02 April 2020

Should Premier League football clubs in the UK continue to pay their players and managers in full during the coronavirus?


Libby Payne
Senior associate | UK

Click here to read more insights on how we can weather the coronavirus outbreak with you.

Premier League clubs are coming under increased pressure to ask (well paid) players and managers to reduce or defer payment of their salaries. Earlier this week, we saw Eddie Howe (Bournemouth FC) become the first Premier League manager or player, to take a voluntary pay cut during the ongoing coronavirus pandemic. Particular criticism is aimed at clubs who are continuing to pay playing staff in full, whilst furloughing lower paid staff in non-playing roles and claiming money from the Government under the Coronavirus Job Retention Scheme. However, this is not a straightforward matter.

Firstly, most players and managers are on fixed term contracts, often several years long. Any changes to these terms needs to be negotiated. Simply reducing or stopping salary payments will likely be a breach of contract and entitle the player or manager to resign and potentially claim the remaining sums due under the contract, subject to any set off against any income from a new role. This will not only be expensive in terms of potential damages and legal fees if there is a dispute, but also result in the club having to spend money to build up its team and coaching staff again. Conversely, non-playing staff are more likely to be on contracts that can be terminated on a few weeks or months’ notice. This means that if they do not agree to the change to their terms, they can be dismissed and could end up out of work at the end of the notice period with only a statutory redundancy payment to tide them over to their next role, and in these times, new roles may not be quick or easy to come by. The commercial reality is that it is therefore much easier to make changes for those employees in a less secure role than a lot of the playing and coaching staff.

Secondly, whilst players and managers may enjoy a high salary now, for players in particular, this salary could end and they could then struggle to find work, or well-paid work, after the end of their playing career. Bankruptcy amongst former professional (and indeed well paid) athletes is very high. Playing careers are short, and can be instantly cut shorter by injury, so players will try to maximise their income while they can. This is likely to be a consideration for players when looking at whether to reduce or defer payments, particularly when it is not clear what the ultimate financial position of the top clubs will be and whether they will be able to recoup any lost sums in future years, and particularly for players who have longstanding injuries or who are coming to the end of their playing career.

Thirdly, clubs have been criticised for accessing a Government scheme to reimburse costs of furloughed workers notwithstanding the relative wealth of many owners. They are not alone in this with many major businesses with wealthy owners taking the same approach. With the season disrupted and no matches for some time, redundancies are an option open to a club and the directors of that club will need to take decisions in the best interest of the club, and not merely the court of public opinion. They are not prevented from accessing this scheme based on the guidance published so far and it would arguably therefore be irresponsible for the directors of these clubs not to do so.

Finally, these are unprecedented time and we do not know what the ultimate effect will be on clubs and players in the long term and if and when the current season will be completed. Clubs are naturally taking decisions to access what support there is and will be thinking about ways to try to reduce costs in a prudent way, cognisant of the risks of simply breaching contracts. Players and managers will also naturally be cautious about undermining their position. However, if players or managers were to take a pay cut, like Eddie Howe has, this may be a useful negotiation tool for contracts in the future. There is no guarantee of this and as such it is understandable that player unions are being asked to take the lead and for there to be a collective approach to this, presumably with some safeguards. This may give some comfort to players who feel torn between taking care of their own finances and doing the ‘right thing’ at a time of international difficulty.

As we all adjust and as the way forward becomes clearer, the approach of clubs and players may change over time to balance out as ultimately it is not in the interests of playing staff to have clubs closing due to financial difficulties. Whether or not clubs and leagues will need further support from the UK Government or will be in a position to repay support that is given to them remains to be seen.

Click here to read more insights on how we can weather the coronavirus outbreak with you.

Libby Payne Senior associate | London, Cambridge

Category: Article