Transfer fees and CBAs and what they mean for the USL
Show me the money!
More reports are coming out that the transfer fee for Junior Flemmings is a massive new record. According to LesViolets.com, Jamaican sources are stating that the deal was for 2 and a half years and the fee was €455,000 ($515,000). If correct, this is a very big deal.
With Junior Flemmings’ move to Toulouse FC of France’s Ligue 2 for an undisclosed but apparently large sum of money, it’s time to talk about the Benjamins. Because there’s quite a bit going on this year in the USL Championship in that regard.
First off, the Transfermarkt report that Junior’s deal was for $500,000 seems dubious, given that the terms were not disclosed and that would be 250% of the previous USL record fee. Obviously, no one here in the Magic City would be upset if it is true, but even the $200,000 or so that is more likely is a decent infusion of cash.
Aside from that though, the USL Championship and the USL Players Association agreed on a historic first ever Collective Bargaining Agreement (CBA) late last season to take effect with the upcoming 2022 season. If you want to take a look at the CBA itself, it can be found here. In addition to establishing various player, club and league rights and responsibilities, it also sets out a number of important terms regarding the use of money. Which could affect how the Legion opts to spend the money from Junior’s sale.
The biggest issue is the approach it takes to establishing a salary cap. As with most other leagues (not least of which is the notoriously arcane and confusing MLS salary structure), the USL system leaves a fair amount of room for the gainful and creative employment of accountants. Gratuitous CPA joke: ask a mathematician what 2+2 equal and he will say “4”. Ask a philosopher and he will say “What do you mean by 2+2?” Ask an accountant and he will say “What answer did you have in mind?”[efn_note]Full disclosure: I spent the better part of a decade working for CPA firms. I escaped.[/efn_note].
Instead of a straight salary cap, the league has what it calls “maximum benefit spend”. Benefit spend is the aggregate money expended on a player, including items not directly given to the player. This includes items such as housing and personal transportation, relocation expenses, free meals, agent fees, insurance, taxes and the like. It also includes any bonuses paid to the player, not just his base salary. Signing bonuses are prorated over the length of the contract; performance bonuses apply specifically to the year in which they are earned.
Most of those items are more or less predictable, but that last item could prove problematic. Since the club will have no idea whether a player will earn a bonus or not until the season is over, it means that the potential bonuses in contracts would have to be discounted from the team’s maximum benefit spend at the start of the season. It’s not clear to me whether this item in the CBA favors the teams or the players. Generally, it is an incentive to teams not to include performance bonuses in contracts, which would seem to benefit the teams. On the other hand, the players could negotiate for higher base salaries in lieu of bonuses, which would be in their favor.
hiding tracking all these expenses is tricky, so the bookkeepers will be busy. But what is the maximum benefit spend? Well, for 2022 it will be $1,880,000 per team, increasing each year of the remaining three years of the CBA. Yeah, compared with top leagues in any sport that’s not much. It would get you about 159 minutes of Cristiano Ronaldo. But compared with other less glamorous professions it’s not too bad. If you had 25 full professional players on the team that’s $75,200 each. Most, if not all, teams won’t have that many. And of course academy and college players signed to non-professional contracts don’t affect the total spend (at least as far as salary is concerned).
In fact, the CBA also sets out minimum base salary requirements. That amounts to just $2,200 per month, or $26,400 a year. Again, that increase every year, but it’s a pretty low threshold. There are also limits on how much a club can spend on indirect benefits.
There’s also a special condition that applies to players on loan: their benefit spend hit is capped at $100,000. If their cost is lower, then the actual cost applies (subject to some mathematical formulae). Obviously, $100,000 is a fairly big hit to the maximum, but if a team can get the services of a high quality player and not have the excess salary count against their limit then such a loan could be very attractive.
Clearly, all this can get very complicated, and it may take teams a year or two to get used to the system and figure out how best to use it to their advantage. Be sure that they will though.
For the moment though, how does all this affect the windfall the Legion just received? Well, on the one hand, it doesn’t change at all how much they can spend on the roster. On the other hand, it does affect how much the club has to spend. But since the club knows how much its player spending is limited to (more or less), it’s a number it can budget for. And it’s a one time deal. Obviously, if the team can generate transfer fee income each year, that’s great. Indeed, it should be an objective for any club, and especially for a club not at the top tier of the pyramid. But it’s not guaranteed. So if the team builds a roster hoping to offset some of its player costs through transfer fees and those fees don’t emerge, they’ll be in need of a paddle, so to speak. It would make more sense – to this writer, at least – to use at least a fraction of that money on other things. Given that the Three Sparks now have a rather large stadium to fill, it strikes me that marketing could be a good use of the cash. We shall see.
Anyway, with this CBA the USL Championship embarked on a new era just as the Legion is rising to contender status. It could be a very fun ride from here.