Is there a salary cap in MLS? How contracts work in Major League Soccer
It’s fair to say that the US likes to do sport their own way, and who can blame them? The MLS is very much part of that, and a key difference it has to global soccer is that there is a salary cap in place.
At least, that’s the simple version. There are various layers, exceptions and nuances to it, though.
So, let’s explore the MLS salary cap and explain what it’s all about.
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Why does the MLS have a salary cap?
The reason is very simple: because the US demands a level playing field for all its sports teams.
In Europe things are obviously very different. The super clubs have much higher commercial revenues than the rest, leverage that into paying the best salaries, which then (usually) translates into dominance on the pitch.
The MLS, and US Sport in general, want nothing to do with that kind of thing. They want fair and even competition in which sporting prowess is the deciding factor, not money.
US Sports have other mechanisms for preserving the level playing field too, such as the draft system. Unlike Europe where, again, the richest clubs often pick and choose the best young talent, in the US the worst performing teams have the first picks of the most talented college players.
What is the MLS salary cap?
The salary cap is the maximum amount of money each team can pay on wages. They don’t have to spend it all, but they can’t go above it. It’s also a hard cap, meaning it’s the same for everyone rather than a percentage of revenue.
In 2023, that cap is $5.2m, although there is an additional $1.9m available to GAM (General Allocation Money) and TAM (Targeted Allocation Money), but more on that later.
Additionally, there are minimum and maximum wages for players set annually by the MLS.
That money has to be spread across a maximum of 20, and minimum of 18, players in the senior team. However, Supplemental Roster players do not count towards the cap.
General Allocation Money is cash each club receives from the league. It is there to compensate clubs for losing players in expansion drafts or losing players to non-MLS clubs and that kind of thing. GAM can actually be traded between clubs, though.
What are designated players in MLS?
Designated players are players who are outside of the salary cap and are reserved for special talents.
Generally they are big-name players from Europe, such as David Beckham, Zlatan Ibrahimovic and Thierry Henry, or big-name US players returning from Europe, for example Landon Donovan.
The rule is sometimes called ‘The Beckham rule’ as it was created specifically to help him come and play in the US when the salary cap would ordinarily not have allowed it.
Each club gets three designated player slots in their squad to fill.
What is Targeted Allocation Money in MLS?
If a team wants to retain a designated player and convert them to a normal roster spot with a reduced salary, then TAM is how they do it. It’s essentially parachute payments for clubs who want to keep designated players after the star has waned a little.
In 2023, the TAM is $2.7m, but there are strings attached. For example, if TAM is used to convert a designated player to a normal roster spot, the designated player slot must then be filled by a player of equal or greater value.