What is a salary cap?
A salary cap in the sporting context sets the maximum amount a sports star can be paid. Salary caps ensure the financial viability of sporting clubs and is intended to guarantee fairness in the sport.
Salary caps are set by the governing body of the relevant sport and requires all teams to sign up to the regulations. Once teams have signed up, they must pay their players no more than the cap. Teams must provide their financial figures to the governing body in the interests of transparency.
What sports currently operate a salary cap?
In the UK, salary caps are imposed in Rugby Union and the Rugby League. It is also common in US in sports such as the NFL. However, football in the UK (and the rest of Europe) is not yet subject to a ‘statutory’ salary cap. That said, there are informal salary caps under the English Football League’s Financial Fair Play rules introduced in 2013. These rules limit spending on wages to a portion of each club’s turnover.
Why is the fitness of clubs relevant?
If clubs are permitted only to pay its players a maximum amount of money in wages, their maximum expenditure will be limited, reducing the losses that they can potentially incur. One of the problems in English football is that when wealthy businessmen own football clubs, they pay huge amounts of transfer fees to other clubs to secure the services of a player – and use vast amounts of money in wages as a bargaining tool to tempt those players to sign for their club over other clubs.
As many of the bigger clubs employ high profile stars, the wage bills are astronomical, making it difficult to recoup this back through the money the clubs make – leading to persistent losses. Football players’ excessive salaries were, for example, at the root of Portsmouth City’s football clubs’ financial a few years ago
How is fairness relevant?
A further argument in favour of salary caps is that it will increase the fairness of the competition. Not all clubs have huge sums of money to tempt players to play for them, so they cannot compete in the transfer market. Reducing the ability of the big clubs to tempt these players with huge salaries enables more clubs to bid for players, making the market more competitive.
Would a salary cap work in English football?
A formal salary cap may work in theory to ensure the fairness of competition and to reduce the possibility of football clubs going under. However, there are a number of reasons why this may not, in practice, work in English football including:
- The resulting discrepancy between English football and the rest of Europe
- The structure of football is already set
- Problem of policing the system
English football and the rest of Europe
If English football teams were subject to a salary cap, but other European football is not, the big stars (English included) would choose to ply their trade in the other leagues in Europe where they can still play top-flight football, and earn more money than in England. This would clearly be to the detriment of the English league. The English clubs would also become less competitive in European competitions, such as the UEFA Champions League.
The structure of football is already set
Football in England has been operating in the same way for years. The system may have changed slightly since the introduction of the FA Premier League, and the introduction of Sky Sports, but the basic structure remains the same. The FA Premier League has been operating for many years now, and change would be extremely difficult. If salary caps were introduced in one league it would have to have a knock-on effect across all leagues in Europe and, arguably, the world. Such a form of new regulation is something which FIFA (the World Governing Body of football) would be reluctant to do.
Policing the system
There are so many professional footballers in the UK that it would be extremely difficult to police the system. All clubs operating in the FA Premier League have large squads, not to mention the lower leagues. Players as young as 15 are playing first team football; and many older players are playing for longer – meaning a huge number of players. Policing the salaries of all of these players, and checking for rule breaches, would take significant time and resources.
Informal salary caps
The Football Premiership does have an informal version of salary caps (though they are effectively restraints on spending) under the FFP, but the impact on the huge payments to top players is minimal. In addition, Liverpool is one of a few clubs to introduce a salary cap of £40,000-a-year for under-17 players in their first season as a professional.
There have been renewed calls for salary caps in football, but whether that will happen in practice remains unknown.