With a salary cap of $3.845 million for 30 roster spots, Major League Soccer has come up with creative ways to pay superstars (Designated Players) as well as improve depth (Allocation Money).
Many fans liken figuring out Major League Soccer’s team payroll rules to something between navigating Seattle traffic and undergoing a root canal.
But it really isn’t too complicated. At least, not compared to some of Major League Baseball’s international free-agency restrictions. Or, the National Football League’s salary-cap rules.
“You’ve just got to stay on top of it,” Sounders general manager Garth Lagerwey said. “And you have to plan.”
So, let’s walk through it.
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Each MLS team has 30 roster spots and a $3.845 million salary cap.
But only the top 20 players count against that cap, while spots 21-24 receive a $65,000 base minimum salary and spots 25-30 a $53,000 salary that isn’t counted.
Except, teams are allowed to spend more than the salary cap. Limiting the top 20 roster spots to just $3.845 million would prevent teams from ever attracting the type of quality players that follow the big money overseas.
The best players can command the entire salary cap and more.
So, MLS created an exception known as “Designated Players” that can be paid an unlimited amount of money. So, even if a DP makes, say, about $4 million like Clint Dempsey, his salary only counts toward 12.5 percent of team payroll ($480,625).
In other words, a team with three DPs will have them count toward 37.5 percent of their total payroll ($1.44 million) though they could be making a combined $5 million to $10 million or more.
Simple enough? Here’s where it can get complicated.
You also need intermediate players to fill out your roster and even those cost well into the six-figure range. You don’t want your MLS team spending all its money on one or two stars alongside a bunch of role players.
So, to improve roster depth, MLS added “Allocation Money” to each club that can also be applied beyond the salary cap.
There is “Targeted Allocation Money” that lets teams sign up to three players that each earn between $480,625 and $1 million. The only exception – a change made this week – is teams can now spend up to $200,000 of TAM money on homegrown players like Sounders products Jordan Morris or Henry Wingo, who are signing their first professional contracts.
If a team doesn’t use all available TAM space in a given season, that extra room rolls over to the next year. The Sounders this season have $1.2 million of TAM space to work with.
Then, there is “General Allocation Money” – which teams keep private for competitive reasons. That money can be spent on any player and not just those making between $480,625 and $1 million as with the TAM funds.
Teams can earn more TAM and GAM space via trades. Additional GAM space can also be gained by doing things like winning the MLS Cup, qualifying for Champions League play, or having a player selected in the expansion draft.
The Sounders have three DPs in Dempsey, Nicolas Lodeiro and Osvaldo Alonso earning unlimited money. Alonso at $1.1 million earns the least of the three.
The rules allow teams to “buy down” DP player salaries with TAM money in order to convert DP players into TAM players. The buy-downs have to be all the way to at least the $480,625 that DP players count for against the salary cap.
So, if the Sounders bring in another DP for unlimited funds – which they can’t now because they’ve maxed out at three – they’d buy down Alonso’s $1.1 million salary with their TAM surplus and convert him from a DP into a TAM player.
Normally, a player can earn no more than $1 million in being converted from a DP using TAM money. But players earning up to $1.5 million can be converted if the move takes place midseason during the league’s secondary transfer window.
That’s how Alonso would qualify to be converted this year, given his salary increase to $1.1 million now has him higher than the usual maximum TAM threshold. Which would free a DP spot to sign, say, Japanese forward Keisuke Honda for whatever money it takes.
Alonso has been converted to a TAM player the last two years so the Sounders could import Nelson Valdez as a DP in 2015 and Lodeiro last year at midseason. When the Sounders declined Valdez’s 2017 option, Alonso was converted back to a DP.
If Honda gets signed as a DP, the $1.2 million TAM surplus would buy down Alonso’s salary and he’d become a TAM player again.
“We have a big reserve of TAM for that purpose,” Lagerwey said. “If you look at our TAM spending, Roman Torres is the only guy we have. A lot of teams have two or three.”
So, there you have it. Nothing complex, right?
OK, maybe just a little.
“I use a spreadsheet to keep track of everything,” Lagerwey said. “There’s no way I could do it off the top of my head.”