Healthy Budget Percentages For Thriving Churches

 

Budget Percentage on Staffing Cost

 


As the leader in your organization responsible for budgeting, it can be intimidating to determine the appropriate budget percentages to allot for facilities, employee compensation, growth, and the many other necessities you manage. What should the highest percentage of your organization’s income go towards? How often should you offer staff raises? Where can you make cuts to offer some margin?

When conducting a compensation analysis, one of the first things we look at to understand the financial health of an organization is what percentage of the budget is spent on total compensation (salary + benefits). There are three data points to consider when determining how much of your budget should be utilized where.

Fact 1: The average church uses 52% of the church budget on compensation. This ranges from 46% to 60% on the high end from Leadership Network’s 2018 compensation survey.     


Fact 2: In faster-growing Churches, the lead pastor’s salary is on average 4% lower and the Church budgets are 25% lower than all other churches surveyed.   

 Fact 3: The older the church, the more full-time employees they have compared to younger churches of the same size and growth rate.  

What Do These 3 Facts Mean For The Health Of My Church?

Using 46% to 60% of the church’s budget on total compensation is a “normal” range for most churches. However, when you combine the level of salary compared to the market and the church’s budget, you create a great barometer of financial health.  

Here are some examples:  

 

% of the budget on total compensation

Salary percentile of Lead Pastor

Financial Health

Church 1

45%

<50th percentile

The church is at the lowest end of the acceptable budget range to use for compensation. So, even though the pastor salary is less than 50th percentile, the church budget has room to increase the salary if the Board sees fit.

Church 2

60%

<50th percentile

This church is at the highest end of the acceptable budget to allot toward compensation. With salary spendings below the 50th percentile, this is a very unhealthy position for the church. To increase salaries would push the total compensation percentage even higher. This could be a sign of an overstaffed situation, declining revenue, etc. 

Church 3

45%

>50th percentile

This church is at the lowest end of the acceptable budget used for compensation. With the salary above the 50th percentile, this seems to be healthy as compensation is higher than 50% other churches at the same level and the church is not using a high percentage of their budget for compensation.  

Church 4

60% 

>50th percentile 

This church is at the highest end of the acceptable budget percentage to use for compensation. With salaries above the 50th percentile, this is a very unhealthy position for the church. To increase salaries would push their compensation percentage even higher when they’re already pushing the boundaries. This could be a sign of an overstaffed situation, declining revenue, etc. 


Using the above chart, you can see how just quickly looking at the budget percentage a church uses for compensation combined with how much they are paying individual staff members can show you a lot about their financial health. This does not mean that salaries above the 50th percentile are bad or unhealthy, however, salaries do need to be assessed with overall budget percentages in mind.

While this is only one way to assess your financial health, it’s critical and telling because compensation is typically the largest collective line item in church budgets. These decisions carry a lot of weight for the future of your church’s financial health, the expectations and morale of your staff, and retention amongst your team. Analyze industry standards for similar roles in organizations within the size and scope of your church to better understand how your compensation plan compares to others.

Healthy Salaries Start With Budget Percentages Start 

Ultimately, it is important to consider the church’s overall budget when determining how much to spend on total compensation for all employees. As your church grows or shrinks, your budget and spending need to reflect that. This may seem like an obvious point, but starting with these basics is the best way to ensure your spending is on track to create a maintainable budget for your church.

Interested in more resources on church budgeting? We’ve got tons of resources available on determining the best budget percentages for your church.

At Vanderbloemen, we offer custom compensation reports to show you how your organization compares to others similar to yours. Our data even factors in cost-of-living for the most accurate and detailed information available to Christian organizations. Find out if your benefits rank competitively and schedule a consultation with our team to create a well-rounded compensation plan that leaves your employees feeling fulfilled and cared for. Let us know how we can serve you with your compensation planning and staffing needs.