The Operation of the Parliamentary Standards Act 2009

Written evidence from the Archbishops’ Council

Contents

1 The remuneration package

2 Stipend against Salary

Definition of Stipend

Salary

Right to stipend

Freehold clergy

Clergy on common tenure

3 Stipend or salary

4 Taxation

5 Employment status of clergy

Ecclesiastical office

 

Chaplains

Diocesan Clergy Posts

6 Historical Background to clergy stipends and housing

Stipend

Provided housing


1 The remuneration package

The normal remuneration package for parochial clergy in the Church of England includes stipend and the provision of housing, with the payment on behalf of clergy of council tax, water charges, maintenance, external decorations and insurance. Section 6 below gives the historical background. Most parochial clergy nowadays receive most (if not all) of the stipend from the diocesan stipends fund.

Stipend The Archbishops’ Council, as Central Stipends Authority, sets a national minimum stipend each year and also makes recommendations for stipend levels more generally, though actual stipend levels over and above the minimum are set by the relevant funding body (each diocese in relation to parish clergy and archdeacons, cathedral chapters in respect of some cathedral clergy and the Church Commissioners in relation to archbishops, bishops and cathedral clergy funded by them). The minimum stipend for 2011/12 is £21,370. Average stipends paid to incumbents are around £23,100. Diocesan bishops receive around £40,000.

Provided housing Stipends are set on the basis that accommodation is provided free of rent, water charges, repairs and insurance and, in England, the Council tax. Dioceses have the power to defray these expenses on behalf of clergy [1] . In some dioceses the payment of some or all of these expenses has been delegated to parishes.

The Central Stipends Authority provides a figure for the estimated value of provided housing. The intention is to provide a general indication of the amount of additional gross income which clergy of incumbent status would require in order to provide basic domestic accommodation (excluding office space) for themselves and their families. In 2011 the estimated value of provided housing is on average calculated to be £9,860 (including an element for ‘grossing up’ for tax and national insurance contributions).

Clergy are also able to have part of the stipend paid free of tax as reimbursement of expenditure on certain costs in respect of the provided house. See section 4 Taxation, below, for the tax treatment of payments defrayed on behalf of clergy, and the tax free reimbursement of costs met by clergy.

From time to time we are asked to provide an estimate of what the value of the remuneration package is to a typical member of the clergy (an incumbent). On the basis that the remuneration package is compared to someone in a comparable public sector pension scheme the calculation comes to a value of about £36,600 for 2011. This includes stipend £23,100, and benefit of provided housing £9,860. The cost to the Church of the package is estimated to be £45,560 or £64,800 if the estimated loss of income on the capital tied up in the typical parsonage house is taken into account.

2 Stipend against Salary

Definition of Stipend

One view is that stipend should be seen as a maintenance allowance which allows clergy to carry out their duties.

In 1943 the House of Bishops defined stipend as

‘The stipends of the clergy have always, we imagine, been rightly regarded not as pay in the sense in which that word is understood in the world of industry today, not as reward for services rendered…but rather as a maintenance allowance to enable the priest to live without undue financial worry, to do his work effectively in the sphere to which he is called and, if married, to maintain his wife and bring up his family in accordance with a standard which might be described as neither of poverty or riches…’

It is doubtful whether the stipends of the clergy of the Church of England have ever been paid in accordance with this definition and so the Clergy Stipends Review Group in its 2001 report ‘generosity and sacrifice’ GS1408, suggested an updated definition (though this was not formally adopted):

‘The stipend is part of the remuneration package which is paid for the exercise of office. It reflects the level of responsibility held. This package acknowledges the dual demands in Scripture of generosity and sacrifice on both those who receive the stipend and those who raise the necessary funds.’

Right to stipend

Freehold clergy

In England parochial clergy with the freehold have no statutory right to a stipend. [2] Furthermore, they are not employed, and so do not enjoy any contractual rights to remuneration.

