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Is your pastor an employee, office-holder or both?

Churches need to consider this question because there are significant practical differences between employees and office-holders and a number of recent cases may mean that pastors who thought they were only office-holders may actually be employees.

The practical differences

The table below sets out the main differences between office-holders and employees.

National Minimum Wage Applies to employees Does not apply
Working Time Regulations Apply to employees Do not apply
Pension Obligations Employee will have pension rights when Pensions Act 2011 is phased in No pension rights
Right to claim unfair dismissal Yes No
Right to bring a discrimination claim Yes Not usually
Income Tax and National Insurance PAYE applies PAYE applies
Documentation of relationship Contract No contract
  Employee Office-holder only

A full list of the differences between office-holders without an employment contract and employees is available here.

Change in the case law

In the past the courts said there was an assumption that pastors would be office-holders only, unless they had been given employment contracts. However, a number of recent cases indicate that in many Independent churches, pastors who are paid for the work that they do may well be regarded as employees unless the church is able to show that it had no intention to enter into a contract with the pastor and can give a compelling reason why the pastor should not be an employee. If your church and your pastor both believe that the pastor should be an office-holder only, you need to ensure that this is clearly set out in the church’s governing documents for this to be respected by the courts.

Readers may be aware of the case of The President of the Methodist Conference v Preston. This case went all the way to the highest court in the UK, the Supreme Court. The Supreme Court delivered its judgment on 15 May 2013 and held that Ms Preston, a Methodist minister, was not an employee. In delivering this judgment, the Supreme Court overturned the earlier decisions of the Court of Appeal and the Employment Appeal Tribunal regarding the same dispute. However, this decision of the Supreme Court should not be seen as restoring the presumption that pastors will be office-holders only. This decision actually highlights the importance of ensuring that a church’s governing documents reflect the doctrines of the church: the Supreme Court reached its decision that Ms Preston was not an employee through detailed consideration of the Methodist Church’s governing document

Office-holder vs. Employee – the difference in the relationship

The fundamental relationship between an employer and an employee is a master/servant relationship. The employee is in the service of the employer to whom he or she is accountable and the employee is required to follow the reasonable instructions of the employer. In practice, many employment relationships may not look like this. For example, in a small family company where there is only one employee who runs the company but a number of directors, the employee may be the person who is practically in charge. However, in theory, the company acting through its directors is the master and the employee is the servant. In an employer-employee relationship, the employee’s duties are determined by the employer and the employee must follow all reasonable instructions of the employer. Another key feature of an employment relationship is that the terms of the relationship arise from an agreement (explicit or implicit) entered into between the employer and the employee, often involving negotiation regarding the rights and duties of each party.

An office-holder relationship is different. The tasks that an office-holder is required to perform are defined not by the reasonable instructions of an employer but rather by the office itself, and the rights and duties attached to the office do not arise from negotiation between the office-holder and the organisation that the office-holder serves; they arise from the rules/constitution of the organisation. To quote Lord Hope in the Preston case, “Broadly speaking… an office is a position… filled by successive incumbents, whose duties were defined not by agreement but by law or by the rules of the institution.” For example, the duties of a company director are defined by the Companies Act 2006, case law, and the constitution of the relevant company. A person who becomes a director of a company does not automatically become an employee of the company but rather becomes the holder of an office within that company. The company may remove a director if it does not like the way that the director is fulfilling the duties of the office, but there is not normally a master/servant relationship and a director is not required to follow the reasonable instructions of the company in carrying out his or her duties.

When churches understand the difference between an office-holder and an employee, some churches are happy for the church and the pastor to be in an employer/employee relationship. In fact they may see this relationship as an example for how all Christian employers and employees should behave in a work situation. However, other churches are emphatic that the relationship between the church and the pastor is not one of employer and employee, because it is not the role of the pastor simply to follow the instructions of the church; rather the pastor holds an office within the church with responsibility for giving spiritual direction to the church and, in most cases, also providing oversight of the practical affairs of the church.

Independent evangelical churches will form different views on this point according to their ecclesiology and their views on the extent to which the church’s legal structure should reflect the church’s theological beliefs. FIEC allows member churches to form their own views on this issue.

Office-Holder-Employees

The comparison table above distinguishes between employees and office-holders. However, it is possible for a person to be both an office-holder and an employee. For example, a director of a company may also be employed by the company as the chief executive. In relation to churches, the recent court cases indicate that pastors are likely to be both office-holders and employees. Previously, the common view was that pastors were office-holders only.

Pastors of Independent Churches

Most independent churches operate under a legal structure that is known as an unincorporated association. An unincorporated association is a group of people who are connected to each other by their promises to abide by the rules of the association which may be referred to as the association’s constitution, rules or governing documents.

Unlike a limited company, the offices within an unincorporated association are defined almost entirely by the unincorporated association’s constitution/governing documents rather than by Acts of Parliament. (One exception to this is that where an unincorporated association is also a charity, the office of charity trustee is something which is defined by statute).

It is possible for a church’s governing documents to set out that pastors will be office-holders only. However, if your church’s governing documents do not do this then it is very likely, due to recent developments to the case law, that any paid pastor will be regarded as an employee rather than, or as well as, an office-holder. Even if your governing documents do set out that your pastor(s) should not be employees, there is still a real possibility that the courts may decide that they are employees in the event of a dispute.

Therefore, if your church does have theological reasons for insisting that its pastors are office-holders only and not employees you should ensure that your governing documents reflect this. FIEC Practical Services has considerable expertise in this area. We can help your church to amend its governing documents to deal with this issue including providing advice on how to approach the Charity Commission to obtain their agreement, which will almost certainly be required.

We also have model documents that have been prepared in conjunction with Anthony Collins Solicitors LLP that churches can use to document an employment relationship or an office-holder relationship.

The employment pack is available for £150 plus VAT. In addition to an employment contract, it contains model policies that employers should have in place and explanatory notes. Click here for a full list of the contents.

The office-holder pack is available for £75 plus VAT and contains an appointment letter, a memorandum of understanding and a pastor’s declaration.

Please contact our office for more information.

Footnotes

First published on 30/11/12 and updated on 20/05/13

This article reflects FIEC Ltd’s understanding on the date above. It is designed for the purpose of knowledge sharing and does not constitute legal advice.

FIEC Practical Services is the trading name of The Fellowship of Independent Evangelical Churches Limited (FIEC Ltd.). FIEC Ltd. is a Registered Charity in England and Wales No. 251395, a Company incorporated in England No. 225717, and a Charity Registered in Scotland SC039913.

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