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Is it time for a wage cap in the Premier League?

Are salary caps and contract trades in football the way of the future?

By Cameron Wolfe

I read an article years ago which compared football transfers with transfers in North American sports ( NFL, NHL, baseball etc) and in which the question was posed: Would an alternative transfer approach work here in football?

The fundamental answer was no. In football players are bought and sold just like in the commodities in the markets. They become an asset to the club until they are sold on at either a profit or in some cases a loss.

Most clubs are hoping that they’ll profit from the sale or at least recoup some of the wages paid to that player during the length of their contract. Or, in the case of players who have been put  on extravagant wages, they’re glad to take a hit and have that players wages of their books. (Adebeyor is a perfect example)

In North America players are traded not bought, which means in fact that the contracts are exchanged with wages negotiated at the start of the contract.

Now there is a fundamental difference between a player being bought and traded.   In football money is paid to the club for the player.  He then belongs to that club for the duration of their contract.  If the club want him to leave or the player wants to move to another club, the next club again buys him.

Not so in the NFL.  Here a player has a contract with his individual team, but the terms of the contract are binding for any other team seeking his services. So if a player is traded to a new team, his contract goes with him.

For example, if he has a contract for 4 years at £8m per year then his current contract carries on being his contract at the new club.  No fee is paid to the team or the player.

But in football, the club of the current player sets a fee that they’d like for the player. The buying club then either meets the valuation or they negotiate until both sides are happy(ish) with the figure. The buying club then pays the club a fee for the player.

In football the argument is always that some of the lower league clubs could fold if they didn’t receive the money from transfers and that is why it is important that money from the sales of players still filters down. Some lower league clubs really do solely rely on that income to survive as they don’t get a big enough crowd through the door to pay the salary.

So buying and selling players looks like it will continue in football for a long time to come but what about salary caps?   Could they work in football?

Salary caps could work if all clubs agreed to only spend 50% of their revenue on wages (or less) and stick to that. The top clubs would all be basically paying the same wages for the top players. The players being courted by the clubs would then have the choice of which club they really wanted to join as opposed to which club were paying the most money.

In North America where I do think they have it right is with young players. They’re not offered multi million dollar contracts at nineteen but rather they’re offered entry contracts. Currently in the NHL an entry contract is $900,000 (something around £10,000 a week). The thinking is that it keeps the teenager grounded for the first few years in his professional career. It’s capped again between 21-23. It then moves on to a more lucrative contract as the player matures.

For the top players in the NHL if they have a $15m three year contract they would receive $15m over three years. They are not allowed to earn more than what their contract states:

For example, a player signs a three-year contract with the following annual salaries:

– Year One: $7 million
– Year Two: $5 million
– Year Three: $3 million

Where this is beneficial to the Clubs is when the player is coming to the end of his current contract or even the end of his playing career at the Club. They’re paying smaller wages to the player in the final year of the contract.

If he starts of his career performing at the level that the manager thought he would, then he’s earning his premium wage. Towards the end of his contract if he isn’t performing to his highest level or his performances are tailing of then at least the Club isn’t still paying top wages in the last year of the contract for the player.

I think that in football the way to make it fairer for all would be to set at maximum amount to be spent on player’s wages per year. The clubs could still attract whichever player they wanted but spending more wages on one player would leave less to spend on the rest of the team. We all know that most EPL teams need a large squad to get through the season. Spending the same amount of money on wages whilst still staying within the parameters of their wage structure (if they have any in place) can only benefit all the clubs in the long run.

I am not saying that this is the answer to the entire wage and transfer issues but I can see the current wages and transfer fees continuing to spiral upwards indefinitely unless something happens to change it.

And it is interesting to note that the Premier club chairmen have discussed the issue at regional meetings, and it is set to be top of the agenda at a meeting scheduled for September 7.

Currently, Manchester City are not convinced about the plans  particularly about the potential for hard-hitting sanctions but other top clubs, such as Chelsea and Manchester United, are behind these ideas.

Footballers’ salaries have increased by 1,508% since the Premier League started in 1992. Compared to a rise of just 186% among the general public.   Approximately. 75% of the club expenditure are wages alone compared to less than 50% 15 years ago

Man City’s last wage bill was 173% of turnover.

