Demystifying Fees and Financial Compensation in Football Transfers

Demystifying Fees and Financial Compensation in Football Transfer

The Bosman verdict had the most obvious immediate impact of removing football clubs’ control of players whose contracts had expired, allowing them to sign new deals with rival teams (For a bit of background, the famous Belgian case from 1995 laid down the principle that football players whose contracts have expired are free to sign a new contract with other teams without the need to pay transfer fees to their previous teams. Failure to do so would curtail freedom of movement, which in is contravention of EU law). This ruling now has global applicability in football.

The clubs were against the Bosman ruling and argued that it posed a serious threat to the growth of football. It eliminated all incentives for players to be trained and developed because it would be less expensive to sign players who have already undergone this process than it would be to do so themselves. The clubs and club organisations brought up this matter with FIFA and its subsidiary football confederations, asking them to create transfer policies that adhered to EU legislation and fairness for the continued development of talents within the football pyramid, while still securing the clubs’ entitlement to reimbursement for players who moved to other clubs.  FIFA, as a result, developed rules that guaranteed compensation or payments to football academies and training clubs for developing players who eventually become skilled enough to land professional contracts. Training clubs were provided with two options for obtaining payment for players they were training and developing: training compensation and solidarity payment.

 

What is Training Compensation and how is it determined?

One type of compensation for football academies and training clubs permitted by FIFA regulations is training compensation. New clubs, on behalf of the player, may be required to make this payment at two distinct points in the professional footballer’s career:

  1. When they register for the first time as a professional player in a nation other than their home country.
  2. When they make a subsequent international transfer.

In the first scenario, any academy or training club that played a role in the player’s training from the season of the player’s 12th birthday through the season of his 21st birthday must get training reimbursement from the club where the player signs.

In the second scenario, the new club has to reimburse the player’s previous professional team for training expenses if the player is later transferred abroad.

Within one month of the player signing a professional contract, training compensation becomes payable. The value assigned to the degree of training (specified by the nation and the club’s standard) multiplied by the number of years spent training (between the ages of 12 and 21) is the formula used to establish the compensation amount.

 

Also read: Addressing the Concept of Neutrality in Sports

 

The financial worth of a club varies depending on the confederation it belongs to and the quality of its training, which is reflected in the category assigned to the club, for example, Clubs within the Confederation of African Football are within categories II-IV, depending on the Club’s development. The six confederations fall into four different club classifications. These classifications are determined by the amount of money clubs invest in their football academies. Category IV is for lower calibre products, while Category I is only for the highest quality.

It should be noted that under Article 20 of the FIFA Regulation on Status and Transfer of Players, Solidarity Payments and Training Compensation do not apply to Women football players. This is however inappropriate, as men’s football is governed by the same principles and financial transactions as women’s football. Non recognition of solidarity payments and Training compensation is a blow to academies that produce women footballers, a very good opportunity to encourage them to keep the line of production open is being missed. Consequently, it is advised that FIFA bring the women’s game into equilibrium with the men’s game in this aspect in order to encourage it’s continued development.

Here are some questions surrounding Solidarity and Compensation Payments to clarify the concepts.

What is a Solidarity Payment, and what is the mechanism for payment?

Football clubs and talent production academies whose players (who are under contract) are transferred across different countries are entitled to be paid solidarity payments. Transfer fees are paid by buying clubs, and up to 5% of these fees are deducted for solidarity contributions paid to all the academies and training clubs. Depending on how long the player spent at each club, solidarity payments are given out proportionately to all of the clubs that trained him between the ages of 12 and 23. Unlike training compensation payments, which end when a player is 23 years old, solidarity payments follow the player throughout his professional career and are paid whenever he is transferred while still under contract.

Are Football Associations entitled to Solidarity payments and Training Compensation?

Bearing in mind the intention of FIFA, for the creation of these dual regimes of player compensation as an aftermath of the Bosman Ruling, which is effective in keeping the production line of young football players going and empowering training clubs and football academies to keep delivering on their mandate, it is hard, if not impossible to see how Football Associations could benefit from the player compensation programme. The only payment due to Football Associations in transferring players is when it issues an International Transfer Certificate to a player getting transferred out of its jurisdiction.

Are football Agents entitled to Solidarity Payments and Training Compensation on the Players they brokered their Transfer?

Football agent’s fees on transfers are a lump-sum payment made by the player, which in practice are usually made by the buying club on behalf of the player. The subsequent income made by football agents is a fraction of the overall earnings (Salaries or Wages) of the player, up to 10% of the entire earnings.  Consequent to the above, football agents are not entitled to Solidarity payments and Training compensation.

 

Authors

Olabisi Afolabi
Beverley Agbakoba-Onyejianya