A stipend is provided for clergy as office holders. The amount of a stipend is fixed by the diocese, taking into account national guidelines from the Central Stipends Authority (which is the Archbishops’ Council). A diocesan bishop under s.5 (2) Diocesan Stipends Funds Measure 1953 can direct, with the concurrence of the Diocesan Board of Finance, how diocesan stipends fund monies are to be applied.

Clergy on common tenure

From 31 January 2011, common tenure applies to all office holders in England who do not have the freehold, and will apply to all office-holders appointed in future to what would have been freehold appointments, if common tenure had not been introduced. Office-holders who are currently in freehold posts can opt to go on to common tenure.

Office-holders on common tenure now have a statutory right to stipend at a minimum level (currently £21,370) (Ecclesiastical Offices (Terms of Service) Regulations 2009, regulation 11 – see below).

Entitlement to stipend of office holders

11.-(1) Subject to paragraph (3), an office holder who is occupying a full-time stipendiary post which is stated to be such in his or her terms of appointment shall be entitled to receive an annual stipend of an amount-

(a) which is not less than the National Minimum Stipend, or

(b) which, together with any income received by the office holder from other sources which is related to or derived from the duties of the office, is not less than the National Minimum Stipend.

(2) In sub- paragraph (1) above "National Minimum Stipend" means the amount specified from time to time by the Archbishops’ Council, in exercise of its functions as the Central Stipends Authority, as the National Minimum Stipend, and the circumstances in which income is treated, for the purposes of paragraph (1) (b) above, as to be taken into account for the purpose of calculating an office holder’s entitlement, shall be specified from time to time by the Council in the exercise of those functions.

(3) An office holder who is occupying a part-time post shall be entitled to such stipend as may be specified in the statement of particulars of office given under regulation 3 above.

(4) Paragraphs (1) and (3) above do not apply to an office holder who is serving a sentence of imprisonment following a conviction for a criminal offence.

(5) Any directions given by a diocesan bishop under section 5(2) of the Diocesan Stipends Funds Measure 1953(a) with respect to providing or augmenting the stipends of the office holders mentioned in that section shall be consistent with the provisions of this regulation.’

3 Stipend or salary

If employed by a secular organisation (for example a NHS trust, or the prison service) salary is paid by that secular organisation. Many clergy employed in administrative roles paid by the Church (for example those who work at Church House, Westminster) are paid a salary in the same way as their colleagues who are not ordained. In the case of clergy working at Church House, Westminster they receive no other allowances or help with housing, so are treated in the same way as lay staff. It is possible for a diocese to offer an employee a remuneration package in the form of a payment at the same level as stipend, and with provided housing or a housing allowance, in the same way as stipend is normally paid, if this was appropriate.

Whether clergy received stipend or salary would be determined by the nature of the post and the policy of the body responsible for providing pay.

See section 5 Employment status of clergy.

4 Taxation

Although the majority of clergy are not employees, they are treated for tax purposes as if they were. However, there are two areas of particular note in the taxation of clergy.

First, HMRC accepts that a tax charge on the value of the benefit of the provided house does not arise for parochial clergy, because they are required to live in provided accommodation for the better performance of their duties, and it is customary for accommodation to be provided for them [3] . The tax position applies not only in respect of the basic provision of the house but also in respect of some housing costs, for example Council Tax and water charges [4] which are paid by the diocese (or parish). If these costs were paid by the clergy occupiers, they would have to come from taxed income, which would be more expensive than the current situation.

Second, for clergy undertaking full-time duties, a proportion of the stipend may be paid free of tax and national insurance in respect of reimbursement of the cost of heating, lighting and cleaning of the official house [5] . This benefit, however, is restricted by the operation of a claw back mechanism known as ‘service benefit’.

The heating, lighting and cleaning allowance is only of value to those in an official house and undertaking full-time duties, although HMRC may give a study allowance in other circumstances.

5 Employment status of clergy

Most Church of England clergy are not employees. Those who are include chaplains- whether of hospital trusts, chaplains in the prison service, school, college and university chaplains, or any other organisations – and those in administrative roles in dioceses or in the national institutions.

