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What Should Severance Packages Include?

What should churches include and how much?
What Should Severance Packages Include?
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Letting a pastor or staff member go is hard, especially when unexpected factors force your hand.

The wisest (and most compassionate) decision for churches is to offer some sort of severance package. But what benefits should churches include and how much should they pay?

First and foremost, why should churches offer severance?

Eligible for Unemployment?

Did you know? It takes pastors a year to find a new job, on average.

Severance packages are a crucial lifeline for church employees. Why?

Churches are not required to pay federal unemployment taxes (FUTA) and few do. As a result, most church employees don’t qualify for unemployment.

Severance packages are often the only safety net available to pastors and staff.

The CARES Act (March 2020) temporarily extended unemployment to church employees but that offer expires on December 31, 2020.

Learn more about the nuts and bolts of unemployment eligibility and the CARES Act over at Church Law & Tax.

Two Basic Questions

Given how important severance packages are, church leaders should ask and answer two basic questions:

  • What do we owe them based on their service?
  • What can we afford based on our situation?
What Do We Owe Them?

Every employee’s contribution is unique. Pastors who serve longer tenures usually leave a bigger impact on the church.

Founding pastors likely deserve a greater level of consideration than recently hired part-time employees.

While guidance varies, a common starting point is to offer employees:

  • X weeks for every X years of service.

The ratio of weeks to years can be increased or decreased depending on the significance of the employee’s service and other factors.

For example, employees voluntarily leaving should be evaluated differently than employees being asked to leave.

Similarly, a founding pastor who has served for several decades deserves a greater level of care and consideration than a part-time custodian who has served for several weeks.

Generally speaking, employees that are laid off, terminated without cause, or asked to resign are eligible for a severance package. Additionally, in order to avoid lawsuits, bad publicity or future conflict, it may be wise to offer a severance package to employees that are fired “for cause.”

Ultimately, what a church owes a staff member will vary depending on their responsibilities, the length of their service, and their reason for leaving.

Weighing how each of these factors should impact the severance packages for all your staff members, as a matter of policy is critical.

Determining a uniform severance package for church staff requires consideration of two primary factors - length of service and church health. – David White, Education and Administration Pastor at North Fort Worth Baptist Church

Offering haphazard and inconsistent severance packages—between pastors and over time—is a surefire recipe for controversy and conflict in the church.

How Will Members React?

For that reason, leaders should also ask:

  • How will our members respond when (not if) they learn about this?

Secrets are hard to keep in a church. Details leak. What seems okay behind closed doors can wither in the light of day.

Regardless of how much you try to keep it a secret your staff and your congregation will learn the details of the agreement and it will communicate your church's values. – Matt Steen, Co-Founder of ChemistryStaffing

Actions reveal values. That’s why staffing professionals like Matt Steen advise churches to consider the impact a severance package will have on their congregation.

How you treat staff and pastors is preaching a message to your members—whether you like it or not.

What Can We Afford?

Churches are often constrained not by compassion but by the bottom line.

Congregations cannot afford to offer severance packages that strain their budget. Before making an offer, churches need to analyze their finances and account for future obligations.

What a church can afford will depend on overall health of its finances as well as:

  • upcoming expenses,
  • projected giving,
  • and other financial considerations.
What will they lose, when we let them go?

Once you have established what your church afford, review the benefits that the employee already receives.

Evaluate what the staff member will lose when you let them go.

Severance packages often include some combination of:

  • pay (partial or full),
  • benefits (insurance, retirement, etc.),
  • and job transition/counseling services.

Churches should also consider creative and non-costly ways to care for departing staff members.

Can you offer:

  • continued access to benefits,
  • a job reference,
  • and other incentives?
How can you make this a healthy transition for the staff member and the congregation?

Many options cost nothing (or very little) to the church and can yield returns over the long run by avoiding controversy, gossip, and conflict. Other options, such as counseling and job transition services, can ease the shock and help pastors and staff stay in the ministry.

For example, ChemistryStaffing.com offers a 3 month long transition program that offers counseling, resume assistance, spiritual care, and personal development for departing employees. Churches can include high-quality job transition services like in every severance package they offer.

ChurchSalary always encourages churches to consult a lawyer familiar with federal and state labor laws when crafting legal agreements between employees and the church.

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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.

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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.