Salary cap

In professional sports, a salary cap is a rule that decides how much money a team can spend on players' salaries. This limit can be set for each player, for the whole team, or both. Many sports leagues use salary caps, especially those that are closed leagues like closed leagues. The main reasons for having a salary cap are to control costs and to keep the competition fair. This helps stop richer teams from becoming too powerful by signing many more star players than other teams.

Salary caps often become a big topic when league leaders talk with players' unions. Because of the cap, players and teams cannot always agree on higher salaries, even when a team is making a lot of money. This has led to several strikes by players and lockouts by team owners and managers, as both sides try to find a fair balance.

Adoption

Salary caps are rules used by many sports leagues around the world to control how much money teams can spend on players. In North America, leagues like the National Basketball Association, National Football League, and National Hockey League use salary caps. Some leagues have a soft cap with extra rules for spending above it, while others, like Major League Baseball, use different methods.

In the United Kingdom, top rugby leagues in England and Wales have salary caps. In Australia and New Zealand, sports like Australian rules football, rugby league, and basketball also use salary caps. In Eurasia, the Kontinental Hockey League has had a salary cap since 2008. France and China have also introduced salary caps in their top football leagues. Some European football leagues have talked about adding salary caps to help control spending.

Benefits

In theory, salary caps have two main benefits: they help teams stay close in skill, and they keep costs under control.

A salary cap stops richer teams from buying up all the best players and making it too hard for other teams to win. This keeps the games more exciting because fans never know who might win. If one team keeps winning easily, fans of other teams may lose interest.

Salary caps also help teams avoid spending too much money on players. Without limits, some teams might spend a lot to win right away, but then struggle financially later. This can make the sport unstable, and fans may lose interest if teams keep going broke or moving to new places.

Hard cap, soft cap and salary floor

A salary cap can be a hard cap or a soft cap. A hard cap is a strict limit that a team cannot go over. If a team breaks this rule, serious penalties can happen, like losing championships. A soft cap allows a team to go a little over the limit in some cases, but there will still be penalties, like fines.

Some leagues also have a salary floor, which is the minimum amount a team must spend on players. This helps make sure teams don’t spend too little money and keeps the league fair. When the salary cap and floor are the same, every player often gets paid a similar amount.

Reserve clause

Before salary caps were introduced, clubs controlled players' contracts through a rule called the reserve clause. This rule stopped players from talking to other teams until their current contract ended, even if they wanted to move. This system started to change in the 1970s because players and their unions spoke up about fairness. A famous player named Curt Flood stood up for players' rights and tried to end this rule, even though he did not win his case. Over time, players with more experience could become free agents when their contracts ended, allowing them to choose where they wanted to play next. This led to competition among teams for the best players, which often helped richer teams in big cities get an advantage.

In North American leagues

National Football League

The new agreement made in 2011 started with a salary cap of $120 million. Each team must spend at least 88.8% of the cap on player pay, increasing to 90% later. The cap grows each year, except in 2021 when revenues dropped due to the COVID-19 pandemic. The NFL uses a strict cap that teams must always follow. Breaking the rules can lead to big fines, losing draft picks, or even canceling contracts. The cap helps keep costs down and makes the league more fair so richer teams can't just buy all the best players.

National Hockey League

The NHL once had a salary cap but it was very small. After a long fight about salaries, the NHL finally agreed to a strict cap in 2005. Now, each team has a limit on how much they can spend on players. The cap changes each year based on how much money the league makes. Teams must stay under this cap or face big penalties, including fines and losing draft picks. This cap helps keep things fair so teams can't just spend way more than others to get better players.

National Basketball Association (soft cap + luxury tax)

The NBA tried a salary cap once but stopped using it. In 1985, they brought it back to make things fairer. Teams have a limit on what they can spend, but there's a special rule that lets teams spend more to keep their own star players. If teams spend too much over the cap, they have to pay extra money, called a luxury tax, which goes to teams that spend less. This helps balance things out so teams with more money don't always win.

Major League Baseball (luxury tax)

Baseball doesn't use a salary cap. Instead, if teams spend too much, they pay a tax on the extra money. This tax goes to help the league. The idea is to stop very rich teams from spending way more than others. Even with this, teams with lots of money still often do better, but it's not guaranteed they'll win every time.

Major League Soccer

MLS also uses a salary cap. Each team has a limit on how much they can spend on players, except for a few special cases. Teams can also use extra money in special ways to pay for certain players. This cap helps keep things fair across all teams.

Canadian Football League

The CFL has a salary cap too. Teams can't spend more than a certain amount on players each season. If they do, they face fines and lose draft picks. This cap helps make sure all teams have a fair chance, no matter how much money they have.

Major League Rugby

Major League Rugby has a team salary cap of $500,000.

Other North American leagues

Many other leagues use salary caps too. For example, the Arena Football League had a cap, and the National Women's Soccer League also uses one. These caps help keep things fair and stop richer teams from dominating by spending much more on players.

In Europe

Salary caps are not commonly used in Europe. However, some European sports competitions and leagues have successfully introduced them. For example, rugby league's Super League, mainly in England with a team also in France, has a salary cap. The league has used promotion and relegation for most of its history.

