- Director of Operations, Lighthouse Christian School
HR & Payroll for Churches and Religious Organizations
An HR and Payroll Solution That Cares
Our HR and payroll software helps your organization focus on what matters most: your ministry, your clergy, and your community.
- Trust our payroll tax services experts to accurately prepare, review, and file your taxes.
- Streamline payroll, compliance, document management, and more by leveraging automation.
- Strengthen your community of employees and show them you care about their experience.
Focus on Your Community, Not Your Payroll
- Tax Services
-
Take the Stress Out of Filing Taxes
Save time and get the support you need to file taxes confidently.
- Handle unique tax considerations like housing allowances or ministerial exemptions with ease.
- Paylocity’s tax services team resolves tax notices on your behalf and provides visibility into federal and state deposits.
- Get peace of mind with our promise to assume liability, penalty, or interest charge in the event of a Paylocity error.
- Payroll
-
Run Simplified, Seamless Payroll
Simplify your payroll with user-friendly software built for your faith-based organization’s complex needs.
- Automate payroll workflows so anyone can run payroll, no HR experience required.
- Create custom payroll workflows to automate processing for hourly, salary, contract, or other compensation structures.
- Easily account for parsonage allowances for clergy members.
- Time & Labor
-
Manage Workforce Time Tracking
Track employees’ and volunteers’ working hours to maintain compliance with overtime laws and requirements.
- Eliminate paper timesheets, reduce administrative tasks, and track time worked accurately.
- Enable employees to clock in via mobile, web, kiosk, or other timeclock options.
- Get powerful insights from real-time reports.
- Employee Self-Service
-
Empower Your Employees
Offer continuous professional development for teachers to keep up with changes.
- Drive meaningful engagement that helps to fuel teachers’ passion for education.
- Easily assign courses tailored to training on new skills, policies, products, and more.
- Take your learning with you, wherever you go via the Paylocity mobile app.
- Employee Experience
-
Strengthen Your Community
Show your employees you care with tools that keep them connected and engaged.
- Provide a central hub for your employees, from file sharing and collaboration and team chat to company-wide announcements, with Community.
- Get a pulse on employee engagement with Employee Voice's data-driven survey and insights tools.
- Publicly celebrate achievements and show appreciation with Recognition & Rewards.
Take the Stress Out of Filing Taxes
Save time and get the support you need to file taxes confidently.
- Handle unique tax considerations like housing allowances or ministerial exemptions with ease.
- Paylocity’s tax services team resolves tax notices on your behalf and provides visibility into federal and state deposits.
- Get peace of mind with our promise to assume liability, penalty, or interest charge in the event of a Paylocity error.
Run Simplified, Seamless Payroll
Simplify your payroll with user-friendly software built for your faith-based organization’s complex needs.
- Automate payroll workflows so anyone can run payroll, no HR experience required.
- Create custom payroll workflows to automate processing for hourly, salary, contract, or other compensation structures.
- Easily account for parsonage allowances for clergy members.
Manage Workforce Time Tracking
Track employees’ and volunteers’ working hours to maintain compliance with overtime laws and requirements.
- Eliminate paper timesheets, reduce administrative tasks, and track time worked accurately.
- Enable employees to clock in via mobile, web, kiosk, or other timeclock options.
- Get powerful insights from real-time reports.
Empower Your Employees
Offer continuous professional development for teachers to keep up with changes.
- Drive meaningful engagement that helps to fuel teachers’ passion for education.
- Easily assign courses tailored to training on new skills, policies, products, and more.
- Take your learning with you, wherever you go via the Paylocity mobile app.
Strengthen Your Community
Show your employees you care with tools that keep them connected and engaged.
- Provide a central hub for your employees, from file sharing and collaboration and team chat to company-wide announcements, with Community.
- Get a pulse on employee engagement with Employee Voice's data-driven survey and insights tools.
- Publicly celebrate achievements and show appreciation with Recognition & Rewards.
The Paylocity Difference
Supporting Faith-Based Organizations Just Like Yours
related resources
Paylocity News,
Payroll
Blog Post
June 03, 2022
FAQs on Payroll for Faith-Based Organizations
The way churches pay their employees can vary depending on the size, structure, and financial resources of the church and the role of the employee. Here are some common methods of compensating church employees:
- Salary or Wages: Many churches pay their clergy and some staff members a regular salary or hourly wages.
