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"Rushed" salary caps in the English Football League

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United Kingdom

The EFL's rushed decision to introduce salary caps for clubs in League One and League Two will cause significant legal and economic fallout. The motivation behind salary caps is positive, but the measures introduced are inconsistent with free market conditions and ignore the significant disparity between the incomes generated by clubs.

The caps, set at £2.5 million and £1.5 million in League One and League Two respectively, cover wages, taxes, bonuses, image rights and agents' fees. Various exemptions have been implemented, which appear to be token additions to gain sufficient votes amongst member clubs, however they were insufficient for eight clubs.  Championship clubs are yet to agree to any such proposals, although the EFL is expected to continue to look for a way at implementation across all 72 member clubs.

Enforcement is modelled around an overrun tax, with fines for clubs that exceed their cap by at least 5%. Further overspend will result in referral to a disciplinary commission with the power to deduct points.

Legal and economic challenges to these measures await. A number of League One clubs led by Sunderland, Ipswich Town and Portsmouth have been vocal in their disdain at measures which ignore their income generating abilities and existing financial commitments.  

The biggest losers will likely be the body of approximately 1,500 professional footballers who ply their trade in the EFL. The Professional Footballers' Association (PFA) has called for arbitration, declaring that the vote was rushed through in breach of the EFL's legal obligation to consult with the PFA and the Professional Football Negotiating and Consultative Committee. The PFA has been advised that the salary caps are therefore unlawful and unenforceable in the absence of collective bargaining.

Further competition concerns may yet arise: salary caps are inherently collusive; the EFL's measures must not go beyond what is necessary and proportionate to achieve the legitimate aim of financial stability.

Salary caps are the lowest common denominator and ignore the reality that clubs - particularly those in League One - can generate vastly different levels of income and have significant existing contractual liabilities. Linking expenditure to clubs' individual financial performance would have been a more acceptable to balance financial stability with the legal reality.

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