How does it work?

The NRL Salary Cap for 2008 is $4.1m for the 25 highest paid players at each club. If each player was paid an equal amount, they would get about $160,000 each. Each club can exercise its discretion in relation to how much individual players are paid, providing that total payments do not exceed the $4.1m cap. In addition to the $4.1m Salary Cap for top 25 players, each club may spend up to an additional $350,000 on players outside the top 25 who play in the NRL competition.

In 2008 the NRL has introduced an exciting new competition for players 20 years and under. Known as the Toyota Cup NYC Competition, this new competition will have a Salary Cap of $250,000 for the top 20 players who qualify for the Toyota Cup but do not sit in the clubs top 25 Salary Cap. In addition to the Salary Cap for the top 20 NYC players, each club will be able to spend an additional $50,000 on players outside the NYC top 20 who qualify and play in the NYC.

Why have a Salary Cap?

The NRL Salary Cap serves two functions.

The first is to assist in 'spreading the playing talent' so that a few rich clubs can not simply out-bid poorer teams for all of the best players. The NRL believes that if a few clubs were able to spend unlimited funds in such a way, that it would reduce the attraction of games to fans, sponsors and media partners due to an uneven competition. Allowing clubs to spend an unlimited amount on players would drive some clubs out of the competition as they would struggle to match the price wealthy clubs could afford to pay.

Another reason for having the cap is to ensure that clubs are not put into a position where they are forced to spend more money than they can afford in terms of player payments, just to be competitive.

Where did it come from?

Salary Caps have been part of sport for many years. The NSWRL first introduced a Salary Cap to Rugby League in 1990 and the NRL has had a Salary Cap since its inception in 1998. The AFL introduced a Salary Cap in 1985 and major overseas sports such as the NFL and NBA in the USA also use Salary Caps.

Salary Cap Timeline

How much can Clubs spend?

In 2008 the Salary Cap will be a maximum limit of $4.1m for the 25 highest remunerated players at each club. All other players that play NRL in the current year must fit under a $350,000 Salary Cap this figure is commonly referred to as the 2nd Tier Cap.

For players in the top 25 Salary Cap or 2nd Tier Salary Cap, the Salary Cap value for a player each year is broken down into the following categories:

• Playing Fee - fully included in the Salary Cap
• Included Benefits - all benefits provided to players including accommodation, travel, motor vehicles, interest free loans and manager's fees and any applicable fringe benefits tax.
• Win bonuses & appearance fees - Payments for appearing in or winning a game are calculated based on the number of NRL games the player played in the prior year multiplied by any applicable bonuses. For win bonuses, the calculation is capped at 13 wins.
  Example: A player appeared in 10 NRL in 2006 and now has a 2007 Contract for a $50,000 contract fee plus $1,000 per game. His Salary Cap Value would be $50,000 plus 10 times $1,000 = $60,000.
• Other bonuses – Any other bonus contained in a player's contract will be calculated in the Salary Cap if the NRL Salary Cap Auditor expects him to achieve the bonus based on his prior year's performance.
  Example: A player played State of Origin in 2006. His 2007 Contract includes a $20,000 State of Origin bonus. This bonus will be included in the player's 2007 Salary Cap Value.

Note: Where a bonus is achieved by a player but was not assessed in the player's Salary Cap Value, the bonus is carried forward and calculated in the player's Salary Cap Value for the following year.

Is any Remuneration excluded?

In addition to allowances, the Salary Cap Auditor has specifically excluded the following benefits to players:

• Tertiary education (TAFE & University)
• Approved Traineeships
• Medical insurance costs
• Relocation & temporary accommodation costs

In addition to the top 25 Salary Cap, clubs will have a maximum limit of $250,000 to spend on the 20 highest remunerated players who do not form part of the top 25 salary cap and who qualify for the NYC (turning 20 or less in the current year). All other players who play in the NYC must fit under a 2nd Tier Cap of $50,000.

For players in the top 20 Toyota Cup Salary Cap, the Salary Cap value for a player each year is broken down into the following categories:

• Playing Fee – fully included in the Salary Cap
• Included benefits – all benefits provided to players including accommodation, travel, motor vehicles, interest free loans and manager's fees and any applicable fringe benefits tax.
• Win bonuses & appearance fees – Payments for appearing in or winning a game are calculated based on the number of NRL games the player played in the prior year multiplied by any applicable bonuses. For win bonuses, the calculation is capped at 13 wins.
  Example: A player appeared in 10 NYC games in 2007 and now has a 2008 contract for a $10,000 contract fee plus $500 per game. His Salary Cap Value would be $10,000 plus 10 times $500 = $15,000.
• Other bonuses – Any other bonus contained in a player's contract will be calculated in the Toyota Cup Salary Cap if the Salary Cap Auditor expects him to achieve the bonus based on his prior year's performance.
  Example: A player played U20's for NSW in 2007. His 2008 Contract includes a $2,000 U20's NSW bonus. This bonus will be included in the player's 2008 NYC Salary Cap Value.

