Fixed Salary for Flexible Hours

Many churches in America struggle to abide by the rigid compensation regulations as they seek to bless their employees. They wrestle with the question of how to continue to care for those who serve their congregations with limited financial resources.

In 2016 the Department of Labor modified the regulations applying to the Fair Labor Standards Act (FLSA) and increased the minimum salary requirement for exemptions.  This change meant that many individuals within the church who were previously receiving small salaries were no long considered exempt from minimum wage and overtime rules.

Do not despair!  There is hope, and there are options for churches within these regulations!

First, Clergy are not covered by the FLSA. 

The FLSA sorts American employees into those “exempt from the law” and those who are “non-exempt from the law”.  Clergy are neither ‘exempt’ nor ‘non-exempt” in the FLSA definition but instead are not covered at all according to US Labor Laws.  This essentially means that regardless of the type of work, amount of pay or type of pay clergy are not subject to either minimum wage concerns nor do they benefit from the FLSA overtime requirements.                                         

BUT, the FLSA definition of Clergy is very stringent and court decisions on the FLSA have looked to the employee as needing to fulfill ALL of the following to be counted as clergy and thus not covered by minimum wage or the FLSA.

  1. Be held out as a minister by both the employer and the individual.

    • Is their position titled “Minister” or “Pastor”? 

    • Do they refer to themselves as “Pastor”?

  2. Regularly perform “essential religious duties.” 

    • Do they regularly administer and conduct the acts of religious worship?

    • Do they, in some capacity, preach and teach?

  3. The title of Minister was received as a result of “significant religious training”

  • Where they ordained (licensed) with or without additional requirements for credentialing?

  • Was there a stringent process including training and study to receive the “title of minister”?

If ALL of the above requirements are met an individual is considered clergy and their compensation does not fall under the laws and requirements of the FLSA.

Second, non-clergy employees are covered by both the minimum wage requirements and overtime laws.  Churches must ensure that any compensation packages abide by both.

This is where Fixed Salary for Flexible Hours (FSFH) comes in handy.

It is not prohibited to pay a salary to a clerical employees as long as it does not violate the minimum wage laws OR the FLSA overtime requirements during ANY period.  Fixed Salary for Flexible Hours allows churches the freedom to pay employees who work an average number of hours per pay period a fixed salary as long as they are not violating either law or requirement by keeping adequate time records.

To set this up, a church should:  Identify what employees are considered clergy by the FLSA and who are not.  For those who are not clergy:

  1. Identify the average number of hours within a pay period,

  2. Calculate their salary based on those hours and the desired pay rate,

  3. Keep a record of their hours per pay period:

  • Verifying that, for the hours worked, minimum wage laws are never violated. 

  • Verify if they are owed overtime for the hours worked. 

  • If the pay rate ever drops below minimum wage or overtime is due, the employee should receive the difference in minimum wage or overtime pay in their next paycheck.

If you are interested in learning more about how the FLSA affects your church and how you can utilize Fixed Salary for Flexible Hours in your ministry, contact Wisdom Over Wealth!