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The Basics | Salary Structure and Pay Grades

Learn about pay grades and how to create a salary structure at your church.
The Basics | Salary Structure and Pay Grades
Image: Klaus Vedfelt | Getty

Not every church leader is familiar with HR terms and concepts. ChurchSalary is here to help.

Summary

The different salary ranges for employees at your church form your salary structure.
A well-designed salary structure is made up of a series of pay grades, or bands, which are defined by a minimum, midpoint, and maximum. These three numbers are often based on the first quartile, median, and third quartile salary figures based on market survey data. To maintain a consistent pay structure, churches should adjust their pay grades and salary structure on a regular basis so that it conforms to their philosophy and theology of compensation.

What is a salary structure?

When the salary ranges of all your church employees are graphed together the data will reveal a structure (or the lack of one). A well-organized structure will be composed of distinct pay bands or grades and will reflect the congregation’s philosophy of compensation.

What Are Pay Bands or Grades?

To make compensation fair, equitable, consistent, and transparent for all your employees, churches should establish distinct pay grades or salary bands. Each pay grades is defined by a minimum, midpoint, and maximum. Employees who have lower levels of education, experience, responsibility, and/or who job duties are less complex typically start out at the lower end of the pay grade. As employees accumulate experience, develop new skills, and take on more responsibility, they normally move up within their pay grade (or, in some cases, into a higher pay grade).

Pay grades are typically numbered in order from lowest to highest. An easy way to visualize pay grades in the church is by comparing the salary data of full-time pastors. ChurchSalary’s analysis of the first quartile, median, and third quartile figures for full-time pastors (normalized by budget) reveals the existence of three distinct pay grades or salary bands:

  1. Grade 3: Senior and executive pastors
  2. Grade 2: Associate, worship, and adult education/discipleship pastors
  3. Grade 1: Youth and children’s pastors

Designing Salary Structures

There are three features which define each pay grades and the overall salary structure. They are visible in the chart above:

1. Width

As pay grades increase their width tends to increase. Width is defined by the interquartile range—the distance between the first and third quartiles. This interquartile range reflects the dispersion—the “spread-out-ness”—of salaries in the marketplace. Another common way to quantify or discuss this width is salary spread.

Wider pay grades allow employees more room to move. This spread is important in a church setting because most employees do not have an in-house “career path.” A promotion often requires pastors to relocate or move to another church. Sufficient width is necessary if your church hopes to retain employees and offer raises. At the same time, to help prevent unconscious bias from unnecessarily influencing starting salaries, narrower pay grades for entry-level positions can be helpful.

The overall width of your organization’s salary structure, the distance from the highest to the lowest paid employee, is also another factor to consider. Churches should discuss and evaluate what kind of overall width is consistent with their organizational goals as well as their philosophy and theology of compensation. Do you want your senior pastor to earn 2-4 times as much as other full-time pastors?

2. Midpoint (or Anchor)

Pay grades are anchored by a midpoint which is typically based on the median salary (or an adjusted average salary) for a specific type of position. The goal of most organizations is to move new employees up toward the midpoint as they accumulate experience and success. Employees with more experience, higher qualifications, and a track record of success will move above the midpoint, toward the maximum.

In the real world, salaries are spread out. There is no singular salary figure for senior pastors. Yet, if you look at enough salary data a central tendency emerges. This central tendency is best captured by the median because it reflects the middle point of the data set.

The same central tendency can be observed in your church’s overall salary structure. Several pay grades may be clustered around a median or midpoint. What is the median salary at your church?

Finally, many organizations identify key pay grades that will function as anchor points or benchmarks within their overall salary structure. These pay grades are based on salary data from market research and adjacent or derivative pay grades are adjusted in relation to these benchmarks.

3. Overlap

One of the purposes of a salary structure and pay grades is to keep pay fair. To avoid a situation where your worship pastor earns more than your senior pastor, pay grades should avoid excessive overlap. Guidance varies on how much overlap is desirable, but the above chart of pastor pay grades—based on real-world data—demonstrates a baseline principle: the third quartile of a lower pay grade should not surpass the median of the next highest pay grade. For example, in the chart above, the third quartile salary (normalized) of associate pastors (grade 2) is $72,315 and the median salary of senior pastors (grade 3) is $74,975.

Creating a Salary Structure and Pay Grades

The basic process of creating a salary structure and pay grades is fairly simple.

First, figure out how many pay grades you need. Single site churches start by counting the types of employees you have. Multisite churches count both employee types and the number of campuses in your network. Or use your most recent organization chart as a starting point.

Second, gather market research on salaries from organizations such as ChurchSalary to establish a minimum, midpoint, and maximum for each pay grade or band. Every ChurchSalary report includes data on the first quartile, median, third quartile and average salary for one of eighteen positions.

Finally, place employees within their respective pay grade. Use factors such as experience, education, ordination status, organizational importance, and/or performance to determine whether they should be paid closer to the minimum, midpoint, or maximum.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

Lilly Endowment

ChurchSalary is made possible through funding from the Lilly Endowment Inc. As part of Lilly's "National Initiative to Address Economic Challenges Facing Pastoral Leaders," ChurchSalary—and our parent, Church Law & Tax—is committed to helping church leaders and pastors develop an atmosphere of healthy financial stewardship, especially in the area of church staff compensation.

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