By Dan Chapman
Updated in November 2016
As clubs begin their recruitment drive for next season, I am increasingly asked (whether in respect of players that we act for, clubs that we advise and work with or – mostly – out of idle curiosity) how the compensation system works. Where a professional player, under the age of 24, has been offered a new contract by his club (subject to certain requirements that the offer must meet set out in Rule 64.3 of the Football League Rules) and he rejects that offer in order to take up the opportunity to sign for another club, compensation will be payable. This is not to be confused with training compensation under the EPPP regime (that applies to Academy players), an entirely different proposition.
In the majority of cases, clubs will reach mutual agreement on a compensation fee. However, in others the two clubs’ valuations will differ, sometimes significantly, and the matter will need to be settled through an arbitration process.
That process is operated by the Professional Football Compensation Committee (PFCC). The PFCC is incorporated under the rules of both The Football League and Premier League, and forms part of the collective bargaining agreement with the Professional Footballers’ Association. The PFCC comprises of an independent Chairman, appointees from The Football League and Premier League (as appropriate), an appointee of The Professional Footballers’ Association and an appointee of the League Managers’ Association.
PFCC hearings require each club to provide evidence to support their valuation of the player in question. In making its judgment the committee will take into account the costs of both clubs in operating a Football Academy or Centre of Excellence, as well as the age and playing record of the player, the length of time he was registered with his original club, the terms offered by both clubs, the status of the two clubs, the substantiated interest shown by other clubs in acquiring the registration of the player and any amounts paid by the original club to acquire the player in the first place.
Unlike FIFA’s formulaic approach which provides foreign clubs with a fixed tariff for compensation, this domestic process is said to provide the advantage of allowing greater flexibility in setting the level of compensation according to the merits of each individual case. The counter to that is that – unlike with the FIFA tariff – there is always inherent uncertainty, and this in my experience can work against players ; particularly lower down the Football League where clubs often feel that they can not afford to carry the risk of uncertainty. Or they may simply feel that the signing of a player governed by the PFCC regime is too complex.
In deciding on a compensation figure, it is not uncommon for the PFCC to set fees that build as the player becomes more established at first team level. It has now become quite usual for clubs to receive a basic compensation fee with further payments becoming due on the player’s debut, following a certain numbers of first-team appearances and after international appearances. It is also usual for there to be a sell-on fee should the player be sold at a profit at any point in the future.
Whilst the system is therefore uncertain, and it is difficult to advise a club or a player with firm precision as to what the likely level of compensation will be (and when acting for a player, this has to be a crucial factor in considering any new contract offer that has been made) I tend to use the following PFCC decisions as a framework (as they cover a good range of players in terms of their ability and status as at the point of the dispute). Even though each case will be different, in one’s submissions to the PFCC it would be perfectly proper to rely upon these precedents.
- Porter had made 34 league appearances for Leyton Orient between the age of 18 and 20. He rejected a new two year contract offer, and instead signed a three year contract with the Championship club Burnley.
- The PFCC decided that Burnley should pay Leyton Orient an initial compensation fee of £90,000.
- Additionally, Burnley were to pay Leyton Orient a further £17,500 after the player has made 15, 30, 45 and 60 appearances (i.e. a total further potential payment of £70,000).
- Burnley would also pay Leyton Orient a further sum of £100,000 if Burnley were promoted to the Premier League in the next three seasons and assuming the player remains at the club and had played at least 23 matches in the promotion season.
- Leyton Orient should receive 16.5% of any profit made by Burnley in selling the player to another club at any point in the future.
- Aaron Creswell had made 70 or so league appearances for Tranmere Rovers when, aged 21, he rejected a new long term contract offer. He signed for the Championship club Ipswich Town on a three year contract.
- The PFCC decided that Ipswich Town should pay Tranmere Rovers an initial compensation fee of £240,000.
- An additional £45,000 was ordered in respect of the player making 15, 30, 45 and 60 appearances for Ipswich Town.
- An additional £100,000 was ordered should Ipswich Town achieve promotion to the Premier League in the next 3 seasons.
- Tranmere Rovers are to receive 20% of any profit made by Ipswich Town in selling the player to another club at any point in the future.
- Robert Hall had signed a professional contract at West Ham aged 17, and made four first team league appearances for West Ham. He also enjoyed successful loan spells, including in particular at Birmingham City and represented England at under 16 through to under 19 level. Allowing his contract to expire, aged 20 he signed a three year contract at Bolton Wanderers.
- The PFCC decided that Bolton should pay West Ham an initial compensation fee of £450,000.
- Additionally, £250,000 will be due if Bolton are promoted to the Premier League in the next 3 seasons
- £2,500 per appearance was ordered for the first 100 appearances (for Bolton) in the Championship, or £10,000 per appearance for the first 100 appearances (for Bolton) if in the Premier League
- 20% of any profit made by Bolton Wanderers in selling the player to another club at any point in the future will be payable to West Ham.
