New Financial Sustainability Rules for WSL and WSL2

The previous Salary Cap Regulations have been rebranded the Financial Sustainability Regulations (FSR) following the direction of travel in the men’s European game. A new salary cap formulation is being introduced, setting out a maximum permitted squad spend per Club as follows:

80% of “Relevant Revenue” plus any “Relevant Cash Funding” (subject to permitted thresholds).

Further details (including the defined terms) are set out below.

On its face, the new FSR clarify that, for the purposes of the regulations, calculating a Club’s Relevant Revenue only includes that attributable to that women’s Club, whilst leaving the door open for the Club’s group to provide certain financial support provided it is done by way of a “gift”.

How Does the New Salary Cap Work?

The FSR still operate under a salary cap mechanism, but this has been revised – a Club must not spend during a season more on its players than the total of:

(a) 80% of the Club’s Relevant Revenue; plus
(b) the Club’s Relevant Cash Funding up to the higher of (a) 25% of Relevant Revenue or (b) £4,000,000.

The FSR also introduce a salary floor, stipulating minimum salaries for players (categorised by age).

What is “Relevant Revenue”?

While the previous Salary Cap Regulations made generic and undefined reference to a Club’s “income”, the new FSR clarify that “Relevant Revenue” for these purposes means only “revenue directly attributable to the Club’s Women’s Football Activities”. This provides a welcome clarification that Clubs which are associated to a men’s team or are part of a multi-club group cannot piggy-back off revenue generated which does not relate to that women’s Club.

That said, contracts (like sponsorship agreements for bundled rights) may not expressly state the value attributable to the women’s Club and therefore this appears to leave scope for such value to be determined by the Club which may not reflect market value.

What is “Relevant Cash Funding”?

Notwithstanding the concept of Relevant Revenue, the FSR permits “Relevant Cash Funding” from the Club’s group which may include donations and contributions, equity and soft loans providing that the women’s Club is under no obligation to repay or do anything in consideration of receiving that support.

This effectively allows companies within a Club’s group to provide cash injections providing:

• it doesn’t request repayment; and
• it falls within the permitted thresholds (being the higher of 25% of the Club’s Relevant Revenue and £4 million).

To put the permitted thresholds into context, the salary spend in the WSL for the 23/24 season ranged from £10.3m to £1.7m [1].

Concluding Remarks

Clarification of the rules regarding Club spending on player wages, including that the Club’s group can provide certain financial support, is no doubt welcome news to committed owners of Clubs and investors.

However, some points to consider are:

• If player wages are in excess of what the Club can afford on its own will some of the financial issues in the men’s game creep into the women’s game?

• Clubs may rely on group support neglecting efforts to generate its own revenue / growth, with no certainty that that support will be provided on an ongoing basis.

• Clubs that do not have access to group support may struggle to compete with talent acquisition and retention.

• Is the permitted amount of group support enough for ‘disrupter’ Clubs to challenge the more established/bigger Clubs.

• The availability of group support is likely to decrease over time as the women’s professional games evolves.

It is also interesting to note that whilst the objectives of the FSR include promoting financial sustainability (to help protect and promote the long-term health and viability of women’s professional football) like the name of the Regulations suggests, they also include:

• Promoting growth and attractiveness of women’s clubs and WSL/2 to investors;

• Promoting and building the most distinctive, competitive and entertaining women’s football club competition in the world;

• Promoting the women’s clubs to remain competitive on the global stage;

• Facilitating sustainable wage growth and raising minimum standards for player compensation (including a floor as well as the cap); and

• To enable multi-year planning by clubs.

It appears that careful consideration has been given not just to ‘sustainability’ principles but also to seek to achieve competitive balance (noting the reported wide variance of salary spend in 23/24), as well as supporting the success of the English clubs competing in Europe. This is interesting, given that these wider objectives are not included by all sport leagues in this area, and may be a reflection of the current state of the women’s professional game and its direction of travel.

From our experience, the introduction of new Regulations tends to follow an enhanced appetite for monitoring compliance and prosecuting non-compliance and the FSR also sets out enforcement and disciplinary procedures (including the introduction of fixed penalties).
What is certain, is that salary caps and cost control mechanisms are a constantly evolving piece and no doubt this is an area which will be closely kept under review as the women’s game develops.

If you require further information and/or would like to discuss in more detail, please contact our Head of Women’s Football Harriet Leach or Lily Elliott, a Senior Associate in our Disputes and Regulatory team (lily.elliott@onsidelaw.co.uk).

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[1] This is based on figures for the 23/24 WSL arising from the Deloitte Annual Review of Football Finance, available here.

This article was co-authored by Harriet Leach and Lily Elliott.