Queens Park Rangers’ current wage bill is 183% of turnover.

In Spain the two top teams have the highest paid players in the world.

  • Messi:              £27m
  • Ronaldo:          £24m

While we have:

  • Rooney:           £17m
  • Aguero:           £16m
  • Ya Ya Toure:    £15m
  • Torres:            £14m

Looking at the names and how much they earn per year, maybe it is time to look at wage caps!

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16 comments to Is it time for a wage cap in the Premier League?

  • WC

    Put a wage cap in the EPL and players will just go to other leagues for more money. American sports are easy because they’re just that – American – so it’s just one governing body that runs the rule over every franchise. Football is different and the FA is just one authority among dozens so until you get every single league in the world to do the same thing then it will not work. The FA might simply mention the idea but it would be an administrative nightmare for every single league to deploy this change.

    A wage cap would save football but from a logistics point of view it’s nearly impossible to coordinate.

  • SB

    WC is right, of course. I would love to see a wage cap but it would have to be enforced by FIFA upon the world (and let’s not put any more power in the hands of those corrupt thieves – my opinion only).

    To quote another interested party: “A wage cap would save football but from a logistics point of view it’s nearly impossible to coordinate.” Couldn’t have put it any better.

  • bob

    WC,
    Assuming (big assumption) that FIFA and UEFA would have the will and the power to enforce a cap – which I don’t believe, don’t these two cover all of the (at least top) competing leagues? Of course, a meaningful decision by FIFA/UEFA to enforce a salary cap would likely result in a “breakaway” Super League in the name of “free competition” and “how dare the bureaucrats deny quality football to our loyal fans,” etc. etc. What do you think?

  • Leon

    Why should there be a wage cap just because Arsenal cannot compete – that’s the reason why you published this post. Arsenal have no ambition, no desire to win anything or to attract the very best players. Their soul ambition is to make their cancerous board of directors as rich as possible. I don’t consider the signings of Podolski, Giroud and Cazorla as a sign of intent – the statement of intent was lost when Wenger sold RVP to United – he should have been sacked for that the bastard – unforgiveable

  • WC

    I believe everyone on the FIFA and UEFA board have to vote on any changes and it’s not in their best interest to have a salary cap. Agents would ban together to lobby against it as it cuts their commission immensely for transfers. There are far too many competing interest for this kind of idea to fly and this really only benefits the fans, not the governing bodies’ bottom line and they’re the ones that make the calls, not us.

  • Cameron Wolfe

    WC
    I don’t see how a salary cap would have an impact on the money earned by agents. I’m of the belief they get a percentage of the transfer fee. That’s why it’s always in the agents intrest to get as a high a tranfer fee as possible.
    I don’t think tranfers will change anytime soon as I do believe that the lower league clubs do profit and survive on the sales of the players they’ve nurtured from a young age.

    Bob.
    I know that Uefa/Fifa are going to have to get their act together if FFP is going to work and be enforced.
    It has to be in the interests of the EPL to have a limit on the amount of wages paid to one player or we will already have a breakaway league inside the EPL.
    It’ll consist of the few teams in the EPL that are prepared to pay any amount to get their man.
    The other teams without the bottomless pockets will be the teams in the lower half of the league fighting survival year after year.

  • goonerbegood

    The only reason for all these is cos we at arsenal fc can no longer compete or should i say , refuse to pay what players are worth these days instead we are looking at other alternatives in which we can compete.
    FFP rules i feel will never work, right from the moment it was stated ,this will not work as am still to be convinced .
    Arsenal fc is hiding behind FFP hoping it comes into effect, even if it does come into effect, we will still not be able to compete financially with others until we change a bit our philosophy.Mind you there is nothing wrong with the way we operate but if you ask me, i will say it is time we changed our policy a bit ,not an overhaul of our policy but an update.
    The times have changed, and the money train has changed with the times.

  • Gerry Lennon

    The other thing to consider is the non-wage payments via endorsements? This again favours the ‘high profile’ clubs with a large fan base, and often these can outstrip the club wages. Clubs with multi million backers could easily pay ludicrous amounts for endorsing whatever their other business interests are, and so it goes on.
    The Chelsea Man U ‘backing’ for the current scheme is probably just a case of pulling up the drawbridge to keep out other of the same ilk?
    There is no easy solution to the ever spiralling costs, and money coming into the game via TV and sponsorship. The only way to gain the lions share of that pot is to be among the top table teams seeking very few trophies, and some will just pay over the top to do it.

