League One and League Two clubs have agreed to introduce a salary cap following a vote by the division’s clubs over financial controls, with the rule taking effect immediately.
The Squad Salary Caps will be fixed at £2.5m and £1.5m for League One and League Two respectively. Included in the cap will be basic wages, taxes, bonuses, image rights, agents’ fees and ,other fees and expenses paid directly or indirectly to all registered players.
According to the release by the EFL, clubs in the two divisions have decided to vote for the rule in an attempt to provide sustainability to the competitions and prevent wage inflation issues.
EFL CEO, David Baldwin stated: “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.”
The EFL has confirmed that clubs who break the salary cap will be subject to fines and could face further sanctions dependent on the severity of the overspend.
Additionally, discussions are also continuing with EFL Championship clubs over the possibility of amending financial controls, however, this may not necessarily mean the introduction of a salary cap.
Some additional information the EFL provided was that payments directly linked to club progression in cup competitions or promotion will not be included in the cap, while any income generated from players going out on loan will be deducted from the Salary Cap calculation.
The EFL has also made amendments for clubs which move divisions by providing
‘transition agreements’ for relegated clubs with players on long-term contracts.
An EFL Spokesperson stated: “Transition arrangements have been incorporated in respect of a Club’s squad salary cap calculation with the key element of these aimed at addressing committed contracts and relegated Clubs.
“Any contract entered into on or prior to today’s vote will be capped at an agreed divisional average until that contract expires. Moving forwards, Clubs that are relegated will be permitted to cap all contracts at the divisional average prior to the Club’s relegation until those contracts expire.”