for the 2011 State of the Plate. We're hoping to hear from church leaders like you about how tithing went during 2010, and any effects on the budget--bad or good. Do you see commonalities between the decline in average income given to churches reported by Christianity Today and your congregation? What did that mean for your church in 2010, and how are you preparing for 2011?