  • nicky

    I’m beginning to wonder whether, short of a world-wide financial meltdown, ANYTHING can be done to halt the spiralling wages being paid to the top tier of professional footballers.
    An agreed wage cap sounds fine until one realises that the “dog eat dog” attitude of clubs fighting for the top prizes, would mean that 100% agreement would be impossible.
    In the meantime and in a perfect world, ticket prices (which are also spiralling) could reasonably be lowered by a voluntary wage reduction by players in the top clubs.
    Golden goose and egg come to mind.

  • Stuart

    Goonerbegood,

    Why should we change our policy? It’s the clubs who have started spending freakish amounts that are the problem here. It is perfectly normal for a company to be expected to run its finances in a self sustaining way.

    The problem is actually rich owners and the fans who demand the high profile transfers to feed their hunger for gloating to their mates.

    With regard to a wage cap, I think it is in the best interests of FIFA and football as a whole. What happens when wages get so high that rich owners are fed up with bailing the clubs finances out? The clubs wont be able to pay the player for the remainder of the agreed contract and will go bankrupt – not good for the game really! Imagine if in five years time, Chelsea, Man City, Barca, Man Utd, PSG and the other sugar daddy / heavily indebted clubs were gone and FIFA had very few remaining flagship clubs.

    A wage cap of 50% turn over is sensible and should be implemented worldwide and if it means footballers have to earn less, then so be it.

  • Gooner S

    Thought provoking article. I am more on the side of clubs only paying out what they can afford and there being governance around that. My first reaction to a wage cap is that it is wrong, we should let (natural) market forces decide who gets paid what. In Europe I don’t think it would get pass European law – not that I’m any expert on that.

    Costs (not just wages) are escalating because there is money to be had – there is a food chain concept here. To limit a players salary you would also have to look at how the money is being managed elsewhere: TV & media, sponsorships, advertising etc etc otherwise that would be unfair. Where do you start and stop on this?

    Some of the points raised (entry cntracts) are interesting but all of football has got to do these things as one body and it has to be governed effectively otherwise players will follow the money! Which is why a lot of the players that play here are indeed plying their trade here and not in their respective homelands or other countries.

  • Mike

    As an american in a small market city (Nashville), the salary cap we have here allows our franchises to be competitive with the powerhouses. That said, having a limited amount to spend makes it even more crucial that the clubs are well-run, the scouting teams are able to identify under-the-radar talent, the coaches get the most out of players, and most importantly, management makes sure to look to the future when big contracts are given out (hence most big money deals are front-loaded as you pointed out.

    However, there are downfalls to the system. Take for example our NFL team, the titans. We made it to the super bowl in 1999 and three years later had to gut our roster to free up salary space and after years of mediocre performance and a coaching change, we are just now finally turning the corner and looking to return to winning ways. Also, like in football (soccer), player wages rising mean alot of teams overspend on players who dont live up to their expectations and negatively affect the team’s ability to bring new players in. Our NHL team, the predators, had an arsenal-esque summer. Our two best players, defensemen Ryan Suter and captain Shea Weber, were both due for new contracts and were considered the best pair in the league. Suter left us for a 14 year, $100 million contract in minnesota. Weber, who was a restricted free agent, had the ability to sign a pre-contract anywhere and the Predators had a week to match it or allow him to move on. Having lost Suter, Weber signed a $110 million offer sheet from philadelphia, and the Predators had no choice but to match the offer. The deal pays 60 million in the first three years. Even with revenue sharing and record attendance, this is going to seriously stretch us financially and i’m not sure you throw the bank at one player for the sake of the franchise, especially in such a physical sport like hockey.

