When it comes to building a church budget, nothing is as important, sensitive, and even controversial as compensation. And for good reasons, compensation typically consumes the lion’s share of the budget, somewhere between 45% and 55% for healthy churches. There is never a shortage of opinions on stewardship when more than half of the donations given to further the church’s mission go to paying people. Some donors in the congregation feel more money should go toward ministry. While it’s equally valid that many working in ministry are drastically underpaid. When these two positions collide, tensions can rise, especially when church attendance and donations cannot support everything in the budget. Churches in this unenviable position during the budget season must make difficult decisions like cutting ministry, reducing hours, cutting pay, and even eliminating staff to avoid a financial disaster.
Churches desperate to fund the ministry and keep the staff necessary to fulfill the mission often do so at the expense of paying their employees competitive wages. Wage stagnation is a lack of pay increases over prolonged periods of time. However, this term applies to more than churches; the United States has been fighting wage stagnation since the 1970s. One way to combat wage stagnation is through increases to the minimum salary, which is the path the Federal Government recently chose. Please note that this is not an increase to the federal minimum wage – only the minimum salary.
Minimum Salary Increases
It’s crucial for churches to understand that they are not exempt from Federal and State requirements, especially when it comes to compensation. The Department of Labor’s (DOL) Fair Labor Standards Act (FLSA) minimum requirements apply to churches as well as other for-profit employers.
Starting on July 1, 2024, the federal minimum salary will begin its phased approach to increasing employees’ salaries:
- Phase 1: Increasing the minimum salary from $684 to $844 per week (equivalent to $43,888 per year) on July 1, 2024.
- Phase 2: Increasing the minimum salary to $1,128 per week (equivalent to $58,656 per year) on January 1, 2025
After that, the minimum salary will change every three years on July 1, starting in 2027.
Church Budget Considerations
Churches must evaluate all positions to ensure the classification of their employees is correct as either “exempt” or “non-exempt.” Covering the difference and all the nuances of pay types is way too involved for this post, but in general, the Department of Labor (DOL) established two basic pay types under the Fair Labor Standards Act (FLSA):
- Exempt: Commonly referred to as salaried employees, these are employees who meet specific criteria and are therefore “exempt” from the FLSA rules for overtime. Employees classified as exempt receive the same pay each period regardless of the number of hours worked.
- Non-Exempt: Commonly referred to as hourly employees, workers classified as “non-exempt” must comply with FLSA rules and must receive overtime pay. The FLSA defines overtime as working more than 40 hours in a workweek. Check your state’s labor laws; many states have more stringent overtime definitions.
Before a church starts reclassifying employees, the DOL has very specific rules regarding which employees are exempt. For example, exempt employees (salaried) must be considered executive, professional, or administrative and perform duties like managing at least two people.
Churches with employees meeting the exempt criteria who make the current federal minimum weekly salary of $684 must adjust their pay and budget to the new federal minimum salary of $844 per week as of July 1, 2024.
For many churches, this means a mid-year adjustment to the budget. The Bible is clear from Leviticus 19:13 to Luke 10:7, 1 Timothy 5:10, and Matthew 10:10—the workers are worthy of their wages. Whether or not the new minimum salary impacts your church’s budget, view this as an opportunity to show the church staff how valued and important their role is in accomplishing the mission.
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