MLS teams only have so much money to spend. It is a source of frustration for teams as they look for players in the transfer market. It is why teams search high and low for bargains and use every last dollar they can find to supplement their squads.
The particulars of the MLS salary budget create another layer of restrictions. It isn’t just a matter of adding all of the salaries together and making sure they fall within the established parameters. Every player is assigned a salary budget charge (or cap hit, in general sports terms) to calculate how much space he occupies.
The most recent version of the Collective Bargaining Agreement outlines how MLS assigns those salary budget charges. As you might expect, the designated section (Section 10.6) offers plenty of twists and turns along the way. It is why teams must move carefully to fit their senior rosters within the 2016 salary budget of $3.66 million (not including Designated Player overages shouldered by investor/operators, allocation money and other measures used to defray salary budget charges).
Let’s use a hypothetical player — Player X — as an example. In order to make this as straightforward as possible, this player is making $100,000 on a straight one-year contract. It is worth noting that most players operate on multi-year deals with a combination of guaranteed years and option years.
1. Start with the player’s annualized base salary and then multiply it by 1.04
This is the first provision of the CBA article, complete with the four percent markup. The math is simple: Player X’s budget charge increases from $100,000 to $104,000.
2. Add any signing bonus to the budget chargeon a cash flow basis
As a part of his one-year deal, Player X received a $5,000 signing bonus. His budget charge increases from $104,000 to $109,000.
3. Add any readily achievable individual bonus in the player’s contract
Readily achievable individual bonuses are “calculated largely, but not solely, by reference to the Player’s performance in a previous year.” Those figures are determined by MLS (after consultation with the MLS Players Union) for players who did not play in the league in the previous season or who sustained an injury.
Player X is on a modest contract. He isn’t likely to make the MLS All-Star team or win one of the major individual honors. His budget charge stays at $109,000.
4. Add any housing or car allowance in the player’s contract
Car and housing allowances are standard fare in contracts across the world. They are somewhat more difficult to procure in MLS because they factor into the salary budget charge.
Player X focused on his salary first and foremost. He skipped out on car and housing allowances. His budget charge stays at $109,000.
5. Add any loyalty bonus
Some players receive a bonus for staying with the club for a set amount of years. Player X — given his short-term allegiance — does not. His budget charge stays at $109,000.
6. Add any additional compensation (including any roster bonus)
This catch-all clause allows MLS to roll other contractual perks into a player’s salary budget charge. Player X doesn’t have any of those frills, though. His budget charge remains at $109,000.
7. Add any marketing bonus (including footwear and gloves)
Some players generate additional money by wearing a certain type of shoe (notably adidas, a MLS sponsor) or a certain pair of goalkeeping gloves. Player X probably doesn’t fall into that category. His budget charge is still $109,000.
8. Add the acquisition cost for loan/transfer
This component reflects the need to account for player fees. Those charges — the sum doled out for a permanent or temporary move — count against the salary budget, usually across the course of the contract. It is why a player with a modest salary can carry a much larger budget charge than his sticker price might suggest.
Player X signed on a free transfer. Therefore, his budget charge is still $109,000.
9. Add the cost of processing a visa or a green card
MLS includes the expenses related to obtaining the necessary working or residency papers for foreign players. The most typical visa used for MLS players — the P-1 work visa for internationally recognized athletes — costs $190, according to the U.S. Department of State. The cost of legal representation often increases the price tag substantially.
Player X is an American citizen who does not need a visa or a green card. His budget charge remains $109,000.
10. Add any fee payable to an agent or a representative
Agents need to make their cut on any deal. The structures vary from player to player and contract to contract. The burden of paying the agent is part of the negotiations.
In this case, the deal included a $10,000 fee (10 percent) doled out by the league. That figure counts here. The budget charge increases from $109,000 to $119,000.
11. Add any other costs reasonably determined by MLS after consultation with the MLS Players Union
There are no more fees to roll into the budget number. Player X counts for $119,000 against the salary budget this year.
As this process shows, the player’s reported base salary is only one component of his salary budget charge. Other factors increase the salary budget charge and limit flexibility as teams build their rosters. It is a process worth bearing in mind as teams continue to make additions ahead of the start of the season and work toward budget compliance before Opening Day.