FIFA Player Transfers 101: Training Compensation, Solidarity Payments & Calculations
The sport of soccer – otherwise known as football in other countries – is becoming more and more popular in the United States. With the rise in its popularity is the rise in players transfers from the United States to other countries and vise versa.
Fédération Internationale of Football Association (FIFA) oversees and has developed a set of rules related to player transfers. These rules include how clubs who invested millions into their players can be compensated once these players are transferred. The rules did not apply to U.S. players because the Major League of Soccer (MLS) had not yet recognized these rules. In April 2019, that changed. MLS confirmed it will comply with these FIFA rules.
What are FIFA regulations on the transfer of players?
FIFA Regulations on the Status and Transfer of Players is a set of rules established to address things like:
- the status of players;
- eligibility criteria for players to participate in organized soccer; and
- player transfers between clubs belonging to different member associations.
Clubs include qualified youth academies as well as professional soccer clubs. The regulations, as mentioned above, outline how the clubs are to be compensated for the training and development of players who go on to be successful and sign contracts to play football professionally with another club in another country. The rules outline when compensation is necessary and how that compensation is calculated. The rules also require associations to keep passports of all their players to record all clubs at which the players trained.
What is training compensation & how is it calculated?
Training compensation is one form of compensation the FIFA rules allow. This payment may be required at two different times of a player’s professional football career:
- the player’s first time registering as a professional player for the first time in another country other than the one where he was trained; and
- the player’s subsequent international transfer.
In the first situation, the club where the player registers must pay training compensation to every club that contributed to the player’s training starting from the season of the athlete’s 12th birthday through the season of his 21st birthday.
In the second situation, when a player is subsequently transferred internationally, the new club must pay the immediately prior professional club training compensation.
Training compensation is due within a month of the player signing a professional contract. The compensation amount is calculated according to a specific equation: the value attributed to the level of training (determined by the country and the caliber of the club) multiplied by the number of years spent training (between the ages of 12 and 21).
Different clubs have different financial values according to the confederation to which it belongs and the caliber of the training – the latter of which is indicated by the category attributed to the club. There are six confederations under four categories of clubs. These categories are based on the financial investment the clubs spend on their players. Category I is reserved for the highest caliber while Category IV is the least.
FIFA provides this chart to indicate what compensation may involve according to the respective confederation and the respective category. This chart wasupdated in 2019.
For example, Fred is an American soccer player who trained at two different American academies before he was transferred to a UEFA club in Germany. Fred was trained from the age of 13 to 21 at one American academy for two years and the other academy for six years, the new UEFA club must pay these two academies compensation. Germany has clubs listed under all for categories within the UEFA confederation, and if the club to which the American player transfer is a category II club, then the club will owe the first academy €120,000 (€60,000 for two years) and the second academy €360,000 (€60,000 for six years).
What is a solidarity payment and how is it calculated?
Solidarity payments are those that occur when a football player is still in a contract but is transferred between different jurisdictions. Clubs pay transfer fees, and up to five percent of this fee is withheld to be used as the solidarity payments. Solidarity payments are distributed to all clubs that trained the player between his 12th and 23rd birthdays at a proportional rate depending on how long the player was at each club. Solidarity payments do not stop at the player’s 23rd birthday (like the training compensation payments do) but continue through the course of the player’s professional career each time he is transferred while under contract.
Transfer fees are usually not disclosed but can be in the millions (reportedly they have been as high as €222 million), so solidarity payments will vary. But to recap, solidarity payments are determined by:
- withholding 5% of the transfer fee; and
- dividing that amount proportionally among all clubs the player trained at between the ages of 12 and 23.
For example, using Fred in the above example, if he is transferred from a club in Germany to a club in Spain while still under contract with the club in Germany, the Spanish club will pay a transfer fee. If that transfer fee is equivalent to $8 million, then 5% is set aside (equivalent to $400,000). Fred’s first academy (where he spent 2 years) would receive $100,000 and the second academy (where he spent 6 years) would receive $300,000.
What is the purpose of training compensation and solidarity mechanism payments?
Southern California is home to two Major League Soccer (MLS) teams: Los Angeles FC (LAFC) and Los Angeles Galaxy and one United Soccer League (USL) team: Orange County Soccer Club. The prospect of transferring MLS and USL players to teams in other countries in greater today than any other time in the history.
For example, Christian Pulisic, an American soccer player, was transferred to Chelsea FC, a Premier League club, at the start of 2019 for anestimated sum of $71.78 million. His early training was primarily at PA Classics, an American training academy – but this academy did not benefit from its investment in Pulisic’s training. The academy could have received an estimated $550,000 through FIFA if the U.S. complied with FIFA rules.
As it is, in April 2019, the MLS confirmed that it would start complying with FIFA regulations. Reported by USA Today, the MLS believes compliance with these specific rules will enable academies and soccer clubs in the United States to continue to invest in new talent. The funds from these types of payments will be put into the development of young U.S. and Canadian players. The MLS Players Association, however, says the move is an attempt to limit opportunities for players.