Most of the church planters I’ve supported didn’t come into the adventure with any direct experience with the costs of hiring church plant staff. Either they came from a ministry position that didn’t manage other employees, or they worked for a megachurch that had an HR department that took care everything. But when you’re the president, hiring manager & HR director all in one, there are some hidden costs of hiring church plant staff you need to know about.
The hidden payroll tax expense really only applies if you’re hiring an employee that has not opted out of Social Security (they’re still in). If your new hire is clergy and has opted out of Social Security, then this doesn’t apply.
If you’ve ever worked anywhere, you’ve certainly had withholdings taken right out of your paycheck. Things like state & federal income tax come right off the top. But you probably didn’t know that social security tax is actually split between the employee and the employer. For every dollar that comes out of a worker’s paycheck for social security, their employer is paying a matching amount.
So if you decide to offer someone $3,000 a month to come on staff, it’s going to cost the church more than that by about 7½%. Yeah, that’s about $225 a month extra for that employee. Surprise!
Here’s where it gets even more complicated: if they’re an ordained, licensed or commissioned minister and will be specifying part of their income as housing allowance, then the church is only matching the social security tax on the salary portion of their pay (not the housing allowance portion). So using the same scenario, if they request (and your Board approves) a monthly housing allowance of $1,200, then the church only pays the social security tax on the remaining $1,800 (about $135/mo).
The bummer for the employee in this situation is that the social security tax liability for the housing allowance portion is transferred entirely to them. Yep, instead of splitting it with the employer, they have to pay the whole 15ish percent on their housing allowance themselves as ‘self employment tax’. Yay. So the $90/mo the church saves in our example would then get functionally billed to the employee.
Some churches see the stinkiness in that exchange and give the money they saved to the employee by way of increasing their salary. This is a courtesy and not practiced by every church. But even if the church does, it’s a sliding scale for the employee: the extra $90/mo in our example is now taxable salary, so the employee won’t ever see the whole ‘raise’. At least it helps, though. And theoretically, it doesn’t cost the church any more than if they were paying a non-clergy employee the same salary.
Workers’ Comp Insurance
The other hidden cost in hiring church plant staff is workers’ comp insurance. This is a special kind of insurance that your church may have to carry. It pays the hospital bills, etc. if an employee gets hurt on the job. Some states require Workers’ Comp for every employee, some only for non-clergy employees (admin, janitor, etc). So if your church has to carry this, expect several hundred dollars a year for each employee in hidden cost.
How to Budget
If you need a ballpark figure as you’re budgeting for a new hire, gross up the new employee’s salary by 10%. It’s rough, but will get you close. So if you’re going to offer them the $3,000 a month, you should budget roughly $3,300 a month as the real price tag.