League One, League Two clubs vote to introduce salary cap

Salary cap
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Clubs in League One and League Two have voted to introduce a salary cap, “effectively immediately.”

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Under the agreed proposal, clubs in England’s third tier, League One, will be allowed to spend up to $3.25 million (£2.5 million) per season on player salaries, while League Two sides will be limited at $2 million (£1.5 million).

The salary cap is, at least in theory, expected to create greater sustainability for lower-division clubs after a number of sides recently relegated from the Premier League and/or the Championship have endured great financial hardship and, in some cases, received hefty punishments for failing to maintain certain financial standards.

According to Sky Sports, discussions about a potential salary cap began back in March, prior to the shutdown, and canceling of the remainder, of the League One and League Two seasons due to COVID-19.

When calculating total salary spending, the salary cap will include not only weekly wages paid to players, but also bonuses, agent fees and image rights, among other mechanisms by which clubs have spent and — again, in far too many cases — lost hundreds of thousands, if not millions, of dollars in recent years.

Per the English Football League, “any contract entered into on or prior to today’s vote will be capped at an agreed divisional average until that contract expires,” meaning clubs will not be forced to immediately shed contracts in order to comply with the newly implemented rule.

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From the EFL’s statement, which can be read in full here, released shortly after the vote:

“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.