How Much Do Churches Spend on Benefits and Health Insurance?
One of the most pressing questions we receive at ChurchSalary is, “What about benefits?” Churches want to know how much other churches are spending on benefits.
Benefits are challenging because they are priced differently than wages and salaries, and they follow a different set of rules.
Thankfully, the basic proportion of benefits versus salary in terms of total compensation is simple. For the last two decades, according to the Bureau of Labor Statistics, employers have spent roughly 70 percent of total compensation on wages/salaries and 30 percent on benefits. Employers spend the following percentage of total compensation on each type of benefit (on average).
- Paid Leave, Vacation, Holiday, Sick & Personal Leave: 14.8%
- Life Insurance: 0.3%
- Health Insurance: 8%
- Disability: 2.5%
- Retirement: 5.1%Note that this does not include required government benefits such as Social Security, Medicare, federal unemployment taxes, and the like, which vary depending on the type of employee (FICA or SECA, minister or non-minister, etc).
ChurchSalary recently discussed this topic and ways that churches can save money on benefits, while offering better coverage, in our joint Improving Total Compensation Webinar with Remodel Health.
How much does health insurance cost?
The Kaiser Family Foundation conducts and publishes an annual Employer Health Benefits Survey. The following figures are pulled from their latest 2021 release.
The average premium for health insurance has increased by 22 percent over the last five years and 47 percent over the last ten. This is creating a benefit crunch for churches. Instead of raising salaries, churches are being forced to spend more on health insurance.
Data from the Kaiser Family Foundation indicates that in 2016 a family plan cost, on average, $18,142: $12,865 contributed from employers and $5,277 from employees. ChurchSalary has comprehensive data from the 2018 Compensation Handbook that indicates that churches contributed a similar premium for family coverage (around $12,000) five years ago. We can infer that the average employee contribution for a family plan was similar (between $5,000 and $6,000).
Notice that the basic cost of each plan is consistent. Individual coverage will cost your church around $5,000-$7,000 per employee and family coverage will cost around $16,000-$20,000. There is no “church discount.”
Indeed, if you dig into Kaiser’s survey data, even firms with a “large share of lower-wage workers (where at least 35% of the workers earn $28,000 annually or less)” premiums only spend an average of $640 less for single plans and 2,092 less for family coverage.
The key takeaway is that health insurance costs do not vary based on how much the employee is paid. This is one of the reasons why ChurchSalary does not include these figures in our salary reports.
- Watch our joint webinar with ReModel Health on Total Compensation for options on how your church can save on benefits.
How are benefits and salaries related?
When it comes to pastoral compensation, budget is the number one predictor of pay. Churches with larger budgets can afford to pay higher wages because most congregations spend between 40 and 60 percent of their total operating budget on staffing expenses. Additionally, some employees get paid higher or lower wages depending on experience, education, ordination, level of responsibility, etc.
Benefits are different. After examining staff-wide data from at least 25 churches, ChurchSalary can find no correlation between common variables such as budget, attendance, staff size, and location. The only variable that explains why some churches offer better benefits is compensation philosophy and priorities.
Simply put, some churches (and denominations) decide to offer better benefits, while some do not.
As the chart below illustrates there is no pattern or correlation to be found in the data. Even churches that spend more on payroll are not more likely to offer better benefits (hover over each color to sort by payroll percentage).
The only consistent trend is that senior pastors are the most likely church employees to receive health insurance, retirement matching, and, in general, a health benefits package. The likelihood and quality of benefits decreases as you move to other pastoral staff, non-pastoral staff and part-time employees.
Offering health benefits to your employees is a choice.
What does this mean for your church?
If you want to offer health insurance to your employees, unless you use a company like Remodel Health, your church will be forced to pay rates similar to the figures quoted by the Kaiser Family Foundation. The figures will vary slightly depending on type, level of coverage, and deductible, but the costs will not scale based on each employee’s salary or your budget.A decent analogy for how salary and benefit employment costs differ is the difference between hiring workers to renovate your kitchen versus purchasing appliances. Ovens are sold at discrete price levels. They vary slightly based on manufacturer and features, but an oven costs what it costs. You can’t buy a fifth of an oven. In the same way, you can’t really buy a fifth of an individual health insurance plan. You can split the contribution costs with employees and defer some through a high deductible, but your cost-saving options are limited. By contrast, you can purchase a fifth of an employee—you hire a part-time worker instead of a full-time salaried employee.
Purchasing health insurance, then, is ultimately a question of affordability. What can your church afford to offer employees based on their position, employment status, and family situation? Can you make room in the budget to offer these benefits (or do you have the will to)?
When it comes to benefits, particularly health insurance, the key question is how much coverage you can afford to buy after you pay all your employees a “fair” wage.
ChurchSalary’s reports can help you gauge what a fair wage is and once you add up all those salaries/wages, and you decide which benefits you want to offer to which employees, you can price benefits. What your church can afford will depend on the level of coverage you purchase and the market rate. These costs will not scale based on your budget or the position.
You can boil this process down into five basic steps.
- Evaluate staff salaries/wages using ChurchSalary’s reports.
- Determine how much your church can afford to spend on staffing (payroll budget minus salaries/wages).
- Determine which benefits you want to offer and at what level of coverage.
- Price benefits and explore options for coverage.
- Use your benefit budget to purchase the best coverage and benefits possible.
Prioritize which benefits are most important to your church and make a plan. Remember, you don’t have to start at full throttle, you can ramp up your benefit spending in several ways. One easy way to scale up spending is to start with retirement matching. You may not be able to offer 5 percent now, but can you start with 1 percent? It’s better than nothing.
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.