“What is the typical range that churches allocate for payroll (or salaries) as a percentage of their budget?”
To answer this question for our members, ChurchSalary surveyed over 3,000 churches about their spending on staff salaries and benefits. While these churches represent a fraction of the churches in our entire database, these results are statistically significant and revealing.
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What is the norm?
Churches allocate an average of 49.1 percent of their overall budget for salaries and/or payroll expenses (+/- 0.59). Depending on the size of the church, the median ranges between 47 and 52 percent (trending higher as budget increases).
Overall, 50 percent of surveyed churches allocate between 40 and 60 percent. This 40 to 60 percent range can be labeled as “the norm.”
Other articles on this topic states that “most churches” allocate between 45 and 55 percent. While this is not a bad advice, we suspect this narrower range reflects a healthy goal rather than reality—i.e., aim for 50 percent and allow for a 5 percent fluctuation. Our data indicates that only 30 percent of churches hit this 45-55 target.Based on the 3,098 churches surveyed, payroll spending between 45 and 55 percent corresponds to the 35th and 65th percentile respectively.
How does spending vary by budget?
The chart below visualizes the distribution of payroll spending within the ten budget ranges currently utilized by ChurchSalary for compensation analysis. The dots correspond to the same quartile or percentile measurements provided in our salary reports: the middle range falls between the green (first quartile) and blue (third quartile) dots. To view precise numbers for each dot, consult this distribution table.
Analyzing this chart may yield interesting insights about payroll spending at your church versus other churches in your budget range.
Learn more about how to read this chart (including why the average falls above or below the median).Three of these points (first quartile, median, and third quartile) divide the entire range into four segments of equal size—hence the term “quartile.” The median is the middle point of the data set: 50 percent of salaries fall above or below this number. It reflects the payroll spending for the 1,549th church in this set of 3,098 churches. The first and third quartiles divide the data set at the 25 and 75 percentile mark respectively (the 775th and 2,324th churches). Ultimately, 75 percent of salaries in this data set are above the first quartile and/or below the third quartile, while a majority (50 percent) lie between them. If the average falls above or below the median, it indicates that the distribution of data points for that range is skewed. For example, the average for churches in the $501K-$750K range is 51.5 percent while the median is 50 percent. This indicates that the data is right-skewed and a large contingent of churches in this range are still spending less than 50 percent of their budgets on payroll. However, the average is being pulled up by churches who are increasing their spending on staffing—likely to grow past the key complexity hurdle. Learn more about skewed distributions here.
The overall shape of payroll spending
The chart below reflects the overall distribution of payroll spending among the 3,098 churches surveyed to date.
There are a couple features worth noting in this chart (above). First, there is a steep drop off once you venture outside of the 40 to 60 percent range (the first and third quartiles). It may be wise for churches that find themselves outside the norm to evaluate the size and health of their staff. Second, most of the churches that spend a large portion of their on payrol(+80%) are likely lean solo pastor ministries and/or small churches.
Many church metrics reflect both the best practice and the reality of what it takes to staff and administer a healthy church. They function like a valley surrounded by mountains. You can visualize this by flipping the above distribution chart upside down. Even though it is possible to hike and climb along the slopes, it can be hard and dangerous.
That said, the benchmarks discussed in this series are not prescriptive. Every church is unique and payroll spending at your church will be influenced by a host of factors. The best approach is to connect these dots together in order to understand how they collectively influence staffing and compensation decisions at your church.
Explore the above charts on payroll spending in more depth and get a sense of the confidence interval of the median (including what this may tell us about a key staffing inflection point) by exploring the bonus charts below.
- Distribution Table | Payroll Spending (at 5 percent intervals)
- Confidence Interval of Median | Payroll Spending
Find more ways to measure and quantify the financial health of your church in these articles from Church Law & Tax.
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