- Anthony Straker joined Aldershot aged 18 having been released by Crystal Palace and went on to make in the region of 200 appearances in the Conference and League Two. He rejected a new contract, and aged 22 signed for Southend United on a two year deal.
- The PFCC decided that Southend United should pay Aldershot an initial compensation fee of £17,500.
- Additionally, Southend United would pay an additional £5,000 if they won promotion to League One during the two year contract.
- Southend will also pay Aldershot 20% of any profit it makes from selling the player to another club at any point in the future.
- James Collins joined League Two club Shrewsbury Town as 21 year old striker in January 2011, having previously been an Aston Villa player (who made no first team appearances for Villa).
- Quickly establishing himself as a first-team regular, James appeared 66 times in the League for Shrewsbury between 2011 and 2012, scoring 22 League goals. In the 2011/2012 season, Shrewsbury won promotion and James was their top scorer.
- In the summer of 2012, only 18 months after signing for Shrewsbury, an out-of-contract James signed for Swindon Town, who themselves had just been promoted to League One.
- The PFCC decided that Swindon Town should pay Shrewsbury an initial compensation fee of £140,000.
- Additionally, further payments of £20,000 after 15, 30, 45 and 60 appearances (totalling up to £80,000) would be due.
- Swindon would also pay Shrewsbury 20% of any profit it makes from selling the player to another club at any point in the future.
- Troy signed for Exeter City in February 2010 having previously enjoyed a successful loan spell for them (from his then parent club Tottenham Hotspur).
- For the then League One club, Troy made 115 League appearances before his contract expired in the summer of 2012. He signed for League One club Swindon Town.
- The PFCC ordered that Swindon should pay Exeter City an initial compensation fee of £200,000.
- Additionally, Swindon were to pay up to £80,000 based on future appearances.
- Swindon were also ordered to pay £40,000 if they gained promotion to the Championship whilst Troy remained an employee and £100,000 further if they gained Premier League promotion
- Swindon were ordered to pay Exeter 20% of any profit they made on selling the player to another club in the future.
- Midfielder James Dunne joined then League One club Exeter City in the summer of 2009 after a youth career at Arsenal.
- James appeared 110 times in the League for Exeter before the club were relegated in the summer of 2012, at the point of his contract expiry. James would sign for then League One club Stevenage.
- The PFCC ordered that Stevenage should pay Exeter City an initial compensation fee of £75,000.
- Additionally, Stevenage were to pay a further £25,000 after 30 and 60 appearances.
- Stevenage were also ordered to pay to Exeter 20% of any profit they made in the event of a future sale of the player.
- Jed had spent all of his youth career at Norwich City and turned professional aged 17. He made his first team debut for Norwich City in the FA Cup, away to WBA, in what would be his only first team appearance for the Canaries. He enjoyed successful loan periods at Cambridge and Yeovil Town, and played for England U16, U17 and U19. Jed was regarded by Norwich City as one of the best young goalkeepers in the country. He allowed his contract to expire and signed for Premier League club Aston Villa, immediately becoming their no.2 keeper.
- The PFCC ordered that Aston Villa pay Norwich City an initial compensation fee of £450,000.
- Additionally, if Jed represents England Under 21 and the full senior side, Norwich City will be paid a further £225,000.
- Appearances for Aston Villa trigger further payments, which in total could amount to a maximum sum of £500,000.
- Aston Villa will also need to pay Norwich 20% of any profit they make from selling the player to another club at any point in the future.
- Danny Ings signed for Burnley as a 19 year old in the summer of 2011 after many years at Bournemouth. It was reported that Burnley had paid a transfer fee in the region of £1 million.
- Danny appeared 122 times for Burnley in the League, scoring 38 goals, with 11 of those goals coming in the 2014/15 season in the Premier League.
- Signing for Liverpool in the summer of 2015 as a free agent, the PFCC would ultimately order Liverpool to pay Burnley an initial compensation fee of £6.5 million.
- Additionally, Liverpool must pay up to £1.5 million based on further appearances and also 20% of any profit they make in the event that they sell the player to another club.
- Curtis had spent his schoolboy years at Stoke City but after being released at 16 he joined Plymouth Argyle’s academy in 2008
- In 2010 Curtis signed his first professional contract with Plymouth and between 2010 and 2016 he started 211 Football League games for them
- Upon his contract expiring in the summer of 2016 Curtis, then aged 23, left the League Two club to sign for League One club Oxford United
- The PFCC ordered that Oxford United pay Plymouth an initial compensation fee of £200,000.
- Additionally, appearances and other factors would trigger further payments that could total another £80,000.
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The spearhead and Senior Partner of Full Contact, Dan is an experienced solicitor and advocate, with a specialist background in employment law and sports.
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