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Checklist for Churches Demonstrating Integrity in Compensation-Setting

Steps 1-3 for all churches…

  1. Approval for the Lead Pastor – The full church board (i.e., entire corporate governing body) or a committee authorized by the board annually approves total compensation of the lead pastor or comparable position.

  2. Notification for Family Members – The full church board or a committee authorized by the board is notified annually of the total compensation of any of the lead pastor’s family members employed by the church.

  3. Documentation – Approval (Step 1) and Notification (Step 2, if applicable) are documented in the church’s board or committee meeting minutes.

Step 4 for churches where the Lead Pastor’s total compensation is $150,000 or more, and recommended for all churches regardless of the Lead Pastor’s compensation amount…

  1. Additional due diligence – In setting the lead pastor’s compensation, the board or a committee authorized by the board must:

  • Exclude anyone with a conflict of interest from the decision making process;

  • Obtain reliable comparability data for similar churches within the past 5 years;

  • Determine appropriate compensation considering the comparability data and factors unique to the lead pastor (skills, talents, education, experience, performance, knowledge, etc.); and

  • Document these additional due diligence steps, its decision regarding total compensation, and, if applicable, its rationale for establishing compensation at a level exceeding that which is supported by the comparability data.

FAQs

  1. How is “total compensation” defined?

Total compensation includes salary, wages, other payments for services, and benefits of all types, whether taxable or non-taxable, and whether paid directly or indirectly by the organization or one or more of its subsidiaries or affiliates.

  1. What if the church’s bylaws outline a different compensation-setting process?

The church should consider amending its bylaws in consultation with legal counsel.

 

Related resources:

 

ECFA Standard 6 - Compensation-Setting and Related-Party Transactions

Webinar - 8 Essentials of Compensating Ministers

 


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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