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HCR Law Events

2 March 2020

If the cap fits…….

Salary cap breach

Rugby fans are all too familiar with the Saracens salary cap breach, the sanctions, the recent publication of the panel’s decision, the club’s belated unreserved apology and finally relegation.

Media coverage of the Saracens affair has brought salary caps under scrutiny once again, which poses more questions than answers.

Premiership Rugby Salary Regulations

Does the cap meet the objectives stated in the Premiership Rugby Salary Regulations?

In other words, does it ensure the financial viability of clubs and the competition, control costs, provide a level playing field for clubs, ensure a competitive league and enable clubs to compete in European competition?

The financial performance in 2019 for 12 of the 13 Premiership clubs doesn’t make encouraging reading, with only Exeter Chiefs in profit and London Irish posting a huge £10.5m loss.

Ironically, Saracens lost almost £4m.

 

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Although player salaries can’t be taken in isolation, in almost every club they are the largest overhead and major contributor to annual losses.

Despite the cap, clubs appear not to be controlling costs and, like football clubs, the majority spend more than they earn.

Notwithstanding salary caps, the concept of a level playing field and fair competition will always be in jeopardy unless everyone plays by the rules.

Despite the existence, in part, of salary caps, European rugby competition remains distorted.

French rugby clubs

The gap between Premiership clubs and France’s Top 14 clubs has grown ever wider. This year, French clubs were capped at €11.3m per season, which, spread over a squad of 35, is €322,000 per player, a total budget some 40% higher than the Premiership cap of £7m.

While the PRO14 league has no official caps, the four Irish provinces’ player costs are similar to those of the Premiership, with Welsh and Scottish clubs operating on much less than everyone else.

The correlation between salary spend and results is well-founded.

In the last five years, European rugby has been dominated by the highest paying clubs, Saracens, Toulon and Leinster.

With the absence of direct salary caps in football, this is more evident than ever with the top six Premier League clubs dominating domestic and, to an extent, European competition.

There is no easy answer to the problem of ensuring the financial sustainability of clubs.

Based on recent financial results, it’s arguable that salary caps in rugby are not working and need reform. Perhaps there is a case for ‘soft salary caps’ such as the domestic and European financial controls applied by the Premier League, the EFL and UEFA in football?

The debate will continue, but for the time being the jury is out.

 

Contact our Commercial team now.

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About the Author
Tim Bailey, Consultant

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