With the Premiership salary cap once again returning to the limelight ParkLife Sport takes a look at how it works and just how effective it’s been.
Harlequins have recently overspent the salary cap. The London based side overspent £12, 479 and were fined 50p for every pound they overspent.
With 11 clubs losing money according to their financial accounts, just how sustainable is the salary cap. Debt is fine as long as it’s serviceable and most owners will no call back the money they apply to clubs once they pull out or move on.
If you removed the cap, the effects would be disastrous for the league. You’d have a wider divide on clubs who have a strong benefactor presence and those who don’t, the losses would just increase, and in the case of Exeter, turn from profit to loss.
CVC has applied a lot of money in a new deal that see’s the investment company take over a large chunk of shares in Premiership Rugby, but this is only a backfiller for the losses and will be a short term solution to the league’s sustainability.
The cap, set by the clubs under the umbrella organisation of Premiership Rugby Limited is overseen by an independent body, but even an increase of the current £7m cap would see clubs set to lose millions more than they already do.
What is the cap?
The salary cap is determined by growth of the clubs and how much central funding they receive from Premiership Rugby. This cap currently lies at £7m and doesn’t include two marquee players.
Within this £7m there is £600,000 of ‘Homegrown senior player credits,’ defined as a player who was at the club before his 18th birthday and has been there for at least two years.
There is a short-term injury cover allowance of £400,000 and one long-term injury replacement isn’t affected by the cap.
International windows can often lead to squads becoming threadbare and so there’s now an allotted £80,000 per player to cover these slots shall they need it.
Will teams stick to it?
Talk over whether the salary cap is high enough has been rife for several seasons. There has been an increase in the cap as a whole, but despite this some clubs still seem to push it to its limit.
Fans question as to how the likes of Exeter and Saracens can afford their squads, but as of yet no evidence has been presented to prove they’ve overspent.
The recent CVC investment cash to the 13 teams (12 Premiership sides and London Irish) has seen a rise in funds. This is supposed to be spent on facilities and not players but if teams are pushing the limits to gain that extra advantage then what’s to say that there’s no significant chance of them using this cash influx on player wages.
It’s fair to say that you can’t blame clubs for pushing limits in order to maximise their winning potential. This doesn’t mean to say there’ll be any further salary cap breaks.
Based on punishments for breaking the cap you’d like to think sides wouldn’t bother breaking it.
Saracens may have found a loophole following a Sportsmail investigation. The property ladder market may be utilised for player benefits.
Nigel Wray – Saracens owner – owns several properties and may have struck up a deal with some key players over living costs and shares in property investment companies, created by Wray and several other property gurus. This would help generate further remunerations for the players, another significant income.
What are the punishments?
There is a slight tax overrun allowance, but there are set fines for overrun depending on how much.
- -£0 to £49,999.99 is 50p for every £1 overspend.
- -£50,000 to £199,999.99 is £1 for every £1 overspend.
- -Over £200,000 is £3 for every £1 overspend.
This seems fair, but by other sporting standards it’s lenient. Wigan Warriors recently got caught overspending by a similar amount to Harlequins and were not only fined but deducted two points at the start of this season’s Super League.
Football employs a financial fair play system that can limit European squad size.
Is the cap high enough?
Some coaches have said that retaining a strong squad can be difficult under the current cap. In relevant terms compared to other leagues it’s competitive with no cap in the Guinness Pro14, but the top teams are reportedly around £8m wage bills and the Top14 has a cap of €10m.
So not only do they have a fair cap within their own structure in terms of competitiveness but they’re on par with industry standard levels.
Raising the cap any further would lead to just further losses of which 11 Premiership clubs currently make (Exeter being the exception).