I have decided to not write this blog on officialdom and instead write about the salary cap, how it came to be, its presence in the game, and to we really need a salary cap?
How does it work?
The NRL Salary Cap for 2008 is $4.1m for the 25 highest-paid players at each club. If each player was paid an equal amount, they would get about $160,000 each. Each club can exercise discretion about how much individual players are paid, providing that total payment does not exceed the $4.1m cap. In addition to the $4.1m Salary Cap for the top 25 players, each club may spend up to an additional $350,000 on players outside the top 25 who play in the NRL competition.
In 2008 the NRL introduced an exciting new competition for players 20 years and under. The National Youth Competition, this new competition will have a Salary Cap of $250,000 for the top 20 players who qualify for the ut do not sit in the club’s top 25 Salary Cap. In addition to the Salary Cap for the top 20 NYC players, each club will be able to spend an additional $50,000 on players outside the NYC top 20 who qualify and play in the NYC.
Why have a Salary Cap?
The NRL Salary Cap serves two functions.
The first is to assist in ‘spreading the playing talent’ so that a few wealthy clubs can not simply out-bid poorer teams for all of the best players. The NRL believes that if a few clubs could spend unlimited funds in such a way, it would reduce the attraction of games to fans, sponsors and media partners due to uneven competition. Allowing clubs to spend an unlimited amount on players would drive some clubs out of the competition as they would struggle to match the price wealthy clubs could afford.
Another reason for having the cap is to ensure that clubs are not put into a position where they are forced to spend more money than they can afford in terms of player payments just to be competitive.
Where did it come from?
Salary Caps have been part of some sports for many years. The NSWRL first introduced a Salary Cap to Rugby League in 1990, and the NRL has had a Salary Cap since its inception in 1998.
Salary Cap Timeline
1990: Salary Cap introduced by NSWRL with a cap ranging from $800,000 to $1.5m depending on individual Club circumstances.
1991: NSWRL lifts Salary Cap to $1.6m.
1994: NSWRL approves rise in maximum Salary Cap to $1.8m.
1997: Super League war. No Salary Cap in place.
1998: NRL formed and proposed a $3.25m Salary Cap for 1999. Cap acknowledges players’ ‘notional values’ from contracts signed during the Super League war.
1999: NRL Club Chief Executives, Chairmen and NRL Board recommend retention of the $3.25m Salary Cap for the next two seasons.
2000: NRL provides guidelines for breaches of the Salary Cap, including fines and the loss of competition points for violations from 2001 and beyond. The Sponsor Servicing Allowance was introduced, lifting the effective Salary Cap from $3.25m to $3.325m.
2001 Sponsor Servicing Allowance further increased, lifting the effective Salary Cap to $3.347m.
2002: Clubs that could increase overall sponsorships were provided with an extension of the Sponsor Servicing Allowance bringing the total available allowance to $200,000 and an effective Salary Cap of $3.45m.
2003: Long Serving Player Allowance was introduced to encourage Clubs to retain players who have served a continuous period of 10 years in first grade. This $100,000 allowance lifted the effective cap to $3.55m
2004: The NRL and RLPA agree via a Collective Bargaining Agreement the Salary Cap for 2005 will be $3.3m and $3.366m for 2006.
2005: The Salary Cap rose to $3.3 million in 2005.
Ahead of the agreement for a four-year Collective Bargaining Agreement was signed in June for seasons 2007-10.
The agreement provided for:
2006: A $3.9m salary cap in 2007 – up from $ 3.366 million. Minimum wages of $55,000 (1-17) and $50,000 (18-25) – up from $37,500. Origin payments increasing to $12,500 per game. Increases in Third-Party Sponsorship Agreements to $150,000
Reduction in the qualifying period for veteran players from 10 to 8 years.
2007: A further $100,000 increase to the salary cap was agreed to by the NRL and RLPA, bringing the total salary cap to $4m for 2007 and $4.1m for 2008.
2008: Introduction of the Toyota Cup NYC. NYC is introduced with a Salary Cap of $250,000.
How much can Clubs spend?
In 2008 the Salary Cap will be a maximum limit of $4.1m for the 25 highest remunerated players at each club. All other players that play NRL in the current year must fit under a $350,000 Salary Cap. This figure is commonly referred to as the 2nd Tier Cap.