Ecclesiastical office

 

The courts have consistently held that Church of England clergy who hold freehold appointments and those who are licensed by the bishop to the exercise of ministry in an ecclesiastical parish or district are office holders. Since January this year office holders who do not hold a freehold appointment have been on common tenure.

It does not follow that the categories of office-holder and employee are mutually exclusive. A cleric with divided duties may be an employee as to part of the work but an ecclesiastical office holder as well: for example a residentiary canon in a cathedral may also serve as – say – Diocesan Director of Education and hold a contract of employment in relation to that element of his or her work.

Chaplains

The position of chaplain is not recognised in law as an ecclesiastical office. Although they are engaged in ministry their duties and the parameters of their role are not defined in statute or the canons, unlike parochial ministry, but are governed by the requirements of the person or body that they serve, or the person or body that appointed them, if different. Guidance is that they should be given a written contract of employment.

Diocesan Posts

A diocesan post is likely to be a full or part-time role which is not attached to any other role and which by its nature, fulfils the qualifications for employed or self-employed status regardless of whether being ordained is a pre-requisite of appointment. If the post holder has to be ordained, an Occupational Requirement will be attached to the post. It may attract either a straightforward salary or a remuneration package equivalent to stipend plus housing (which may be seen as a taxable benefit by the Inland Revenue) or a housing allowance, and a clergy pension or an administrator’s pension, dependent upon the diocese’s policy.

Employed clergy who hold the bishop’s licence

Employed clergy in chaplaincy or diocesan roles may hold the bishop’s licence to enable them to preach and officiate in connection with their duties. The licence technically brings these clergy within the scope of common tenure, but s2(3) of the Ecclesiastical Offices (Terms of Service) Regulations 2009 disapplies the Regulations to such clergy, whose terms and conditions are instead governed by their contracts of employment. These clergy do not, therefore, have the entitlement to stipend described in section 2 above.

6 Historical Background to clergy stipends and housing

Stipend

Historically clergy stipends were made up of a number of sources,

1. Endowment – including private endowments providing for the retention of a priest, perhaps for a family or an estate.

2. Glebe – property in addition to the parsonage house and grounds which was owned by the incumbent by right of his office. An incumbent was entitled to retain the glebe for his own use, or let it, and the income from letting formed part of the stipend.

In England, the Endowment and Glebe Measure 1976 swept up the amounts of income received from endowment income and glebe income into a ‘Guaranteed Annuity’ of a maximum of £1,000 per year (‘Endowment’ also included permanent augmentation grants – ‘Permanent Annuities’ – made by the Ecclesiastical Commissioners to individual benefices over the years, and any trusts which were covered by the provisions of the 1976 Measure). By the Stipends (Cessation of Special Payments) Measure 2005 Guaranteed Annuities were abolished unless the incumbent in post wished it to continue for such time as he remained in post. The 2005 Measure did not apply where incumbents who had been appointed before the 1976 Measure came into effect, were still in post.

3. Tithe – an annual payment of an agreed proportion (originally one tenth) of the yearly produce of the land which was payable by parishioners to the parish church, to support it and its clergyman. From early times money payments began to be substituted for payments in kind.

Income from tithes was largely transferred to Queen Anne’s Bounty (which merged with the Ecclesiastical Commissioners in 1948 to form the Church Commissioners) by the Tithe Act 1925 and tithes were largely abolished by the Tithe Act 1936.

4. Parochial Fees – From early times voluntary offerings were made on the occasion of spiritual ministrations either by those who received them or by others on their behalf. By virtue of the development of local customs, fees began to be recognised as payable to parochial clergy in relation to the performance of occasional offices (weddings, funerals etc).

In 1938 power was conferred on the Ecclesiastical Commissioners to establish a table of fees for any parish. This was replaced by the power (now exercisable by the Archbishops’ Council, subject to the approval of the General Synod) contained in the Ecclesiastical Fees Measure 1986 which continues to provide for a nationally-applicable table of parochial fees.

