Solving 4 Common Church Payroll Challenges

Most people outside of the church administration don’t know how much goes into keeping the lights on and making their members feel welcome. A team of volunteers and employees work to keep the space clean, provide services to the community, and handle the technical aspects of running a church. One of the most cumbersome (and confusing) jobs fall to the accounting and payroll staff. Balancing who gets paid and for what comes with extra levels of complexity, especially when it comes to flat pay agreements, housing, and volunteer hours. Check out below a few common payroll mistakes that are unique to churches and how they can be resolved. 

Volunteer working on organizing stacks of church documents

Separating Work and Volunteer Hours

One of the biggest challenges that church payroll teams face is balancing work hours with volunteer hours. Think about the school teacher or administrator who also volunteers at Sunday school. How can church officials separate volunteer hours without underpaying or overpaying their staff members? If they overpay, they waste money and the church could hand out several hours of unnecessary overtime. If they underpay, then the church risks losing its employees and may even face legal action. 

This challenge can be solved through dedicated time tracking. Employees need written agreements for the number of hours that they will work and when. This way their managers (often a church official) can make sure they only clock in during those agreed-upon hours. The employee/volunteer also benefits by getting the fair amount they expect to get paid, whether that falls on a Sunday or not. 

Distinguishing Between Employees and Contractors

Along with noting the difference between volunteer and work hours, many churches also contend with the differences between contractors and part-time employees. For example, if someone plays the organ or leads a church choir every Sunday, do they count as a part-time employee or did you just contract out their services?

The gig economy has made it more popular for companies to take on freelance and contract labor over actually hiring employees; however, there may be some cases where contractor pay doesn’t qualify. Working with payroll professionals can ensure that your team members get paid fairly based on the types of work that they do. 

Managing Different Pay Types 

Church payroll records grow even more complex when you factor in the various pay stipends and allowances for employees. For example, how can churches tax the use of the church van or the costs of a priest living in the church house? These are complex accounting elements for both the faith-based organization and the people trying to track their earnings. 

These stipends further emphasize the importance of seeking outside accounting and payroll assistance if your church is unable to hire an expert full-time. There are just too many moving pieces to leave these accounting steps open to one overworked employee or a few volunteers.

Retaining Organized Records

According to the Equal Employment Opportunity Commission, employers must retain payroll records for at least three years. This allows for transparency in the event that the IRS audits an organization or if the church faces a pay discrimination lawsuit. 

Most churches hoard documents for several years in multiple locations. This makes recordkeeping confusing ⁠— especially if someone needs a specific file. An outsourced service can easily maintain records digitally and in a manner that you could pull specific information if needed. The burned of keeping up with EEOC’s standards is lifted.

At Corban OneSource, we understand how challenging it is for faith-based organizations to balance their volunteers, contractors, and employees. There are so many moving pieces that bring the church together, that it can seem almost impossible to keep the payroll process organized. We provide payroll outsourcing and other HR solutions so you can focus on furthering your mission without feeling burdened by paperwork and similar tasks.