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What Is A Church Compensation Strategy?

By Sam Paredes posted 07-08-2021 11:36 AM


Here's another article from Smart Church Management:

People who work for churches do so because of a calling and deserve the same compensation as someone working in any other organization.

A church compensation strategy can help!

Churches that are large enough to have a paid staff should intentionally consider their employees’ pay and benefits.

Church boards should develop a compensation strategy that lines up with the overall strategy and mission of the organization.

Church compensation planning includes employee pay and the cost of all other benefits – health, life, disability, 403-b contributions, etc.

A compensation strategy is part of the overall strategic plan that simply guides the organization through the process of compensating employees.

This strategy determines how the organization views pay for employees and outlines a process to determine pay grades and total compensation.

Today we will talk about creating a pay policy as part of the compensation strategy.

As part of the process, an organization will develop what is called a Pay Policy and make a conscious decision to structure employee pay in one of three ways:

1.  Lag the Market  

In this model, the organization determines that it will pay employees below comparative market rates (25th percentile) for the same job.

Organizations that go with this kind of pay structure do so when they know they are a sought-after place to work.

This is usually determined when the organization is rated high on employee satisfaction and maintains low employee turnover rates.

The advantage of this model is that it is less of a salary expense.

The disadvantage is that it may be difficult to recruit highly qualified employees.

2.  Match the Market

This model aligns the pay ranges (50th percentile) with what other like organizations are paying their employees.

Organizations that use this model do so to compete with others in their market for the same employee skills.

The advantage of this model is that it is competitive with other like organizations.

The disadvantage is it is not necessarily tied to improved employee performance.

3.  Lead the Market

This model leads the market in pay (75th percentile), and the pay ranges are higher than what other like organizations would pay for the same job.

This model is used to attract the best and the brightest employees.

The advantage of this model is that it is a very competitive approach to recruiting employees.

The disadvantage is that it is a very expensive model to sustain.

What Is The Difference In Lead Vs Lag Pay Range?

Let’s look at an example of what this would look like for a secretarial job:

In this example, the average pay for a secretary in an organization that lags the market would be $18,000.

In contrast, a secretary doing the same job in a lead the market policy would be earning $32,000, on average—a significant difference in pay.

This kind of pay policy deliberately pays below, at, or above comparison pay for the same job.

As you can see there is a great difference between the lag and the lead models.

Knowing the organization’s stance on compensation allows for a strategic approach to employee pay.

Ok, now that we have a pay policy and know where on the scale we will pay our employees – we need to come up with pay grades.

How To Create Pay Grades

Creating Pay Grades can be a cumbersome process, making it well worth purchasing a Compensation Handbook for Church Staff where pay grades are laid out. Hence, all you have to do is translate them to your particular employee population.

When determining pay grades, you want to put them in a document that shows the minimum pay, middle of the scale, and maximum pay for the job.

A pay grade document might look something like this.

As you can see there are several pay grades for this particular organization.  

You will also notice that some of the scales (the difference between the minimum and maximum) are larger than others.

The reason for this is some jobs have a lot of growth potential while others are very limited.

For example, look at #6 as compared to #22. Pay Grade 6 has an $11,000 range between min and max, whereas #22 has a much wider range of $20,000 between its minimum pay and maximum pay.

In these examples, pay grade 6 might be appropriate for a receptionist position which is typically an entry-level job that doesn’t have much growth potential. In contrast, pay grade 22 might be for an assistant pastor who might increase his skills as he gets experience pastoring.

Please note that the salary ranges used in this example are not necessarily appropriate for each of the jobs listed.

Be sure to determine the best scales for your particular organization and job titles.

The next thing we will do is come up with a job title to pay grade document that might look something like this.

In this graph, you can see all of the job titles and the corresponding pay grades. You will notice that some of the jobs are in the same pay grade.

This is done because as an organization grows, it becomes too complicated to have a different pay grade for each job title, so the HR department will slot job titles into an appropriate pay grade.

Next, we want to create one document that shows all of the information about job title, grade slotting, and pay scale.  

An Example Pay Grade Document

The advantage of going through the process of creating this document is that it allows for an unbiased approach to determining employee pay and takes the guesswork out of it.  

Once this document is created, you can merely update it annually based on COLA percentages.  

If you can’t afford the  Compensation Handbook for Church Staff, there are many free search tools to help with your research.  You probably won’t find many of the ministry-specific jobs (pastors), but most other jobs are out there.

Investing the time and effort into formalizing the pay process for your church will send the message to employees that they are valued and that the organization is intentional in its approach to employee compensation.

Does your church have a compensation strategy?

Here is the link to the article.