£2.5m salary cap introduced in League One as new rule passes by just one vote

PUBLISHED: 13:32 07 August 2020 | UPDATED: 16:02 07 August 2020

Ipswich Town were against the introduction of a salary cap in League One. Picture: PAGEPIX/STEVE WALLER

Ipswich Town were against the introduction of a salary cap in League One. Picture: PAGEPIX/STEVE WALLER

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League One clubs have voted in favour of a salary cap which will restrict clubs to spending £2.5m a season on players’ wages.

A majority of at least 16 of the 24 member clubs was needed at today’s vote in order for the cap to be introduced following weeks of talks, with the EFL confirming that number was achieved. Portsmouth chief executive Mark Catlin later revealed the cap passed by just a single vote.

Ipswich, along with the likes of Sunderland and Pompey, had previously made their opposition to the move known but will now be restricted on what they spend.

As things stand the Blues are thought to be spending at least double the £2.5m limit on players’ salaries, with the new cap also having to include signing on fees, bonuses, National Insurance and agents’ fees. Town spent more than £300,000 on the latter during the last two transfer windows.

EXPLAINED: How League One salary cap will impact Ipswich Town

The cap will be introduced in time for the start of the 2020/21 season, due to begin on September 12, but there is relief for clubs in Ipswich’s position, who are paying significantly more than the £2.5m allowed.

While full details are yet to be published, managers’ and backroom staff members’ wages are excluded while salaries for players aged 21 and younger are not expected to count towards the cap.

Also, players who signed contracts prior to today’s introduction of the cap will see their salaries treated as if they were the League One average for the duration of their deals. That means, while the vast majority of Town’s senior players earn over the average figure, they will be treated as players on £1,300 per week until those contracts expire.

The same will be true of clubs relegated from the Championship in the future, who will have players salries judged to be at the League One average.

Players who are loaned out will not count towards the cap while any payments, such as bonuses, linked to cup progression or promotions will not apply.

A system will be in place to issue sanctions should clubs go over the agreed spending levels, with teams breaking the cap by up to 5% potentially being penalised financially for ever £1 they go over.

A salary cap his also been introduced at League Two level, following the vote, with clubs in the fourth tier restriced to spending £1.5m on players’ wages.

Discussions regarding a Championship cap remain ongoing, with figures in the region of £18m discussed there.

Speaking after the vote, Porstmouth chief executive Catlin told The News: “We’re very disappointed, one more vote and we would have been able to stop it.

“But we have to respect the views and opinions of the majority of the clubs in League One. So we now have to move on to the next stage.

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EXPLAINED: How League One salary cap will impact Ipswich Town

“Sixteen was the required number of votes and the number who voted for it was 16. Unfortunately, a couple of clubs changed their minds this morning which was disappointing.

“I was speaking to clubs pretty much daily and it was taking up a huge amount of time, so I knew it would be close.

“I knew one was in the middle and likely to abstain, but I spoke to one club this morning who said they were going to flip their vote.

“After speaking to the EFL at length this morning they changed their mind. That’s their decision. We have to respect the majority rule and we’re part of a democratic organisation.”

EFL STATEMENT

Clubs in League One and League Two have today voted for the introduction of new financial controls in the form of ‘Squad Salary Caps’ into their respective divisions which take effect immediately.

The decision follows extensive and comprehensive consultation with all Clubs in respect of addressing sustainability and wage inflation issues across the EFL which were initiated prior to the suspension of football in March following the COVID-19 outbreak and have continued during the course of the summer.

Those discussions culminated in today’s divisional vote, with representatives of League One and League Two Clubs opting to implement the new measures in place of the existing Salary Cost Management Protocols (SCMP), with fixed caps of £2.5million and £1.5million respectively.

Discussions continue with Championship Clubs in respect to amendments to their own financial controls. League One and Two Clubs are also going to continue discussions towards the introduction of additional measures aimed at addressing Club financial sustainability.

When calculating total salary spending, the ‘cap’ includes: Basic Wages; Taxes; Bonuses; Image rights; Agents’ fees and; Other fees and expenses paid directly or indirectly to all registered players.

Payments directly linked to a Club’s progression in cup competitions or promotion are excluded from the Cap, while any income generated from players going out on loan is deducted from the Club’s Salary Cap calculation.

Transition arrangements have been incorporated in respect of a Club’s squad salary cap calculation with the key element of these aimed at addressing committed contracts and relegated Clubs. Any contract entered into on or prior to today’s vote will be capped at an agreed divisional average until that contract expires. Moving forwards, Clubs that are relegated will be permitted to cap all contracts at the divisional average prior to the Club’s relegation until those contracts expire.

An ‘overrun’ concept is also included if a Club’s total squad salary payments exceed the Cap by up to 5%, whereby dependent on the percentage level of the overrun, a financial penalty would be payable for every £1 in excess. Clubs exceeding the ‘overrun’ would be referred to an Independent Disciplinary Commission, although the EFL will monitor the Cap on a real-time basis throughout the season as is the current position with SCMP measures across the two divisions. Where breaches do occur, sanction guidelines are in place to be considered as appropriate by an independent Disciplinary Commission.

EFL CEO, David Baldwin said: “The term ‘salary cap’ is an emotive one, creating the impression of a restrictive measure but we are clear in our view that this is neither the objective nor the likely effect of these changes to EFL Regulations. The financial impact of Covid-19 will be profound for EFL Clubs and today’s vote will help ensure Clubs cannot extend themselves to the point that could cause financial instability.

“Over the last two weeks the discussions amongst Clubs in both Leagues One and Two have been healthy and constructive, allowing us to reach a clear consensus today and I am pleased that the Clubs have determined to adopt the new approach. We will now work with all Clubs, the PFA and, where appropriate, other stakeholders to implement the new rules and continue our efforts to bring long-term sustainability to the EFL.”

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