In rugby union, two major leagues—the English Premiership and the French Top 14—have also introduced salary caps. The Premiership's cap has been in place since the late 1990s and has increased over time. Special rules help teams manage their squads during important tournaments.

The most notable ice hockey league with a salary cap in Europe is the Kontinental Hockey League. Despite challenges like different currencies, the league implemented a cap to control costs and maintain fairness.

Several European football leagues have considered introducing salary caps to help clubs spend responsibly. However, challenges such as free movement of players between leagues, international competitions, and varying tax systems make it difficult to implement a cap across European football.

In Australia and New Zealand

Australian rules football

Main article: AFL salary cap

The Australian Football League has had a rule limiting how much money clubs can spend on player salaries since 1987. This helps make sure that richer teams cannot dominate the competition by signing many top players.

The limit was set at A$1.25 million for the years 1987 to 1989. Over time, this limit has increased to A$13,165,950 for the 2020 season. There are also rules to make sure teams do not spend too little on players.

Some players, like experienced ones or new rookies, may have special arrangements that affect how much they count toward the team's total spending.

The AFL Players Association works with the league to discuss player salaries.

Success of the cap

Since the rule was introduced in 1987, many different teams have had a chance to compete at the top level. This has helped keep the competition fair and exciting for fans.

Football department cap

Originally, the rule only covered player payments. Recently, there have been discussions about also limiting how much teams can spend on their football departments. Some teams have been spending much more on these areas, which could give them an unfair advantage.

In 2014, a new rule was added to tax teams that spend too much on their football departments. This helps keep spending more balanced across the league.

State and regional leagues

Other regional leagues also have their own rules to limit spending, though these are usually less strict than the main national league.

AFL Women's

In 2017, the AFL started a women's league. This league also has rules to limit how much teams can spend on player salaries, which have increased over the years to support the players better.

Rugby league

Main article: NRL salary cap

The National Rugby League has a rule limiting how much money clubs can spend on player salaries since 1998. This helps spread talent more evenly and makes sure clubs do not spend beyond their means.

The limit was A$9.6 million in 2018, with a minimum spending requirement as well. This rule helps keep the competition fair so that every team has a chance to win.

There have been times when some teams have won multiple titles in a row, showing that even with these rules, clever coaching and player recruitment can still lead to success.

Rugby union

Australia: Super Rugby

Australian teams in rugby's Super Rugby competition had a limit on how much they could spend on player salaries until 2018. This was introduced to manage financial pressures and make it harder for some teams to win titles.

The limit started at A$4.1 million and was adjusted over time. There were also some special rules for certain players, like those sponsored by teams or from other countries.

Eventually, a new agreement changed these rules, removing some special cases and adding a minimum spending requirement.

New Zealand: NPC

New Zealand's top rugby competition also had a rule limiting how much teams could spend on player salaries. This started in 2006 to ensure fair competition and better television ratings.

The limit was reduced over time because some teams were struggling financially. The purpose was to keep the competition balanced and sustainable.

Association football

A-League

Both the men's and women's association football leagues in Australia, known as the A-League Men and A-League Women, have rules limiting how much clubs can spend on player salaries.

The men's league had a limit of A$2.5 million in the 2021–22 season, which was adjusted over time. There are also special rules for certain players, like "marquee players" whose salaries do not count toward the team's total limit.

There have been cases where teams were penalized for breaking these rules, such as being fined or losing points in the competition.

The women's league had a limit of $450,000 in the 2021–22 season, with plans to increase this over time.

National Basketball League

The National Basketball League has a rule limiting how much each team can spend on player salaries. This limit was A$1.1 million as of the 2016–17 season.

There were also rules to spread talent more evenly, such as assigning points to players based on their performance. Teams had to keep their total points within a certain limit.

Over time, these rules changed. The limit became softer, meaning teams could spend a little over the limit but would have to pay extra. There were also special rules for certain players, like "marquee players" or young prospects from other countries.

Netball

The old trans-Tasman netball competition had a limit on how much each team could spend on player salaries. After 2016, Australia and New Zealand started their own separate leagues, each with their own spending limits.

Australia's new league started with a limit of A$675,000 per team, which has increased slightly over time. There are also minimum salaries for players to ensure they are fairly compensated.

Chinese Super League

After facing big money problems in 2020 because of COVID-19, the Chinese Super League had some tough times. In early 2021, one of the top teams, Jiangsu F.C., stopped playing, and another team, Shandong Taishan, was not allowed to play in an important tournament because they owed money.

To help fix these money problems, the Chinese Football Association set rules in December 2020 to limit how much money teams could spend on player salaries. Starting in 2021, teams could only spend a certain amount — about US$91.7 million — on all their players' salaries. There were also special limits for foreign players and for how much any one player could earn.

In rugby union

Salary caps are rules that limit how much money a team can spend on players' salaries in rugby union. These rules help keep costs down and make sure teams stay competitive, so richer teams cannot just buy all the best players. The limits shown here were accurate as of July 2020.

In cricket

Salary caps and currency conversions accurate as of January 2018.

2026 season