Competitive balance and financial and employment security in the PSL: ‘FFP’, minimum salaries and collective bargaining

Two primary problems in South African men’s club football are the competitive imbalance in the DSTV Premiership, our country’s top tier league, and the lack of profitability and financial sustainability of clubs, aside from the several exceptions.

Another issue perpetually plaguing the South African game is the lack of employment and income security for many players, which is brought into sharp focus every time a club is sold and is exemplified by the absence of minimum salaries across the Premiership and the second tier Motsepe Foundation Championship (both run by the National Soccer League [NSL], which trades as the ‘Premier Soccer League’ [PSL]).

The most widely used tool in professional sport to facilitate competitive balance and financial stability is some form of cost control mechanism. And the most common of these is the ‘salary cap’.

However, for a few reasons, a salary cap is not currently a viable solution for the local game.

But there are other mechanisms which can play an important role in improving such a sporting environment. These include ‘salary floors’, minimum (and maximum) salaries and squad size limits.

Such instruments can form part of a collective bargaining agreement (CBA), in this instance between the PSL, or its clubs, and the South African Football Players Union (SAFPU), the trade union representing professional footballers in the country.

The collective bargaining relationship between these parties is central to any changes which may be brought in.

‘FFP’, salary caps and other mechanisms

‘Financial Fair Play’ (FFP) is the name of the now-replaced cost control system imposed by UEFA on the clubs which compete in its competitions, including the Champions League. The phrase has become a synonym for cost controls in sport, and especially in football.

The identifying elements of this type of system are the limits which it places on spending by clubs on line items such as player and coaching staff pay, transfers, image rights payments and agent fees.

Salary caps can take various forms.

UEFA’s current system sets limits on expenditure as a percentage of revenue and profit on player sales, and it places a limitation on losses over a three-year period.

In the United States, the National Football League (NFL) and the National Hockey League (NHL) have ‘hard’ salary caps, which franchises are not permitted to go above. The National Basketball Association (NBA) has a ‘soft’ cap, in terms of which clubs are liable for a ‘luxury tax’ if they exceed the cap. In these leagues, cap figures are determined as a percentage of league revenues from the previous season. Major League Baseball (MLB) also has a luxury tax system in place.

Often, and invariably in the US, salary caps form part of CBAs between players’ unions and leagues, or their constituent franchises or clubs. So, in these cases spending limits are mutually agreed to.

Importantly, CBAs include other terms which also help achieve competitive balance. These relate to payment structure, squad composition and contractual instruments governing player movement and free agency.

A salary cap is sometimes coupled with a salary floor, which is a minimum figure for a team’s wage bill. In the NBA, NFL and NHL, for example, the floor is set at 85-90% of the cap. This prevents teams from using a salary cap to minimise costs.

In addition, in the vast majority of cases, CBAs set minimum salaries for players.

Often, minimum salaries will be stratified by experience (or draft status in the US context), on a sliding scale.

In some cases, CBAs set maximum salaries and salary brackets.

A salary cap is not the answer, but there are other options

Caps can bring regulation and sustainability. And in the US world of equal franchise revenues, they allow owners to minimise costs and increase profit margins. But South African football is a very different marketplace.

In 2010, the then PSL chief executive, Kjetil Siem spoke about the prospect of a salary cap (tied to revenues) being introduced together with minimum salaries.

However, it should be widely accepted that as things stand a salary cap is unlikely to work in local football, whether a flat cap or revenue-specific. This is primarily because of the extreme disparity in the financial prosperity of clubs, due to their close reliance on grants from the PSL and as a result of the extent to which owners inject capital into their clubs, whether out of ambition or necessity. This is putting aside the legalities of introducing a cap.

Nonetheless, other available mechanisms could play an important role in improving competitive balance in the top league and in facilitating a less precarious employment environment for players.

It seems implementing a limit on the size of squads could go some distance to ensuring a more equitable distribution of talent across the Premiership. In a data-driven analysis, The Outlier explored squad sizes in the Premiership and changes which could be made on this front.

Restricting the size of squads would hold the risk that with more affluent clubs unable to contract as many players as they are in the current regime, the salary of the average player who would be contracted elsewhere as a result of this measure – likely at a ‘smaller’ club – would be less.

As far as steps to improve employment security and living standards for players are concerned, we can consider salary floors and minimum salaries as possible corrective measures.

Provisions such as these can change the pay landscape in a league significantly, and whilst they raise the pay floor, not everyone is better off than they otherwise would have been. In the NFL, for example, the cost of upwardly mobile minimum salaries has been increasingly shorter careers and a shrinking ‘middle class’.

Over the years, the topic of minimum salaries has popped up regularly in local football, in the media, from fans and from within SAFPU.

Player exploitation through derisory salaries appears to be less acute an issue than it was a decade ago and beyond. And average salaries have risen markedly over this period, particularly in the Premiership, as TV money has increased.

But exploitation and the pay gap seem to still be concerns, especially in the second tier.

In 2017, the International Federation of Professional Footballers (FIFPro) conducted a survey which recorded that 38.4% of PSL players earned a monthly salary of less than R8 000. One must bear in mind, though, that this was six years ago, and that indications are the situation has improved in this regard.

Other traditional big-ticket items on the agenda of players unions in fulfilling their mandate to improve player wellbeing include broader support and services, such as retirement benefits and medical insurance. These things are being bartered over at the moment in Australian rugby league in the CBA saga playing out down under.

As far as improving financial sustainability of clubs is concerned, one of the ways to achieve this would be for the PSL to conduct more stringent due diligence in vetting prospective purchasers of clubs and league statuses. This would go a long way to reducing the regularity with which clubs change hands and to separating the wheat from the chaff in terms of ‘fit and proper’ owners.

Thereby, mismanagement and speculative investments would be minimised, as would the knock-on effects of this on players.

If the value of the Premiership broadcasting rights continue to increase like they have since SuperSport’s entry in 2007, the financial security of the less affluent clubs and the league as a whole should be on decent footing for the foreseeable future. This is in spite of the dearth of front-of-shirt sponsors and substantial revenue streams at club level.

Collective bargaining is central to changes being made

Through their collective bargaining negotiations, SAFPU and the PSL and its clubs have the ability to guide the local footballing landscape to take a form which is increasingly beneficial to the players and to other stakeholders including the clubs themselves, as well as fans.

In each of South African cricket and rugby, the CBA between the employer body and the players’ union sets a salary cap (or equivalent) and minimum salaries for players. And in both sports, the respective CBAs set out prescribed limits on squad size.

It is widely accepted in labour economics that centralisation of collective bargaining leads to lower wage dispersion. It follows that achieving a fairer pay ecosystem is more likely through collective efforts than through negotiations between clubs and individual players and their representatives.

Of course, SAFPU has available to it the last resort lever of strike action, which it can use as a power play if negotiations are deadlocked.

History shows us that effecting such change is often the result of a hard-fought, steady process. However, to quote Bill James, from the foreword to the autobiography of Marvin Miller, the former executive director of the baseball players’ union in the US, the sheer logical force of arguments – such as that in favour of the introduction of minimum salaries – can shatter an existing structure which has grown heavy with the weight of time.

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Sports labour lawMiles ChennellsFebruary 15, 2023