Payroll and HR Trends for Religious Organizations in 2025
In 2025, religious organizations—particularly churches—face a unique set of human resources and payroll challenges that differ from the broader nonprofit sector or commercial businesses. With limited budgets, volunteer-led operations, and complex rules around tax-exempt status, churches require simple, cost-effective, and compliant solutions to manage their people.
At PeopleWorX, we understand that churches are not looking for the latest AI-based workforce optimization tools. You need tools that are reliable, straightforward, and built for ministry, not enterprise. This article outlines the practical payroll and HR trends most relevant to churches in 2025 and how your organization can stay compliant, organized, and focused on your mission.
Content
- Simplication of Payroll for Dual-Status Employees
- Increased Interest in Outsourcing Payroll and HR Functions
- Rising Need for Volunteer and part-Time Staff Management
- Affordable HR Support with a Human touch
- Increased Scrunity Around Tax-Exempt Status and Recordkeeping
- State-Level Labor Law Changes Are Catching Churches Off Guard
- Churches Are Seeking More Than Soft Software – they Need Partnership
- Final Thoughts
Simplification of Payroll for Dual-Status Employees
One of the most confusing issues for churches is the payroll treatment of clergy. Ministers often occupy a unique dual status: they are considered employees for federal income tax purposes but self-employed for Social Security and Medicare. In 2025, the IRS continues to scrutinize proper treatment of ministers, especially in regard to:
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Exclusion of housing allowance from taxable income
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Handling of SECA (Self-Employment Contributions Act) taxes
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Opt-out procedures for Social Security
Churches that fail to handle these correctly may expose themselves to back taxes, penalties, or even reputational damage. In response, more organizations are turning to payroll providers like PeopleWorX that understand the unique nuances of clergy payroll and offer built-in checks for housing allowances and SECA compliance.
Increased Interest in Outsourcing Payroll and HR Functions
Many churches continue to rely on a bookkeeper or even a church volunteer to manage payroll, benefits, and tax reporting. However, as labor laws grow more complex and volunteers become harder to retain, we’ve seen a trend toward outsourcing HR and payroll functions—especially among churches with part-time staff or multiple ministries under one roof.
The benefits of outsourcing include:
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Timely and accurate tax filings, including 941s and W-2s
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Easy tracking of employee versus contractor status
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Tools for managing time-off and PTO accruals
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Direct access to support that understands religious organization needs
Outsourcing offers peace of mind while reducing the administrative burden on pastors and office staff who’d rather focus on discipleship than deduction codes.
Rising Need for Volunteer and Part-Time Staff Management
Churches rely heavily on unpaid volunteers and part-time help, from youth group leaders to music ministry coordinators. Managing this flexible workforce requires clear documentation and communication—even if you’re not offering benefits or full pay.
In 2025, churches are increasingly:
Maintaining basic records for volunteers (to meet insurance or background check requirements)
Using scheduling tools to coordinate Sunday volunteers, especially across multiple services.
Keeping clean documentation of hours worked for part-time employees to avoid wage violations
Clarifying the line between volunteers and employees, as state labor boards continue to crack down on miscalculation
PeopleWorX offers tools that help churches manage both paid and unpaid workers in one system, streamlining scheduling, records, and payroll where appropriate.
Affordable HR Support with a Human Touch
Most churches don’t need a full-time HR director—but they do occasionally need advice. Whether it’s a policy update, a workplace complaint, or managing a termination, access to expert HR guidance is becoming increasingly important.
The trend in 2025 is toward “HR-on-call” models that provide:
- Templates for employee handbooks
- Guidance on hiring and firing practices that respect both legal requirements and religious freedom
- Best practices for worker classification and timekeeping
- Help navigating compliance without requiring large technology investments
PeopleWorX clients benefit from this kind of consulting relationship, gaining a trusted partner who knows ministry operations and delivers practical, affordable guidance.
Increased Scrutiny Around Tax-Exempt Status and Recordkeeping
While most churches maintain their 501(c)(3) status, IRS enforcement and documentation requirements have increased. In 2025, we expect even more emphasis on:
- Proper classification of exempt employees
- Annual IRS filings (such as Form 990 for affiliated entities)
- Maintenance of bylaws, minutes, and employee records
- Compliance with local wage laws, which may still apply despite federal exemptions
For churches that operate affiliated ministries – daycares, food banks, or counseling centers – additional layers of payroll and HR compliance may be required. Keeping accurate records and following consistent employment practices helps reduce the risk of audits and protects your exempt status.
State-Level Labor Law Changes Are Catching Churches Off Guard
Though churches often enjoy exemptions under federal employment law, this is not always the case at the state level. In 2025, more states are requiring:
- Paid sick leave tracking—even for small nonprofits
- Minimum wage compliance for part-time and seasonal help
- Mandatory anti-harassment training (California and New York, for example)
- Electronic wage statements or timekeeping systems
These changes are catching many faith-based organizations off guard, especially those with no dedicated HR staff. A payroll partner with multi-state compliance expertise can help churches avoid missteps as state laws evolve.
Churches Are Seeking More Than Just Software—they Need Partnership
Unlike tech startups or fast-growth retail chains, churches are not trying to automate every process. Their goal is to build a faithful, compliant, and compassionate ministry. In 2025, churches are looking for HR and payroll providers who understand their mission and offer:
- Simple, user-friendly platforms with minimal training required
- Direct access to real people when help is needed
- A knowledge of ministry-specific rules and employment exceptions
- Affordable pricing with no hidden fees
At PeopleWorX, we see ourselves as more than a software vendor—we’re a strategic partner committed to helping churches focus on people, not paperwork.
A Few Final Thoughts
Churches are not like other nonprofits. Their blend of spiritual mission, volunteer dependence, and complex payroll scenarios makes HR and workforce management both essential and challenging. Fortunately, 2025 is bringing with it a growing awareness that getting these processes right matters—not only for compliance, but also for credibility, stewardship, and community trust.
Whether you’re managing clergy payroll, tracking part-time hours, or updating your policies, know that you don’t have to go it alone. PeopleWorX offers straightforward HR and payroll solutions built for ministries like yours.
If you’re ready to learn more, explore our HR and Payroll Solutions for Nonprofits and Churches or reach out for a no-pressure conversation with one of our specialists.
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