Salary Cap Policy

Major League Soccer

The salary cap in MLS is the budget each team is allowed to devote towards their roster. For 2019, MLS salary cap was set at $4.24 million per team. The club must spread their salary budget across a minimum of 18 players and a maximum of 20 players. The investor-operators decide the individual players’ salaries, but no individual can earn more than $530,000 per year.[1] International and domestic players face the same salary caps, but MLS only allows 208 to play for the 26 teams in the league. Each team begins its inaugural season with 8 foreign players but can trade these roster slots such that some clubs have more than 8 and some have less than 8 during a given season.[2] Compared to other leagues, MLS has a relatively low salary cap ceiling, which further speaks to the league’s socialist monetary strategy. Some critics believe that this salary cap is good for initially league growth but will restrict its potential to become regarded as elite, for players will go to the CSL or Premier League to earn more money. Perhaps MLS wants to attract developing or retiring players who are not at their peak play, but several exceptions to the salary cap rules suggest that MLS is not fully committed to becoming a developmental or retirement league.

There are some exceptions to the salary cap, specifically outlined by the Designated Player rule and Targeted Allocation Money (TAM). The Designated Player rule allows MLS teams to acquire up to three players whose total compensation exceeds the league’s salary cap protocol. In practice, this rule enables MLS clubs to attract international players through more lucrative contracts.[3] For example, while the maximum single salary for a player in a club’s salary budget is $530,000 per year, Zlatan Ibrahimovi’s base salary as a designated player at LA Galaxy was $7.2 million.[4] Target allocation money (TAM) is a more recent league development. It essentially allows teams to sign or re-sign a non-designated player at a higher rate than that designated under the salary cap. TAM can also be used to convert a designated player to a non-designated player by buying down his salary to at or below the designated player threshold ($530,000 in 2019). If TAM is used to free up a designated player slot, the club must simultaneously sign a new designated player.[5]

The Designated Player Rule and TAM are more similar to the CSL’s trickle down strategy than any other aspect of MLS’ corporate structure. Still, the majority of these designated players came to the United States in their 30s, after reaching the peak of their career in another league. These rules corroborate that MLS is shaping itself into an elite retirement league, but its restrictions on foreign players suggest that this is not the only future of the league. Perhaps this foreign player restriction is an investment strategy itself, for it forces clubs to spend more on expanding American soccer, where the players are cheaper to acquire than the European or South American stars. Thus, MLS salary caps may only cap the level of play in the short term.

Chinese Super League

Prior to the transition of the CSL to an independent, league run corporate structure in 2020, there was no salary cap in place. According to Asian Football Confederation Statistics, the 16 CSL clubs spent a totally of $696 million on player salaries in 2018, well over three times that of MLS. Two years ago, Brazil midfielder Oscar joined Shanghai SIPG from Chelsea for an Asian-record of $70 million.[6] The following video, produced by Tifo Football, provides insight into the extent of CSL spending on top talent:[7]

In 2015, President Xi outlined several goals that justified this kind of spending: expanding the economy and entertainment sector through soccer, hosting world cup, mandating soccer in school, building a national team capable of winning. Although this spending is unsustainable in the long run, wealthy businesses and individuals have been willing to invest huge sums of money to show their commitment to the country’s aims. Although these high salaries have brought attention to soccer in China, they have failed to produce a national team capable of winning. The CSL is now more focused on sustainability and development than attracting top talent quickly.

In efforts to curb this lavish spending, the CSL recently introduced a salary cap on foreign signings. The cap is set at $3.3 million per year, compared to the $27 million that Oscar currently earns annually. CSL local player will also face a salary cap of $1.45 million. Each club is allotted a total salary cap of $95 million.[8] These rule changes are intended to make the league more sustainable and attractive to investors. However, there are several potential loopholes, such as performance bonuses that are not included in the salary cap. In conjunction with the new salary cap policy, the CSL will alter its stance on the foreign player quota. Under the new rules, each club can register up to seven foreign players during the 2020 season, but only six of them will be registered at one time, five can be in a squad list, and only four can play in one match. This is up from the quota of four foreign players on a squad list from previous years. A player who is born in China or has Chinese ancestry will not occupy a club’s foreign player quota.[9] The salary cap combined with the expansion of the foreign player quota will most likely increase the number of lower-paid foreigners but decrease the number of foreign starts in the CSL. Several Chinese soccer pundits, however, believe that the salary cap will not create an exodus of foreign stars because Chinese clubs will circumvent the rules with performance bonuses.

Despite these new rules, CSL clubs still pay players much more than MLS; CSL salary cap on foreign players is over 6 times the cap in MLS and their cap on domestic players just under 3 times as great. The new CSL policy appears to be financially motivated and not a result of rethinking the future purpose of the league as developmental or retirement. This steadfastness is further corroborated by the lawful unequal pay amongst foreign and domestic players. The Tifo video argues that President Xi encouraged investment in soccer so that the Chinese economy could expand beyond manufacturing. In fact, four English clubs are majority owned by Chinese business. The international versus national salary cap discrepancy suggests that the CSL is primarily interested in becoming elite quickly and secondarily focused on domestic development. However, the introduction of the cap begs the question of whether Chinese soccer can afford to compete with European and South American teams. More distributed spending on development, like the MLS, may be the only feasible route to a sustainable future.

[1] “What Is the MLS Salary,” Goal.

[2] “MLS Roster,” Major League Soccer.

[3] “MLS Roster,” Major League Soccer.

[4] “What Is the MLS Salary,” Goal.

[5] MLS Soccer Staff, “Targeted Allocation,” MLS Soccer.

[6] “Lavish Club,” China Org.

[7] “Chinese Super,” video.

[8] Price, “Chinese Super,” Forbes.

[9] Cooper, “Threat of Chinese,” 90 Min.