For players in the top 25 Salary Cap or 2nd Tier Salary Cap, the Salary Cap value for a player each year is broken down into the following categories:
· Playing Fee: fully included in the Salary Cap
· Included Benefits: all benefits to players, including accommodation, travel, motor vehicles, interest-free loans and manager’s fees and any applicable fringe benefits tax.
· Win bonuses & appearance fees: Payments for appearing in or winning a game are calculated based on the number of NRL games the player played in the prior year multiplied by any applicable bonuses. For win bonuses, the calculation is capped at 13 wins. Example: A player appeared in 10 NRL in 2006 and now has a 2007 Contract for a $50,000 contract fee plus $1,000 per game. His Salary Cap Value would be $50,000 plus 10 times $1,000 = $60,000.
· Other bonuses: Any other bonus in a player’s contract will be calculated in the Salary Cap if the NRL Salary Cap Auditor expects him to achieve the bonus based on his prior year’s performance. Example: A player played State of Origin in 2006, and his 2007 Contract includes a $20,000 State of Origin bonus. This bonus will be included in the player’s 2007 Salary Cap Value.
Note: Where a player achieves a bonus but is not assessed in the player’s Salary Cap Value, the bonus is carried forward and calculated in the player’s Salary Cap Value for the following year.
Is any Remuneration excluded?
In addition to allowances, the Salary Cap Auditor has expressly excluded the following benefits to players:
· Tertiary education (TAFE & University)
· Approved Traineeships
· Medical insurance costs
· Relocation & temporary accommodation costs
In addition to the top 25 Salary Cap, clubs will have a maximum limit of $250,000 to spend on the 20 highest remunerated players who do not form part of the top 25 salary cap and who qualify for the NYC (turning 20 or less in the current year). All other players in the NYC must fit under a 2nd Tier Cap of $50,000.
For players in the top 20 Toyota Cup Salary Cap, the Salary Cap value for a player each year is broken down into the following categories:
· Playing Fee – fully included in the Salary Cap
· Included benefits – all benefits provided to players, including accommodation, travel, motor vehicles, interest-free loans and manager’s fees and any applicable fringe benefits tax.
· Win bonuses & appearance fees – Payments for appearing in or winning a game are calculated based on the number of NRL games the player played in the prior year multiplied by any applicable bonuses. For win bonuses, the calculation is capped at 13 wins. Example: A player appeared in 10 NYC games in 2007 and now has a 2008 contract for a $10,000 contract fee plus $500 per game. His Salary Cap Value would be $10,000 plus 10 times $500 = $15,000.
· Other bonuses – Any other bonus in a player’s contract will be calculated in the Toyota Cup Salary Cap if the Salary Cap Auditor expects him to achieve the bonus based on his prior year’s performance. Example: A player played U20s for NSW in 2007, and his 2008 Contract includes a $2,000 U20 NSW bonus. This bonus will be included in the player’s 2008 NYC Salary Cap Value.
Note: Where a player achieves a bonus but is not assessed in the player’s Salary Cap Value, the bonus is carried forward and calculated in the player’s Salary Cap Value for the following year.
Are there any allowances?
The only allowance a club may use to pay players outside of the Toyota Cup Salary Cap is an allowance of up to $20,000 across the top 20 NYC players for secondary education.
What about money paid from other people or companies? The essential guide is that if a player receives money from any person to induce him to play for the club, then that money will be included in the Salary Cap.
The income a player earns from parties unrelated to his club is generally not included in the Salary Cap. However, the details of the agreement must be advised to the club by the player. The club must then get approval for the deal from the Salary Cap Auditor for the remuneration to be excluded.
In 2006, the NRL also introduced an allowance for players entering Third Party Agreements with club sponsors. IN 2007 three of the top six players are allowed to earn up to an extra $50,000 each from sponsorship leveraging but the total payments under these sponsorship leveraging agreements must not exceed $150,000.00 per club.
How can some clubs have so many elite players and still be under the Salary Cap while other clubs at the bottom of the table seem to be just under the Salary Cap?
The reality is all clubs spend the Salary Cap, but not all are successful on the field. Someone has to come last, and someone has to win, regardless of what they spend. Some clubs will attract players based on what the club can offer a player’s career rather than just money, and other clubs may need to spend more money to attract the same player.
Many factors affect an individual player’s remuneration levels. Some of the reasons why a player may sign for less would include the following:
· Staying close to the player’s hometown and family.
· The chance to work with one of the top coaches in the game.
· Being part of a winning team and the potential to play in the Telstra Premiership Finals series or Grand Final.
