The Salary Cap
Clubs in the English Premiership Rugby (Premiership) are subject to a salary cap. The objective of the salary cap is to ensure the financial viability of clubs and the competition, control inflationary pressures on clubs’ costs and foster competition by providing a level playing field. The salary cap for last season was set at £7m.
The definition of “Salary” in the Premiership Salary Regulations (Regulations) includes but is not limited to wages, bonuses, loans to the player or a connected person and the supply of any accommodation, holidays or cars. Specifically excluded from the definition are any payments or benefits in kind with an individual sponsorship, endorsement and other such arrangements between a player and a connected party of the club. For example, an individual sponsorship agreement between a player and the club sponsor, which is outside the player’s general obligations to the sponsor under his contract with the club, may be excluded. A number of factors are considered in determining whether such a scenario is captured by the Regulations, including whether the arrangement was negotiated at arm’s length and whether the Player will be required to perform his obligations under the arrangement in his Club’s playing kit.
The Independent Disciplinary Panel found that Saracens did not disclose payments to several players and when these payments were included, Saracens were found to have exceeded the Salary cap. The undisclosed payments were reported to be paid via property co-investment companies in which the Saracens’ owner Nigel Wray and a number of Saracens players are shareholders.
One such arrangement related to the company Vunprop Limited which was founded in January 2017 with Nigel Wray as the sole shareholder. On 27 February 2017 Saracens and England players Mako and Billy Vunipola were appointed as directors and joint shareholders in Vunprop Limited. In accounts filed for year end 31 March 2018 the company had assets of over £1.5 million. It has been reported that Saracens failed to disclose this arrangement, and similar arrangements with other players including Owen Farrell, Richard Wigglesworth and Maro Itoje.
In calculating sanctions for Salary Cap breaches the Independent Disciplinary Panel follows strict guidelines. For every £1 exceeding the £350,000 overrun threshold a fine of £3 is payable, and moreover if the breach is over £650,000 a 35 point deduction can be made. This led to the Disciplinary Panel imposing the fine of £5,360,272.31 and a 35 point deduction. Although Saracens’ infringement took place over three seasons from 2016 to 2019, the sanction does not apply retrospectively and only applies to the current season. Therefore, Saracens will not be stripped of its Premiership title from the past two years.
Saracens has decided not to appeal the decision of the Independent Disciplinary Panel, which could only have been challenged on the grounds that there was an error of law, the decision was irrational or that there had been procedural unfairness.
The points deduction could have a significant effect on Saracens’ current season. For example, Saracens would have finished in 10th place in the Premiership last season had a 35 point deduction been applied then. This season it will face the additional challenge of complying with the salary cap and being able to field its full strength team. In that context the Saracens Director of Rugby has stated that the club will prioritise avoiding relegation in the Premiership rather than focusing on the Champions Cup, despite Saracens being reigning Champions Cup champions.
Does the Salary Cap Apply to other Rugby Union Competitions?
In contrast with the English Premiership, the Pro14 does not have a salary cap. Most of the clubs in the Pro14, including all four Irish provinces, the Scottish clubs and some of the Welsh clubs, have a relationship with their respective national unions which effectively means that the risks, which justify a salary cap in the English Premiership, are not as prominent.
Contributed by: Patrick Murphy & Donnacha Egan