Church Payroll Game Changer


Most Churches in the USA are not a Mega-Church. The average congregation size in America is 70 people. Many of these live from Sunday to Sunday to meet budgetary demands. Most rely on some fundraisers throughout the year just to engage in ministry outside of their four walls.


The last thing Churches in the USA need is to have additional salary demands placed upon them by the Federal Government, but it happened. Effective December 1, 2016, the Department of Labor implements their new overtime rule and the fallout is huge.


The New Rule


Effective December 1st all non-ordained employees and those ordained, performing mostly non-ministerial duties must be paid time-and-a-half for time worked exceeding 40 hours per week. All salaried employees who make less than $913 per week ($47,476 per year) must also receive this overtime pay.


To be exempt from this ruling, Church employees must meet these requirements:


  1. He or she must have the title of Minister (Must be ordained)
  2. Must be operating in the capacity of a Minister
  3. Must Perform Sacerdotal Duties
  4. Employer must be a Religious Organization or Church
  5. Must be performing Religious duties (Does not apply to those performing clerical/non-ecclesiastical duties – Example: If an ordained minister was teaching religion and math in a Christian School, he or she would have to teach more religion classes than math classes to be exempt.)


Payroll Options


Churches have six months to prepare for this change. Here are some options:


  • Limit employees (except Pastor and Associate Pastors) to 40 hours per week
  • Pay time-and-a-half for hours worked over 40 in a workweek
  • Raise salaries from the current minimum of $455 per week to the new minimum of $913


The Church cannot remove an employee from salary to hourly to reduce the hourly rate so that the employee may work the same amount of hours for the same pay. For example, a salaried employee making $455 per week, working 50 hours per week, cannot have his or her payroll status changed to hourly at $8.28 per hour with 10 hours of overtime at $12.42 per hour to keep the employee working the same hours for the same pay. In this scenario the Church must keep the employee at $455 which is the equivalent of $11.38 per hour and then pay $17.07 per hour for all hours that are more than 40 in the week.


The Church can include bonuses, incentive pay and commissions when adding up employee’s salaries, however there are caveats.


  • Those types of payments can count toward only 10% of the salary threshold
  • The payments must be made at least quarterly
  • Only non-discretionary bonuses may be included


Why You Need Us


Issues such as these continue to appear. The Federal Government posts all changes in their particular publications. Unfortunately, Churches do not know what to look for and are left holding the bag which may include the assessment of many penalties. Churches struggling to survive week-to-week do not need additional financial burdens placed upon them.


Chitwood & Chitwood is the ultimate Church and Clergy Accounting firm in the world. For more than 78 years we have protected Churches and Ministers. Our dedicated staff constantly reviews Internal Revenue Service (IRS) and Department of Labor (DOL) regulations to ensure our Churches are in compliance.


This is why very Pastor and Church Leader should attend a Church Management Tax Conference in the nearest location to learn what the IRS and DOL expect from Church and Clergy. Visit or call 800-344-0076 to register or obtain more information. You will be glad you did.


Remember, for us, “It is a Ministry – Not a Job!”