Here’s a once-useful metric in church budgeting that needs to be buried and forgotten: the idea that no more than 50 percent of a church budget should be devoted to personnel expenses.
Although present in many Protestant traditions, this handy reference point may have been birthed among Baptists in the 1950s – a time when Southern Baptists were becoming ever more institutionalized and pushing out all kinds of uniform programs and practices from denominational headquarters in Nashville. And because a 50 percent mark is so easy to remember, this arbitrary metric has lived on in the minds of pastors and lay leaders alike, handed down as gospel truth from generation to generation.
Even today, some church consultants are still peddling the myth that a church devoting more than 50 percent of its budget to personnel is in a “danger zone.” The problem is, this is a faulty metric and sometimes even a dangerous idea. If you follow this metric today, you may risk starving your church of its energy or life force.
“Stop looking at the personnel budget as an ‘expense’ and see it instead as an ‘investment’ in ministry.”
At the end of the day, obsessing over what percentage of your budget goes to personnel is asking the wrong question. A better question is to ask: What is the true cost of staffing our church to do the things we say we want to do? Besides, some churches are handicapped up front by building debt and others suffer from having more money than mission. There is no single metric that works when evaluating personnel budgets.
Here are five reasons why the 50 percent rule no longer holds water:
1. The 50 percent rule of thumb was created at a time when all churches had more volunteer hands on deck.
What percentage of the non-retiree adults in your congregation work for pay at least part time? Likely, the vast majority. Since 1950, for example, the percentage of women in the workforce in the United States has more than doubled. Most American churches today simply cannot staff programs with volunteer labor the way they could in the 1950s because most all adults – men and women – are paid to work, many outside the home.
Concurrently, the rise in combined household income made possible by two-parent working households has allowed families to travel more, take more vacations, go to more sporting events and, therefore, miss church more.
In the 1950s and ’60s, churches could get by with smaller staffs than today because more laypeople were able and willing to give extensive volunteer service, and most regular attenders were present more than 45 weeks a year. Neither of those are true today. Most all the generative work done on behalf of a church in its congregation and community originates with staff leadership today, not with lay leadership.
2. The expectations of church members have risen dramatically.
Years ago, I used to hear people joke that something done in an average or mediocre way was “good enough for church work.” I haven’t heard that said – even in jest – in years. Most of our churches operate with higher levels of expectation than ever before, and some of our churches (mine included) expect professional excellence in everything from food service to music to education and preaching.
A business consultant friend has labeled this “concierge church,” meaning many church members expect from their church staffs the same level of on-the-spot service they would get from the concierge desk at a five-star hotel.
Here’s a practical illustration: Because fewer adults have free time during the week to prepare for Sunday school teaching, it is harder to enlist teachers. And it’s also harder to enlist preschool or children’s teachers who will gather all their own supplies and prepare their handouts each week. Instead, churches like Wilshire in Dallas, where I serve, use paid staff to prepare all the materials needed for Sunday school and have them boxed up and ready for use when the teachers walk in the door on Sunday mornings.
In the old days of Baptist church life, anyone who was willing and could read could be enlisted to teach adult Sunday school from the denominationally produced quarterly curriculum book. My father, who completed high school with a GED and did not graduate from college, was a competent adult Sunday school teacher for years using mainly his Bible and the teacher’s quarterly. That simply doesn’t happen today.
3. The mission of the church today is increasingly fulfilled by personnel expenses, not by sending buckets of money for someone else to do “missions” for us.
Part of the old formula for church budgets also taught that churches should send at least 10 percent of their annual budget income to the denomination for missions work. This was the backbone of the success of the Southern Baptist Convention’s Cooperative Program, which funneled tens of millions of dollars to both “home” and “foreign” missions work.
While most denominationally affiliated churches today still send some amount to such missions agencies, few send anything close to 10 percent. Most also spend more than ever before to teach and facilitate missions in their communities or regions, with a greater focus on hands-on experiences for members. Forty years ago, no one ever heard of a minister of missions on a church staff; yet today this is a common paid position in midsize and larger churches.
4. Personnel costs vary by context.
No single rule of thumb for church budgets works for all churches because size and scale matter – a lot. Especially for smaller churches, different rules apply. A small church with a bi-vocational pastor may spend less on personnel than a church with a full-time pastor who is the church’s sole employee. Likewise, a large church with an expansive staff likely will spend more of its budget on personnel than a mid-size church.
Cost of living also plays a role. We all know it costs more to live in most cities than in most rural areas. So, a small church in an urban area likely will spend more of its budget on personnel than a similar-size church in a rural area. Church finance committees and personnel committees must take into account the actual costs of pastors and staff members living in the communities where churches are located.
A third component of context is to consider the ever-increasing variety of staff positions churches create today. Remember there was a day when we had pastors, ministers of education, ministers of music, youth ministers and maybe associate pastors. Today, the interdenominational group The Church Network tracks 110 job titles used in American congregations. Every context is different.
5. Personnel benefit costs have increased dramatically.
We all know that health insurance costs have skyrocketed. But unless you’re paying the bill, you may not realize just how much. In the past 20 years alone, the average cost of health insurance coverage for smaller businesses has quadrupled. Health care benefit costs are now increasing at a faster pace than inflation or the typical worker’s increase in take-home pay.
To illustrate, let’s assume that in 2000 your church spent $5,000 annually to provide health insurance to your pastor and the pastor’s family. Today, you are likely paying $20,000 for such coverage, and with a higher deductible for the pastor to cover out of pocket. Yet few pastors have seen their actual compensation increase fourfold in the last 20 years.
Sadly, some churches have balanced their budgets by no longer offering health insurance benefits for their pastors and staff – or by offering pastors a “lump sum” compensation with the expectation that the pastor will use part of that to purchase health insurance on the open market. The problems with this approach are so profound they require a separate column to address.
In summary, then, if the 50 percent rule doesn’t apply anymore, what’s a church budget or finance committee to do?
First, don’t be held captive to arbitrary formulas that held sway at some time in the past or in some other location. Second, figure out what you need in staffing, lay that against what you can afford, and do as much of that as you can. Third, consult reliable church compensation studies such as MinistryPay.com, an interdenominational resource maintained by The Church Network and applicable to churches of all sizes, not just megachurches.
Finally, think hard about the changing expectations of leadership in your church and the demands of ministry today. Stop looking at the personnel budget as an “expense” and see it instead as an “investment” in ministry. Jesus said it best: “You reap what you sow.” And today, most of what churches plant in their communities and congregations is made possible by paid staff.