Let’s all assume that Kyril and Juan are successful in their bid for Sunderland and their benevolence knows no bounds. Kyril’s mother gives him the keys to the trust fund and he has cash to burn and knows just where to burn it. Happy days right? Well, perhaps not as it happens.
Last season perhaps but not from now on. Last season, you see, we were restricted by our own austerity and Salary Cost Management Protocol or the snappily abbreviated SCMP. Many talked of financial fair play, but this was far from what we know as FFP. This season everything changed and, like many ills in the world at the moment, Covid-19 is quoted as a causative factor in the introduction of salary caps in League One and League Two. According to the EFL talks with Championship clubs continue but for the moment there appears to be a void opening up between League One and the Championship.
It’s probably best to start with how things were to expunge a few myths peddled around last season and (pre-Covid) used as a reason for us not signing expensive players. The term Financial Fair Play is incredibly misleading when talking about the requirements in League One pre Salary caps. Effectively SCMP was actually supportive of madcap owners. The rule was actually rather simple, you couldn’t spend more than 60% of your turnover on player salaries. Dead easy. Based on the club accounts to 31 July 2019, where turnover was £58m, we could blow about £35m on players wages. Yes those wages included agents fees and taxes and bonuses and image rights etc. etc. but ostensibly that definitely gave us the largest amount of breathing room in the division.
Even if we were running close to the 60% mark though, it was simple for us to escape sanctions. All the owners have to do is either gift us some cash or introduce some equity. With apologies to all accountants out there who are about to shake their heads in disgust at the capital v revenue blurred line, gifts and equity are included as part of turnover in SCMP. With a bonkers owner with incredibly deep pockets our wage bill could have been anything provided said bonkers owner made sure he or she was putting in enough in gifts and equity to make sure it was only 60% of turnover.
This system was actually beneficial to a club with the turnover that Sunderland had. The catch was that there was no moratorium for Championship clubs...but hang on, no they kind of had that covered as well. Players signed prior to the September of the relegation season on contracts longer than three years were essentially carved out of the calculation under transitional arrangements. Which means that other than in terms of eating up the cash, financial fair play was not an issue with the likes of Lee Cattermole. Will Grigg counted though. Also not included are players under the age of 20 at the start of the season. So you can see that under these arrangements it would actually be happy times under Kyril and Juan if they ploughed cash into the club via equity or gifts. Unfortunately, we are no longer in that position. Salary caps are here.
Now salary caps are a very divisive issue. On the one hand they protect the integrity of the game and promote the development of youth in the lower leagues, on the other hand they massively balls up Sunderland’s bid for a quick rise back to the top. Selfishly, I’m not keen on them. Let’s start with the detail, or at least the detail we know, or at least the detail that’s there until some club sues the EFL for preventing fair competition and trade. Again, it’s fairly simple on the face of it. The annual outgoings on player salaries is capped at a total of £2.5m (£1.5m for League Two, no limit for Championship...yet). Straightforward. Except you then look at what a salary includes. Basic wages, taxes, bonuses, image rights, agent fees and other fees & expenses paid directly or indirectly to a player. You have £2.5m for that, for you entire squad. To put that into context that would probably get you less than a fortnight of Gareth Bale.
To put it further into context and to bring it closer to home, under SCMP Sunderland were allowed to spend £34.8m on wages last season, this season they can spend £2.5m. That £2.5m includes the agent fees which Stewart Donald has ranted about on many an occasion. Also includes taxes and bonuses. We will come back to that one in a moment. So how do we cope with that? Well looking at the 2019 accounts, not very well. Wages and salaries are listed at £23.5m in the 2019 accounts which suggests we are some way off £2.5m. There will be other costs in there which aren’t included for salary cap purposes, not least of all coaches’ salaries, manager salaries, U20 salaries and all club staff; but you can bet the rump of that £23.5m is wrapped up in costs that do count for salary cap purposes. However, before you run around the room screaming about us being doomed, there is good news (ish).
Say we still had Lee Cattermole. I think it’s widely accepted that the Simon Cowell waistbanded cruncher was on a fairly high salary. Let’s assume it was £40,000 a week. Over the course of the year that equates to £2m based on a 52-week year. For one player. However, what if I were to tell you that Lee Cattermole would only cost us £88,400 a year for salary cap purposes? That’s right, you see there is a transitional period which, for us, is a bloody good thing. Any player on an existing contract is assumed to be earning an agreed divisional average salary which looks to be around £1,700 a week.
So, in this example, Will Grigg is no worse for financial regulation than anyone else really. That rule only lasts as long as the contract though so the real difficulties will kick in when the contracts expire. Just as well we have poured all the investment into the Academy to produce our own talent… hmmm. The real reason however why this isn’t entirely good news is that while that rule lasts for the length of the contracts for current League One teams; it applies to every Championship club that is relegated to League One. What this does is create a situation where Championship clubs can pay whatever they like in terms of salary (within Championship financial fair play rules of course) and if those players stay with the club they are assumed to be earning £1,700 a week for salary cap purposes. Expanding the imagination a bit here, with Barnsely interested in Mario Balotelli at the moment there is a possibility that Balotelli could be playing League One and be less damaging from a Salary Cap perspective than a player we sign from Cheltenham Town.
So £1,700 a week includes all those factors, including tax and agent fees. Let’s assume that leaves about £1,000 a week per player. I absolutely understand that over time lower league players will get used to being paid that much. In terms of the average UK salary it’s ok. A decent amount to be earning. If, however, you’re a League One club and you’re convincing a young lad to sign for your academy and a Championship club come knocking then what happens? If you convince the academy player to join you and you bring him through the ranks but don’t get promoted after he’s had a decent season, where’s he going to go? Despite the aims of the EFL in introducing these rules I think they are severely flawed unless they apply across the board from the Premier League down.
This massively hampers Kyril and Juan. They are allowed a 5% overrun bracket if they match every £1 excess with a fine, but let’s face it, that isn’t going to get us much. If they had come in last year and blown a load of wedge on players under SCMP, not been promoted it wouldn’t matter what those players were on for Salary Cap purposes. They could have bought Gareth Bale, funded the salary with gifts last season and this season still been compliant with salary cap rules.
I do have some good news for them though. If they really believe in us and if they can get prospective signings who believe in themselves and in the capability of the team, they’re fine. Bonuses linked to cup runs and promotion do not count for Salary cap purposes. Convince Messi we’re going up and give him a massive wedge at the end of the season lads, I’m sure he’d be happy on £1,700 a week.