Summer is traditionally a time for football transfers. It’s when clubs strengthen and make the necessary adjustments to their squads ahead of a new season and it’s a period of excitement and fresh hope for fanbases. But how does this process work from behind the scenes? What must a club do when signing a player in order to register the new arrival with LaLiga? What is involved in the Economic Control and Squad Cost Limit rules that have been approved in LaLiga?
Here comes a look at how the LaLiga transfer market works from within.
Economic Control is a regulatory framework that was self-imposed by the LaLiga clubs and SADs (public limited companies), launched in 2013 with the clear objective of guaranteeing the sustainability of the competition and of the clubs themselves through financial review. This framework applies in the top tier, which is LaLiga Santander, and in Spain’s second division of LaLiga SmartBank too, so all participating clubs must abide by the same rules. LaLiga’s Economic Control is preventative and coexists alongside retrospective measures such as UEFA’s Financial Fair Play. The clubs know how much they can spend in advance, making it easier to stay within the limits and preventing the creation of unsustainable debt. Looking at the five major European leagues, this measure differentiates LaLiga from the others when it comes to the transfer market.
When making signings, one of the pillars of Economic Control is particularly important, that of the Squad Cost Limit (SCL). This is, in other words, the amount that each club can spend on their squad. It should be noted that the squad is made up of Registrable and Non-Registrable parts. The Registrable squad refers to the players with shirt numbers 1 to 25, the head coach, assistant coach, fitness coach and other coaches with similar roles. However, there are also players who aren’t assigned to a particular squad of the club or some who have already departed but who still account for a cost (such as a compensation). So, the Non-Registrable squad encompasses the other players and coaches at the club.
This framework isn’t only concerned with the salaries of these professionals, but with various other factors too, such as variable payments, image rights payments, agent fees, amortisation of transfer rights, loans costs, social security contributions, compensations, 25% of the purchase option price (when it’s quite likely to be carried out), license fees and other remunerations. As such, any new player a club wishes to register must fit within the club’s SCL.
Looking at all the factors that make up the SCL, the limit for each club corresponds to a simple equation: budgeted non-sporting expenses are subtracted from the budgeted revenues, taking also into account the debt repayments, as well as the losses to be recovered. The remaining sum is the SCL of the club in question.
When a club or SAD signs a new player they send all the documentation to LaLiga, who will authorise or reject the registration of the player, based on the rules and on the SCL at the date of the application. There is a Valuation Body that, using reports from independent experts and following the rules set out in the policy framework, can revise any particular operation, for example, to ensure that a deal is in line with market values and/or economic trends. This guarantees that all registrations of players by LaLiga clubs are in line with Economic Control. Only in this way can it be ensured that all of the teams are competing with the same rules and that there is no form of financial doping. Above all, this ensures the sustainable growth of LaLiga clubs.
The application of Economic Control in LaLiga and the responsibility of the clubs have already produced undoubted benefits. From 2014/15 to 2019/20, the combined equity of clubs rose by 250%. Meanwhile, debt owed to public bodies has gone down from €650m in 2013 (the majority overdue) to just €17m in 2021 (all up to date). Furthermore, complaints from players over non-payment have fallen drastically, from €89m worth in 2011 to €1.5m worth in 2021, with most of the current objections stemming from conflicting interpretations of criteria, rather than unsubstantiated failures to pay.
In the time since the introduction of Economic Control, the positive off-the-pitch results have been accompanied with success on the field of play, as 17 of the past 26 European titles in this time have been won by Spanish sides. All players who ply their trade in LaLiga know that they are in a competition that is very strong in a sporting sense and, at the same time, stable financially. That is a double achievement, one that is even more impressive in the recent times of the COVID-19 crisis.
Which bodies play a role in establishing the SCL?
When a club or SAD sends the documentation for a new player, the managing body of LaLiga’s Economic Control is in charge of authorising the registration request. Furthermore, LaLiga is also responsible for approving the SCL of each club. In order to make these decisions, there are some specialised bodies and tools that act as guarantors of the just compliance with the rules. There is a team of analysts in the Economic Control department at LaLiga, there is a Validation Body and there are technological appliances (software, BI&A, AI, etc). Nothing is left to chance.
This is all done to reassure clubs that the rules are being followed to the letter. To provide further guarantees, there is auditing of data and the compilation of independent expert reports. In the case of any discrepancy, it is possible to go to the Financial Supervision Committee of LaLiga’s Economic Control, to a UEFA Appeals Committee (RFEF – Spanish Federation) or to the ordinary courts.