While, historically, fee levels were one of the many reasons why clergy incomes varied considerably from parish to parish this is no longer the case. Each diocese now provides a stipend for each member of the clergy irrespective of the fees earned in the parish. About 91% of clergy choose to assign their fees to the diocese and the rest who choose to keep them have to declare the amount to the diocese, which then reduces the stipend by a corresponding amount. Under legislation passed earlier this year, which has not yet been brought into effect, fees that are currently legally payable to the incumbent will become payable to the diocese [1] .

5. Offerings – Easter offering (Whitsun offering in some parts of the country) was a payment to which an incumbent was entitled as an emolument of his freehold office. Again this practice has ceased. One or two parishes still make direct payments to clergy for stipend, and more towards heating, lighting, cleaning and garden upkeep expenses at the parsonage house. These count as stipend and are subject to tax.

6. Other income – it remains the case that some incumbents receive chaplaincy fees or other income, e.g. for teaching, arising from functions which are regarded as part of the duties of their office.

7. Local Trusts – in the past some clergy received income from local trusts and some still do so.

While these sources of income have been important in the past, the position now is that most parochial clergy receive most of the stipend (if not all) from the diocesan stipends fund.

Provided Housing

The origin of the tied house system lies in the middle ages when clergy were provided with land, on which to live, and farmed or rented out to provide income. To secure it incumbents were given freehold rights in the property for the tenure of their office, (in the form of a ‘corporation sole’) and this arrangement continues to this day. Full-time clergy in receipt of a stipend who are on common tenure have a statutory right to provided housing. In the case of an incumbent this is in the form of a ‘parsonage house’, which, with the church and churchyard, constitutes the property of the benefice. Otherwise it is housing provided by arrangements organised by the Diocesan Parsonages Board.


Annex

Note on Employment

 

It is impossible to draw up a complete list of factors that should be weighed in the balance when determining employment, as every case will depend very much upon its own facts.

There is no comprehensive statutory definition of ‘employee’ mainly because of the sheer diversity of working arrangements so the courts have had to develop a number of tests to help determine employment status.

However, the four irreducible minima for the existence of a contract of service, which defines employment, [1] are:

o A legally binding commitment (a legal contract, not necessarily in writing)

o Mutuality of obligation (an obligation on the employer to provide work and a corresponding obligation on the employee to accept and perform the work offered)

o Requirement for a personal service (where any power of delegation is only occasional or limited) i.e. where the service is provided personally by the individual and not delegated or outsourced to others

o Sufficient element of control by the employer of the employee (whether an individual is under a duty to obey orders, has control over his or her hours of work, is supervised in his/her mode of working and provides his/her own equipment)

If any of these components are missing, then the role is not employment but not necessarily an office (it may be, for instance, self employment). On the other hand, if these components are present the entirety of the picture presented should be looked at to determine the matter in the round.

This status can only be finally determined by the courts weighing these factors and it is important to note that the status agreed between the employer and the employee or the office holder and the relevant overseeing authority, is not relevant. This means that it may be agreed that the status is x but the courts could determine it to be otherwise.

October 2011


[1] Under section 16 of the Repair of Benefice Buildings Measure 1972, as amended.

[2] except in the few cases when the 2005 Stipends (Cessation of Special Payments) Measure did not apply, where incumbents were still in post who had been appointed before the 1976 Endowment and Glebe Measure came into effect.

[3] Section 99(2) of the Income Tax (Earnings and Pensions) Act 2003.

[4] Section 290(1) of the Income Tax (Earnings and Pensions) Act 2003.

[5] Section 290(2) of the Income Tax (Earnings and Pensions) Act 2003.

[1] Except for incumbents who currently receive fees direct who have given notice that they wish to continue to receive them while they remain in the current post.

[1] IDS handbook Contracts of Employment 2001.

Prepared 19th October 2011