- Housing Allowance: For clergy members, especially pastors and ministers, a common practice is to provide a housing allowance as part of their compensation package.
- Benefits: Churches may offer various benefits to their employees, like health insurance, retirement plans, life insurance, and disability coverage.
- Stipends: Some churches, especially smaller ones, may provide clergy and other part-time workers (like choir directors or youth group leaders) with stipends instead of regular salaries.
- Volunteer Positions: In smaller congregations or when financial resources are limited, many roles within the church like Sunday school teachers, choir members, and ushers may be filled by volunteers who do not receive monetary compensation. In some cases, churches may offer certain benefits, like access to counseling services or educational opportunities, to their volunteers as a form of recognition and support.
- Contract Work: Churches may pay contractors a fee or hourly rate for specific projects or services, such as event planning, music performances, or building maintenance.
- Reimbursements: Some church employees, particularly those who incur expenses while carrying out their duties (e.g., travel expenses, supplies, or equipment), may be reimbursed for these costs.
In the United States, churches and religious organizations are generally exempt from paying federal income taxes and are not required to withhold or pay payroll taxes like Social Security and Medicare taxes (also known as FICA taxes) for their clergy members, including pastors, ministers, and priests.
Clergy members are not completely exempt from taxes, but there are some unique tax considerations that apply to them:
- Income Tax: Clergy members are generally subject to federal and state income taxes on their compensation, including salaries and housing allowances.
- Housing Allowance: A housing allowance may be part of clergy members’ compensation, which can be used to cover housing-related expenses, such as rent or mortgage payments, utilities, and property taxes. This housing allowance is typically exempt from federal income tax.
- Self-Employment Tax: Clergy members who are considered self-employed for Social Security and Medicare tax purposes are required to pay self-employment taxes (SECA) on their ministerial income, which includes compensation from the church. Unlike employees who pay FICA taxes through payroll withholding, clergy members are responsible for both the employer and employee portions of Social Security and Medicare taxes.
- Filing Status: Clergy members may have the option to use the "ministerial exemption" when determining their filing status for federal income tax purposes. This exemption allows them to exclude housing allowances from their taxable income, potentially reducing their overall tax liability.
- Retirement Benefits: Some clergy members may be eligible for tax-advantaged retirement benefits through plans such as a 403(b) or 401(k). Contributions to these plans can be tax-deferred, reducing their current taxable income.
- Exemption from Withholding: Clergy members may be able to request exemption from federal income tax withholding on their compensation. However, they are still responsible for paying their taxes through estimated tax payments or at the time of filing their tax returns.
The IRS provides further tax information for members of the clergy and religious workers in Publication 517.
Churches and religious organizations are generally exempt from paying Social Security (FICA) and Medicare (Medicare) taxes for their clergy members, including pastors, ministers, priests, and other religious leaders. Clergy members are typically considered self-employed for Social Security and Medicare tax purposes, which means they are responsible for paying both the employer and employee portions of these taxes themselves.
Generally, religious organizations are exempt from filing Form 990, which is an annual information return required for most tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code. However, there are some important points to note regarding the filing requirements for churches:
- General Exemption: Churches and religious organizations are automatically considered tax-exempt under Section 501(c)(3) without the need to apply for this status.
- Exceptions: While churches are exempt from filing Form 990, there are certain situations in which religious organizations associated with a church (such as religious schools or hospitals) or separate entities formed by a church may have to file Form 990.
- Transparency: While not required to file Form 990, some churches choose to do so voluntarily. This can enhance transparency and demonstrate fiscal responsibility to their congregations and the public.
A parsonage allowance, also known as a clergy housing allowance, is a specific type of compensation provided to religious leaders that allows them to exclude a portion of their income from federal income tax. This housing allowance is designed to assist clergy in covering the costs of housing, including rent, mortgage payments, utilities, and property taxes.
To qualify for a parsonage allowance, clergy members must meet specific criteria:
- They must be ordained, licensed, or commissioned ministers.
- They must perform ministerial services as part of their employment.
- The allowance must be designated in advance by the employing church or religious organization.