What is meant by a salary cap in Sport and would this ever be used in English football?

Economic Downturn

Ever since the beginning of the economic downturn many industries have come under the financial microscope with the sporting industry of football proving no exception. With many clubs going into administration – even some in the Premier League – the amount of money being spent and consequently lost is an issue which is fast becoming big news.

There are many proposed schemes being discussed such as the UEFA proposals for financial fitness and one which always seems to recur, in fact was last mentioned in 2008 as a possible solution, is that of a salary cap.

Salary Cap

What is a salary cap?

A salary cap sets the maximum amount that a sports star plying his trade in a particular sport can be paid. This limit is set by the governing body of the sport requiring all teams to sign up to the regulations. Once teams have signed up they will only be able to pay their players a specific maximum amount. Consequently teams will have to provide their financial figures to the governing body to rule out any possible wrongdoing.

Do any sports currently operate a salary cap?

The use of a salary cap can be seen in England in both forms of Rugby – Union and League – and is a key component of all sports in America and also Australia.

What is the idea behind the salary cap?

The main reasons behind fixing a salary cap on a particular sport are as follows:

  • To ensure the financial fitness of the entities taking part in that sport

  • To guarantee the supposed fairness of the competition.

Financial Fitness

As clubs will only be able to pay players a certain amount of money in wages then their maximum expenditure will be cut thus reducing the losses that they can potentially make. One of the current problems surrounding English football is that when wealthy businessmen are in ownership of some of the clubs they will not only pay huge amounts of transfer fees to other clubs to secure the services of a player they will also 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 the services of many high profile stars the current wage bills are astronomical meaning that they are unable to recoup this back in the money the club makes causing the club to make consistent losses.

Fairness of the competition

Another argument often put in favour of introducing a salary cap is that it will increase the fairness of the competition, for example the current position is that some clubs have huge sums of money meaning they can tempt any player to play for them. As other clubs do not have this much money they simply cannot compete in the transfer market. If the ability of the big clubs to tempt these players was removed as they cannot pay the huge wages then it may enable more clubs to bid for the services of the payers making the league in theory more competitive.

Does this work in practice?

The MLS (Major League Soccer) in America runs a salary cap system whereby all players are on a certain wage but then clubs also have the ability to breach the salary cap in relation to two players – this is the reason why LA Galaxy were able to sign David Beckham.

Would a salary cap work in English football?

A salary cap may work in theory to ensure the fairness of competition and to reduce the possibility of football clubs going bust but there are a number of reasons why this would not work in English football.

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For more information on:

  • The discrepancy between English football and the rest of Europe
  • The structure of football is already set
  • Problem of policing the system
  • The possibility of the league becoming less exciting