· Increased opportunity to play NRL with that club due to a lack of competition for the player’s preferred position.
· The high profile a player may enjoy in a one-team town.
· The number of support staff, their expertise and the support facilities.
· Education and welfare support structures.
Also, a player’s salary package may include benefits excluded explicitly from the Salary Cap, such as medical premiums, university fees, etc.
How does the Salary Cap Auditor monitor the Salary Cap?
All NRL player contracts must be lodged with the Salary Cap Auditor. These contracts are reviewed, and each player’s remuneration is included in the Salary Cap. Besides, the CEO and Chairman of each club must provide a statutory declaration to the NRL at the beginning and end of each season in support of the club’s Salary Cap calculation.
The Salary Cap Auditor monitors each club’s Salary Cap position throughout the year based on the information provided by clubs. Also, the Salary Cap Auditor may investigate players’ remuneration if discrepancies arise. These investigations usually involve the club and its associated entities and cover all payments made and agreements entered into that may result in benefits being provided to players. The Salary Cap Auditor also continually monitors media reports and makes enquiries to uncover any information that may have Salary Cap implications. When clubs have been found to either breach the Salary Cap or have made undisclosed payments to a player, the club is issued a breach notice.
Why hasn’t the Salary Cap gone up?
The Salary Cap has, in fact, risen substantially since its introduction in 1998. That year, the Salary Cap was $3.25m for the top 25 players and $500,000 for all players outside the top 25, regardless of whether they played in the NRL.
In 2007 the base figure was $4m, with a further $350k available to all other players who played NRL in 2007.
In 2008 the base figure will be $4.1m, with a further $350k available to all other players who played NRL in 2008.
Also, clubs will be able to spend an additional $250,000 plus allowances on players in the NYC, with a further $50,000 being available to all other players who play in the NYC in 2008.
Why do clubs have to let players go after they have been successful?
A player’s value rises when they have played well and the club has a successful year. If players improve their worth by becoming a representative players, for example, the club needs to increase their pay or face the fact that another club will poach them and pay him his new market rate. It is fair to say that a club will release a player and blame Salary Cap pressures, but this is not always the case as quite often, the club will not look to re-sign a player in favour of upgrading another player or recruiting another player from outside the club. It is easy to blame the Salary Cap when the real reason may differ, but the club does not want to be painted as the ‘bad guy’.
So, in summary, I think the Salary Cap is an excellent thing in evening out the playing talent and that if there was no salary cap, the competition would be dominated by the Brisbane Broncos (funded by News Limited), the Sydney Roosters (supported by Nick Politis and James Packer), the South Sydney Rabbitohs (funded by owners Russell Crowe and Peter Holmes a Court), Manly Sea Eagles (sponsored by owners Max Delmage and Scott Penn) and the Warriors (funded by former owner Eric Watson) and who really wants to watch a competition where five teams are going to win the completion and the rest have nothing to play for, which is quite different to the English Premier League where the top 10 or so fighting out for spots in Europe and the bottom teams fighting to avoid relegation.
Another thing: The Origin teams were announced on Monday evening and Tuesday afternoon. Interesting things come up in the selection of the units. I will start with the NSW team; they only picked three props, two starting and one on the bench, meaning that one of the starting props will play long minutes or one of the back-rowers playing in the front row where they are not front row players. Speaking of the back row, it’s interesting that the three starting back-rowers, Ben Creagh, Luke O’Donnell and Paul Gallen, all defend on the left side where both halves, Peter Wallace and Trent Barrett, are both right-hand defenders, which means one of the back-rowers and one of the halves will be defending out of the position, also defending out of position is Jarryd Hayne who will be defending on the wing where at club level another factor not helping Jarryd is he will have the inexperienced Michael Jennings inside him who is only in his second Origin game and is a poor defender in past instances. In-game one, the New South Wales selectors said they were selecting a young team for the future, yet they brought back Trent Barrett for game two. If NSW loses four series, the selectors should be held accountable for their selections not only over the last for years.
Only one change was made for Queensland, which was forced due to injury. Willie Tonga comes into the team as the right centre, yet Willie Tonga is a left-side centre at club level, so he will be playing out of position for Queensland. I think the result of game one flattered NSW, with all of their tries coming off lucky bounces. For mind Queensland to win easy
Quote of the week: The lawyer representing Sydney FC defender Sebastian Ryall on a charge of sexual intercourse with a 13-year-old girl: “[It’s] very much a storm in a teacup
Till next time,
Cheese