The answer is “both.” Most ministers are considered employees in every respect except for purposes of paying self-employment tax (Medicare and Social Security). This means that they are eligible for virtually all employee benefits that are given favorable tax treatment in the IRC. Many of these benefits are unavailable to the typical self-employed individual.
Ministers who have not opted out of the Medicare and social security system, however, are not permitted to have FICA withheld and matched by the church. The minister must pay the entire 15.3 percent self-employment tax. Many churches provide additional funds to assist their ministers in the payment this tax, but this additional compensation, while very helpful, is itself subject to both income and self-employment tax.
Itinerate evangelists are a common example of ministers who do not have employee status; they are entirely self-employed.