How the EFL's new League One salary cap will affect Sunderland as controversial plans approved
League One have voted in favour of the EFL’s controversial salary cap proposals on Friday – and here’s how the plans will affect Sunderland.
Clubs convened on August 7 to discuss the salary cap mechanism, which is now set to replace the Salary Cost Management Protocol regulations which are currently in place in the third tier.
But what is being implemented and, crucially, how will it affect Sunderland? We take a look:
What exactly is being implemented and why?
The EFL’s proposals will see a £2.5million salary cap placed upon League One clubs.
These plans were initially proposed last summer following the issues which emerged at both Bolton Wanderers and Bury, and the events of recent months have only fast-tracked the implementation of the salary caps.
What does that £2.5million limit include?
In addition to player wages, that total must include player bonuses, signing-on fees, agent fees, National Insurance contributions and relocation costs.
Exempt from the cap are promotion bonuses, management and coaching salaries and transfer fees.
What happens if you go over the £2.5million limit?
The EFL have confirmed that an ‘overrun’ concept will be in place should clubs exceed the salary cap.
In a statement, they explained: “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.”
Essentially, this means if a club’s expenditure is within over 5 per cent of £2.5million there will only be financial penalties to pay. If it tops that sum, then sanctions such as points deductions could be implemented.
Will Sunderland be restricted in how many players they can recruit?
Yes. Under the current proposals, Sunderland will be limited to registering 22 players for the 2020/21 season - reducing to 21 and then 20 players in the subsequent seasons.
It’s worth noting, though, that this squad cap does not include players aged 21 and under. Youngsters, therefore, could be handed a chance to impress.
How will it affect Sunderland in the transfer market?
This salary cap will naturally have a big effect on Sunderland in the transfer market.
Phil Parkinson’s desire to bring in ‘seven or eight’ players tallies up with the squad size limit set to be imposed upon clubs, but it is the salary cap that will pose concerns for Sunderland.
Imposing this limit upon the Black Cats - and other clubs who generate far more revenue than their rivals, such as Portsmouth and Ipswich - will severely affect their ability to recruit players that they may have been able to target in previous windows, given that they will now be working beneath a financial threshold.
While in the past the bigger clubs in the division were able to go out and recruit players earning far more than the League One average - because their incomes allowed them to without putting the club into jeopardy - this will now prove much harder.
It’s for that reason that the vast majority of clubs are yet to launch major forays into the transfer market this season.
How about when it comes to players with existing contracts?
One crucial factor is how the salary cap will affect those currently under contract.
It has been confirmed that an average League One wage calculated and applied to every player currently contracted by Sunderland for the purposes of the salary cap monitoring, making initial calculations easier and giving clubs a chance to rebuild in the market this summer.
As an example, a player like Aiden McGeady - who we can safely assume earns far higher than the League One average - will not see his full salary count in the cap calculations. Instead, for the remainder of his current deal, his salary will be counted as the League One average – which is around the £1,750 mark. His actual salary will remain the same, but Sunderland can count a far lower amount towards the salary cap.
Now in theory, this should benefit the Black Cats. Given they will have very few, if any, contracted players earning less than the League One average, it will see Sunderland given some extra flexibility to manoeuvre in the transfer market in the short-term given they not see their full wage bill count towards the cap.
However, the problem will come in the long-term. If Sunderland wanted to negotiate a new contract with McGeady, for example, his new agreement and therefore wage would then apply towards the cap. Simply put, it means Sunderland would go from having an average League One wage applied for McGeady to his full salary - which is presumably far higher and would place greater strain on the club as they look to abide by the salary cap. This could leave clubs struggling to retain some of their better players given they may struggle to offer comparable terms due to the pressures of the salary caps.
Any player who was signed before August 7 will see their wage reduced in this manner, meaning that Bailey Wright and Aiden O’Brien’s full salaries will not count towards the cap.
This ‘loophole’ saw clubs rushing to complete deals before the plans are passed in order to benefit from this reduction towards the salary cap.
Will there be a ‘grace period’ for clubs?
While initially there were plans for a grace period, these are now off the table.
They have been replaced by the plan mentioned above, where every existing contract will be counted at the League One average rather than its true value for the first season.
What have clubs said about these plans?
A number of clubs have been vocal in their opposition of the plans, with Sunderland chief executive Jim Rodwell saying that while the Black Cats support the notion of increased financial controls, they are against a uniform salary cap.
“Sunderland absolutely agree that clubs should become more sustainable, but that doesn't mean a hard and fast wage cap,” he said.
“Sustainability is not about creating a level-playing field, it's about living within your means.
“If that means one club is larger than another, so be it.
“That's what sustainability means.”
Rodwell’s counterpart at Portsmouth, Mark Catlin, branded the proposals as an ‘absolue disgrace’.
“Should salary caps come in, those clubs with a 40,000 average attendance and generating huge commercial revenues will be only allowed to spend the same as clubs with a 2,000 attendance and no commercial income,” he explained.
“How can that be right?
“It is an absolute disgrace. I have been fighting this behind the scenes and will be fighting it even more strongly over the coming weeks and months.”
Oxford United are also known to be against the plans, while the PFA slammed the salary cap in an explosive statement published on the eve of the vote.
And what have the EFL said?
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.”