It was a classic local newspaper story from the mid-90s, joyfully regurgitated for the social media generation. “I’ve had enough Yorkshire puds, says United star Yeboah” ran the clipping from a 1996 copy of the Yorkshire Evening Post which did the rounds on Twitter last week, along with the story of how the Leeds striker’s unique bonus – two puddings per goal, plus one for each for his team-mates – had ended because “the Ghanaian hotshot’s goal-grabbing exploits have earned him so many puds he had to say ‘no more thanks’.”
I thought of that heartwarming tale while listening to the sports lawyer Ian Lynam, who has spent more than a decade acting for players and clubs on transfer deals and contracts, make a fascinating admission: that despite all the money that has flooded into the Premier League since then, most teams are getting their pay and bonus cultures wrong.
As Lynam explained in his talk to the MIT Sloan Sports Analytics Conference in Boston, Massachusetts, one top-six English club have a bizarre eight-page contract solely for individual bonuses – which involves eight algebraic equations taking in various performance metrics. “And eight is at least seven too many,” he quipped. “And no player understands it, which rather defeats the object.”
Another club, in the bottom half of the table, give their players an extra win/draw bonus in their first and last six Premier League games of the season – which makes no sense given one set of games isn’t any more valuable than any other. And what if a club are already relegated after 32 games? Then there is the cautionary tale of a Championship club who gave their squad an £8m bonus for making the play-offs – only to be left with a black hole on their balance sheet when they failed to win promotion.
As Lynam pointed out, although revenues and wages have kept galloping upwards almost all Premier League sides are now also confronted by potential problems lurking in the undergrowth. For lower-half teams, relegation is a potential £100m-plus kick to the guts. While for the top six, failing to make the Champions League is a £40m hit. Yet most player contracts do not do enough to reflect this dynamic.
His solution? More variable pay for players to reward the most consistent performers when a team are successful – and soften the financial impact of failure. And scrapping all player bonuses for goals, assists and clean sheets. As Lynam explains, this is needed because “Players will inevitably act to maximise what they are paid for but that might hurt the team. A striker, say, might shoot from poor positions to try and score more goals rather than play in a team-mate”.
Lynam highlights the advantages of variable pay by comparing two Premier League sides in the top six with very similar wage bills. Club A pay just 66% of their players’ wages as a fixed sum, and the other third based on Champions League qualification (12.5%), whether they played at least 60% of competitive games (12.5%), and the rest on trophies and awards won.
Club D, however, pay 98% of their players’ wages per week, with only 2% set aside for bonuses, because they feel that top of the market salaries mean players will perform to the best of their abilities week in and week out.
In Lynam’s view, Club A’s approach has two key advantages: first, if they miss out on the Champions League they only lose £20m while Club D suffer double that. Second, players who don’t turn out regularly put less stress on the wage bill.
“Football is, frankly, a very conservative industry, which means there is a kneejerk reaction to variable pay,” Lynam says. “Some think players won’t accept it because the industry is used to having X amount a week basic, but my experience says otherwise.”
Yet for flexible pay to work, Lynam says clubs have to sell it by focusing on the greater amount a player could earn if his team is successful. So if someone is worth £100,000 a week they need to be offered the opportunity to earn £120,000 if things go well, and £80,000 if things go to pot.
Such discussions are not always straightforward. “With one player, we went into a negotiation believing his value was £150,000-a-week – that was the number we wanted to get to,” he says. “And then the club emailed an £85,000-a-week with bonus offer. The player’s agent thought it was an insult. But when we used analytics to work out what he was likely to earn, it was between £110,000-130,000 a week, a perfectly reasonable early offer. However because of the way the club had presented it, there was a massive loss of goodwill.”
Despite Leicester’s heroics last season there is strong correlation between the size of a club’s wage bill and their league position. And it remains the case that the absolutely best strategy for a team to succeed in the Premier League will always be to pay far more than anyone else. But in the era of financial fair play, it is harder for clubs to repeat Chelsea and Manchester City’s old trick. They have to act smarter. And that includes paying smarter.