Note: Where a bonus is achieved by a player but was not assessed in the player's Salary Cap Value, the bonus is carried forward and calculated in the player's Salary Cap Value for the following year.

Is any remuneration excluded?

The Salary Cap Auditor has specifically excluded the following allowances for players to encourage clubs to spend money on career development outside football for players in the Toyota Cup:

• Up to $10,000 net per player for Tertiary education (TAFE & University)
• Up to the award rate for Approved Traineeships
• Up to $10,000 net per player towards an approved apprenticeship or pre-apprenticeship program.
• Up to $10,400 per annum in living away from home allowances.
• Medical insurance costs.
• Relocation & temporary accommodation costs.

Are there any allowances?

The only allowance a club may use to pay players outside of the Toyota Cup Salary Cap is an allowance of up to $20,000 across the top 20 NYC players for secondary education.

What about money paid from other people or companies?

The basic guide is that if a player is receiving money from any person as a way of inducing him to play for the Club, then that money will be included in the Salary Cap.

Income that a player earns from parties not related to his Club is generally not included in the Salary Cap, however the details of the agreement must be advised to the Club by the player. The Club must then get approval for the agreement from the Salary Cap Auditor in order for the Remuneration to be excluded.

In 2006, the NRL also introduced an allowance for players who enter into Third Party Agreements with club sponsors. IN 2007 three of the top six players are allowed to earn up to an extra $50,000 each from sponsorship leveraging but the total payments under these sponsorship leveraging agreements must not exceed $150,000.00 per club.

How can some clubs have so many elite players and still be under the Salary Cap while other clubs at the bottom of the table seem to be just under the Salary Cap?

The reality is all clubs spend the Salary Cap but not all are successful on the field and, someone has to come last and someone has to win, regardless of what they spend. Some clubs will attract players on the basis of what the club can offer a player's career rather than just money. Other clubs may need to spend more money to attract the same player.

Many factors affect individual player's remuneration levels. Some of the reasons why a player may sign for less would include:

• Staying close to the player's home town and family.
• The chance to work with one of the top coaches in the game.
• Being part of a winning team and the potential to play in the Telstra Premiership Finals series or Grand Final.
• Increased opportunity to play NRL with that club due to a lack of competition for the player's preferred position.
• The increased profile a player may enjoy in a one-team town.
• The number of support staff, their expertise and the support facilities.
• Education and welfare support structures.

In addition, a player's salary package may include benefits that are specifically excluded from the Salary Cap, such as the payment of medical premiums, university fees etc.

How does the Salary Cap Auditor monitor the Salary Cap?

All NRL player contracts must be lodged with the Salary Cap Auditor. These contracts are reviewed and each player's remuneration is included in the Salary Cap. In addition, the CEO and Chairman of each club must provide a statutory declaration to the NRL at the beginning and end of each season in support of the club's Salary Cap calculation.

The Salary Cap Auditor monitors each club's Salary Cap position throughout the year based on the information provided by clubs. In addition, the Salary Cap Auditor may perform investigations into the remuneration of players if discrepancies arise. These investigations usually involve the club and its associated entities and cover all payments made and agreements entered into that may result in benefits being provided to players.

The Salary Cap Auditor also continually monitors media reports and makes enquiries in an effort to uncover any information that may have Salary Cap implications.

When clubs have been found to either breach the Salary Cap or have made undisclosed payments to a player, then the club is issued with a breach notice.

Why hasn't the Salary Cap gone up?

The Salary Cap has in fact risen substantially since its introduction in 1998. In that year the Salary Cap was $3.25m for the top 25 players and $500,000 for all players outside of the top 25 regardless of whether they played in the NRL.

In 2007 the base figure is $4m with a further $350k being available to all other players who play NRL in 2007.

In 2008 the base figure will be $4.1m with a further $350k being available to all other players who play NRL in 2008.

In addition clubs with be able to spend an additional $250,000 plus allowances on players in the NYC with a further $50,000 being available to all other players who play in the NYC in 2008.

Why do clubs have to let players go after they have been successful?

The value of a player rises when they have played well and the club has a successful year. If players improve their worth by becoming a representative player for example, then the club needs to increase their pay or face the fact another club will poach them and pay him his new market rate. It is fair to say that a club will release a player and blame Salary Cap pressures but this is not always the case as quite often the club will not look to re-sign a player in favor of upgrading another player or recruiting another player from outside the club. It is easy to blame the Salary Cap when the real reason may be quite different but the club does not want to be painted as the 'bad guy'.