This fall churches are extremely aligned on a cost of living adjustment for their 2025 budgets. At the same time, market forces are threatening to further shrink staff sizes or to force hard cuts to budgets for many churches.
ChurchSalary conducted our third annual State of Church Compensation survey to once again pool the knowledge and plans of American churches. Much like last year, those results are presented in our regular two main sections addressing 2024 Changes and 2025 Changes. As a bonus, we have included a third section unpacking some of the results from our questions about the impact of the minimum salary requirement for exempt employees.
2024 Changes
- Actual v. Predicted
- Distribution of Budget Changes
- Staff Size Changes
- Reasons for Cuts/Decreases
- Benefit Changes
Last year, churches reported that they planned to increase their total 2024 personnel/payroll budget, on average, by 4.5%. This anticipated increase reflected a combination of ~3% cost of living adjustment (or COLA), merit raises, and increases in overall expenses related to benefits and hiring.
At a more detailed level, last year’s respondents planned to spend an additional 3.9% on salaries, 4.25% for benefits, and 4.2% for total personnel/payroll in 2024.
How did our projections fare?
As the chart below illustrates, many of the churches who participated in our 2023 survey appeared to underestimate the extent to which they would need to increase their 2024 personnel/payroll budget. The biggest gap was in the area of benefits.
To quantify whether this was a statistical fluke, ChurchSalary directly compared data from the 70+ churches who answered the same subset of questions in both our 2023 and 2024 State of Church Compensation surveys. According to that analysis, these churches reported spending an additional 1.3% more on benefits, on average, than they anticipated in the fall of 2023.
Even though this is a small subset of churches, it makes good sense of the data, especially when you consider that the cost of health insurance increased between 2023 and 2024 by around 9% — largely as a delayed reaction to inflation which peaked in 2022. This increased pressure to spend more benefits than churches initially planned also shows up inwhen you look at the range o distribution of actual 2024 budget changes.
When we combine the above data points with 2024 survey responses to questions about staff and payroll changes, several other insights emerge. First, as the chart below indicates, very few churches (5%) spent less on benefits. Second, increased spending on salaries/wages and total payroll expenses was driven in roughly equal proportions by increased hours for existing staff (62%) and staff expansion/new hires (52%).
Based on responses to our 2023 survey, fewer churches planned to hire additional staff in 2024 than in the previous COVID rebound era (2021–2023), and fewer churches planned to let staff go in the coming year. This led us to believe that more churches would shift from the “decreasing” or “increasing” categories to “stay the same.”
Unfortunately, our 2024 survey data paints a different picture. As the chart below shows, despite planning to do the opposite last September, 8.8% of churches were either forced (or decided) to decrease the size of their staff in 2024.
This 8-point swing away from “same” to “decreasing” is concerning, especially when you dig into the “why.”
Churches who fell into the “decreasing” staff size category overwhelmingly cited decreased giving (48%) and attendance (30%). This widespread decrease — of up to 20% in some cases — pushed these churches to either not replace existing staff when they resigned or were fired (21%), to change the status of employees from full to part-time (16%), or to decrease the amount of money they spend on benefits (5%). A handful of churches (10%) attributed their cuts to new priorities or different ministry goals, while 7% cited increased costs associated with utilities, facility maintenance, or loans.
For the half of churches that either increased (32%) or decreased (17%) their staff size in 2024, the average change was around 3.4 employees. While this may not seem like much, the quantity of these changes in relation to total staff size amounted to approximately a 20% swing in either direction (avg. increase = 19.4% / avg. decrease -21.3%).
In terms of specific benefit costs, health and dental as well as retirement matching continue to put the most pressure on churches — with 34% of churches report that they increased their retirement matching or contributions and 59% spending more on health/dental in 2024.
In light of persist health insurance rate increases, we feel compelled to point out that there are new options available — through companies like Remodel Health — that are enabling churches to save money on health insurance. These savings are available via health insurance plans sold at the state level through the Affordable Care Act. Learn more about these types of plans and benefit models by watching our 2022 webinar on Improving Total Compensation for Church Staff with Remodel Health.
2025 Changes
- Overall Changes
- Staff Size Projections
- COLA
As churches look ahead to 2025, 74% anticipate they will spend more on salaries/wages, 40% plan to spend more on benefits, and 72% expect they will need to spend more overall on payroll. Across the board, data captured in this year’s survey projects a 2 to 5% shift away from “same” or “decreased” spending. There is simply no way to escape the increased cost of benefits or the pressure to pay staff higher wages. All of this is a delayed response to the roughly 20% shift in expenses that COVID brought to the economy (2019 versus 2023).
Despite all these pressures, churches continue to be optimistic that the size of their church staff will stabilize. As they did last year, only 7.6% of churches are planning to decrease the size of their staff. Comparatively, 5% fewer churches plan to expand or increase their staff size in 2025 (27.1%) than in 2024 (32.3%).
Given the outcome of last year’s projection and the higher number of churches that anticipate they will need to spend more on salaries/wages and benefits, ChurchSalary is incredibly skeptical that only 7.6% of churches will decrease their staff size in 2025.
At best, we believe that churches will fall short of these goals. Instead, we are confident that 2025 will look a lot like 2024, with a fair amount of churches who plan to “stay the same” being forced to decrease the size of their staff.
More than any previous year, churches are extremely aligned around a cost of living adjustment. The consensus this year among roughly half of churches (47.5%) is a COLA of 3–3.5%, with an average of 3.3% and a median of 3%. This makes a lot of sense in light of the recent good news that the Consumer Price Index dipped below 3% for the first time in three and a half years.
Watch the 2024 State of Church Compensation webinar to learn more about anticipated changes and pressures for churches as we prepare to move from 2024 to 2025.
Minimum Salary Requirements for Exempt Staff
In addition to our regular questions, ChurchSalary and Church Law & Tax asked churches a series of questions about the impact of changes to the minimum salary requirement for exempt employees.
This article will not explore the substance or technical details of the increases. For that information, we recommend your church read Church Law & Tax’s excellent article: Fed Raises Minimum Salary Requirements for Exempt Status.
Across both increases, the number of churches clearly affected by the increases appears to be between 17 and 28%. Another 13 to 19% of respondents are unsure of how the increase will affect their congregation.
In an attempt to quantify how many employees will be affected by these changes, ChurchSalary asked churches to quantify their total full-time or salaried employees and the number of employees affected by the increases. According to the 85 to 130 churches who provided this level of data, the median impact of both the July and January increases was/will be 3 employees. While 3 employees may seem small, the median impact relative to each church’s current number of exempt employees will amount to between 11% (July) and 16% (Jan).
Of the 13–20% of churches who are unsure about the impact of the exemption requirement changes, 57% need to learn more while 33% are still evaluating which positions and individuals will be impacted.
Despite this, the vast majority of churches (74.5%) are confident that they will not need to let staff go or decrease their staff size to compensate for the added costs associated with these changes.
Instead, if changes are needed, ChurchSalary anticipates that churches will make cuts elsewhere in their budget or reclassify workers as hourly instead of exempt.
