The primary goals are to honor the pastor and to help him and his family to minister for the long term as effectively as possible. The following categories cover most of the basic considerations that a Pastoral Search Team and Board need to cover in the calling of a pastor.
1. Salary Considerations ~ It is wise to include a "cost of living" adjustment such as the CPI into the Letter of Call {Agreement}. This gives some assurance that his effective salary is maintained and does not go down. Each year the Governing/Elder Board should review the salary to see if it is appropriate to grant an increase above and beyond this amount.
2. Housing Allowance ~ This is essential to do each year in the Official Minutes of the Board. There is a special IRS provision that allows a pastor to have a Housing Allowance that is a distinct tax advantage. “Clergy Tax and Law Report” by Richard Hammar is the trusted guidebook for details.
3. Vehicle Allowance ~ Mileage spent driving as a pastor is also considered a non-taxable business expense if handled correctly. It must be written in a Logbook which is widely available. A “best practice” is a Policy to reimburse the pastor for mileage at the current IRS rate ($0.50/mile for 2010) rather than giving them a fixed amount.
Possible Wording: "The Board will pay the current IRS mileage rate for driving done as a part of the pastoral job up to a maximum of XXX dollars per year."
4. Social Security Offset ~ Arrange the Agreement so that the pastor is paid the Social Security offset separately each quarter. This helps keep the pastor out of a financial bind with the IRS.
Example: If his base salary & housing is $80K, out of which $12K is needed for Social Security obligations, pay him $68K for salary and housing, plus an additional $3K each of the three months that his Social Security payment is due.
5. Medical Insurance ~ Make sure that this is a covered expense for both the pastor and his family. This can include Dental and Optical Coverage @ some reasonable level.
6. Disability Insurance ~ Most Denominations have a Group Policy that is reasonably priced. This wise expenditure protects both the pastor and the local church.
7. Retirement ~ Make sure that the church is paying into an appropriate retirement package. 10% is the normative figure. The Denominational Retirement Plans {403b} are most advantageous because of the manner in which the distribution is made after Retirement in the form of a Tax Free Housing Allowance.
8. Educational Expenses ~ For a pastor who is working on a Board approved study program, it is extremely encouraging if the church will pick up a % of the actual tuition costs involved. Life long learning for the pastor is a great investment.
Possible Wording: "The church will pay for 50% of tuition costs at XXX Seminary up to a maximum limit of $ ___ / year for ___ years."
9. Work Hours ~ The expectation among pastors was that 50 hour work week plus Sunday is about average for a healthy situation. If this becomes a problem, minimums and maximums can also be agreed to in writing. It is useful to actually chart how many hours of work occur for a couple of weeks once a year.
10. Vacation ~ At least four full work weeks a year. The Agreement can also be written to increase this by ___ number of days every ___ years. It is helpful to have money built into the budget to pay for pulpit supply.
Posted by Dennis Baker, CAM Senior Ministry Consultant
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