    The problem is that all of these drawbacks is offset by the fact that we have an extensive college athletics system and these players come to the pros through a draft system in which the worst teams from the previous year pick first, so it disperses talent more easily and can make teams competitive again very quickly. No such system exists in the rest of the world. Also, MLS is an example of salary caps hurting teams- landon donovan and robbie keane and david beckham make more per year than the rest of the squad combined. Finally, the geographical reach of soccer compared to here would make implementation of a salary cap nearly impossible without full backing from fifa/the various confederations, the leagues, and the clubs. Also, would the number of cup games increase a players pay or would they be flat no matter the number of games (nfl and nhl players recieve extra compensation for playoff games)? A lot of planning would have to be done.

    Finally, baseball and the NBA have soft/not nearly as restrictive salary caps but still maintain relative parity within their leagues- although the yankees and lakers spend a ton of money on top stars, neither has won a trophy in the last few years.

    Its an interesting idea but there are so many unique features here in America that make it work here that may not translate to the rest of the world. I agree with the insanity that clubs like citeh, PSG, chelsea, etc bring to the table, something bad is bound to happen eventually. The TV rights and revenue sharing in spain is a joke, at least the FA has somewhat adressed that. Something must

  • Shard

    Good article, and I find it interesting that the PL bosses are actually talking about it. A few of them have mentioned that it is essential to not let the money from the new tv deal go straight out of football into players’ and agents’ pockets.

    Wage caps can be enforced in different ways. You can have hard caps, where no club is allowed to go over a limit. You can have soft caps where they can exceed the limits if they pay a ‘luxury tax’ to the rest of the league. You can have wage caps on the basis of turnover of each club individually.

    It’s going to be tough to enforce wage caps though. Some clubs will always look to get around the rules by paying players’ agents, or families, in cash or kind etc. It would be really tough to check this without the non football authorities looking into it.

    Also, as others have pointed out it would be a disadvantage for the English league compared to Spain. We already have disadvantages in terms of the shared tv deals, the 50% tax rate, difficulty in acquiring work permits, 25 man squad rules etc. To add to this with lower pay, English clubs will be at a severe disadvantage.

    Also, I think though you dismiss the concept of trading, it might be a good thing. Instead of trading, the club could still buy the players’ contract, but maybe there should be rules that they can only offer the player say a 10% increase (a sort of moving expense) on the current deal until it runs out. That way you’d really find out if players move for money or for trophies, and you’d go some way to redress the sheer imbalance brought on by the Bosman ruling.

  • Cameron Wolfe

    goonerbegood

    It’s not the case of me being an arsenal fan and it’s sour grapes that Man.U/City/Chelsea pay huge fees and more importantly massive wages but in the end common sense will haveto prevail or even those top teams will fail.
    You just have to look at Spain. Barca and Madrid are shored up by the banks who are in fact shored up by European bailouts. It wasn’t all that long ago that Liverpool was basically owned by the bank and could have been declrared bankrupt if the bank had called in the loans.
    Sahin has seemingly just been signed on loan there for a reported 5m plus 2.2m wages.
    7.5m or 150,000 per week for one year and if they win nothing?
    He leaves back to his original club or sold on. i think it’s in Madrid’s intrest just to have him playing at Liverpool’s expense.
    Last year we signed Jenkinson for @1m and I think he’s doing a decent job covering for Bacary.
    I think if Arsene can just get the blend right between young and experienced players then as club we will be competeing on all fronts without breaking the bank and sending our wage costs out of control.
    You sign a player on 230,000 per week you raise the bar for every other player at the club.
    Roy keane when at Utd. seemingly had a clause in his contract that stated he had to be on par with the top earning player.
    Imagine the wage bill if you had four or five Rooney’s on the same wage structure?
    From a club that still spends 50m a year just servicing their debt.

  • DocBrody

    As most have mentioned, the issue is that EPL player have a choice of leagues. Like it or not, Financial Fair Play is probably the only hope for reform in football. Unfortunately, it’s likely that clubs will find loopholes and UEFA will be slow to react to plug those holes (if they do at all).

  • Richard

    The fact that a third of the EPL is now American owned almost guarantees that we will move in a more ‘American’ direction. Don’t forget that Arsenal are now run at CEO level by the man that organised all footballers contracts in the USA. Arsenal appear more and more determined to take wage inflation out o the equation – it’s part of the FFP deal – and, given that it remains the biggest single burden on an industry that is edging ever closer to bankruptcy it is inevitable that wages will come under greater and greater scrutiny.