I recently had a pastor ask me what the appropriate percentage of the church budget should be dedicated to payroll.  My first thought was about 1/3.  I decided to do some research because I knew the percentage was much in the retail sector. Labor costs run higher there because they are service based. (It takes people to serve!)

Turns out that the same is true in the church world.  According to a survey conducted byChurchSalary.com most churches spend 47-52% of their annual budget on salary.  Those numbers may seem shockingly high, but when you think about it, churches, like retail stores, are serviced based.  Staff to serves people and staff has a cost.

Fight the urge to look at your church budget and make drastic changes if you are spending less than 50% on payroll costs! The bottom line is that you must be able to pay your bills.  Hiring staff you can’t afford will ultimately lead to layoffs or financial struggles that you want to avoid.  That’s not being a good steward.

It takes time for churches to grow into a healthy place in which they can spend the appropriate amounts on staff.  First cover basic operational costs while planning to add staff as you can.  Plan and budget to do so.

When you think about all the things churches should be doing, like feeding the hungry, supporting missions, spreading the Gospel, spending half of your church budget on payroll costs might sound counter Kingdom.  Why would you spend all that money on payroll instead of on missions?

Good staff helps increase ministry.  You have two hands, two feet, one head and only 24 hours each day.  Alone you can only grow your ministry so far. Volunteers can do incredible things, but paid staff members that are dedicated and passionate about specific areas of ministry are invaluable.

Statistics show that the average church attender contributes $80 per month to the church.

That would mean a church of 100 brings in $8,000 per month. What if they budgeted 10% to missions monthly? They would send $800 each month to missionaries. 

If they added a paid kids pastor to their staff that helped attract new families and grow the church to 300, their monthly income would increase to $24,000 and they would give $2,400 to missions.  Paying good staff can increase funds to available for missions.

(Suddenly everyone wants to hire a great kids pastor!)

The key is hiring good staff.  Don’t hire just to fill positions.  That almost always costs more than it gains.

(Click on link below to learn more about hiring good staff!)

Also look for opportunities to be creative with payroll costs: 

Can you hire two part-time employees instead of one full-time? 

Would it make more sense to pay someone a stipend instead of an hourly rate?

Eliminate all overtime hours. Never allow it unless there is an emergency. Find ways to get work done at regular rates and not time and a half. 

Are there positions that would make more sense to out source, like bookkeeping and payroll? (YCA DOES THAT!)

The old saying is true, “It takes money to make money.” I understand that God doesn’t need money to bless his church, but I also know that investing in good staff multiplies your opportunity for effective ministry.   “One will put 1000 to flight; two will put 10,000 to flight…”

Investing in the right staff will always eventually have incredible returns.