Compensation in the English league
Out of the many football leagues in the globe, the English premier league features as the most successful in terms of revenue generation. This is because the league has a huge fan base of at least 5 million viewers and clubs compensate players handsomely. As of 2014, for instance, records indicate that players in the league earned 2.3 million per annum. The figure was slightly higher than the pay for players in Spanish and Germany clubs, which is the reason for the shift of interest by football investors to the English league (Conn, 2013). As noted, the expectation of the entrepreneurs in preferring England is that the league is rewarding. Another premise for the decision is that the compensation structure in the country augments the growth of the clubs and players among many other stakeholders in the business. Although the pay is beneficial to players, the strategies employed in determining the pay contributes immensely to variation in earnings, leading to the increase in clubs wage bill (Bose, 2012). With reference to Manchester’s wage bill of 2012/13, the figure stood at £182m. As noted, the externalities such as the urge to invest in world class players due to competition from Chelsea among many other teams contributed to the increase.
The situation in England
Previous records of the pay of managers, footballers and referees imply that the league offers an exemplary package. As noted, in 2013, the wages were £1.6bn. This revenue is the reason that many players in European league seek ways to ply their trend in England. Their expectation is that the compensation offered in the league will translate to better life. Even though in most cases the decision to venture in English league pays off, there is the downside of the compensation. For instance, some analysts cite the inconsistency in the pay structure for the different shareholders in the business. There are also many reasons for the situation such as match broadcasters and club owners engaging in decisions that affect the operation of the entire league. A case in point is investors recommending a transfer that contradicts the decision of the club advisors. Likewise, broadcasters can engage in activities that change the perception of viewers. In certain occasions, the owners of the club alter the compensation structure by recommending investments unapproved by the club (Buraimo & Simmons, 2014). In turn, the decision to change translates into an overall shift in earning for the entire club. However, due to such possibilities, the FA has enacted measures to limit the influence of wealthy investors by capping expenditure on an individual player to £56 million in 2014/15 season.
The pay structure
One unique aspect of the league when it comes to paying is that there is no single method for designing compensation structure. Instead, stakeholders in the business employ diverse strategies that influence the outcome of individual club decision. As noted, some teams use the break-even principles in the compensation of players. According to the structure, a club evaluates its performance with future expectations in deciding pay for players. The estimated figures serve as measurement for remuneration of other players. Another technique used in England is the system of capping the number of clubs in the league to ensure fair play (Oberstone, 2009). Unlike the breakeven technique, the methods encourage teams to focus on the activities taking place on the pitch while monitoring the commercial aspects of the venture. The principle also ensures accountability among agents who might take the advantage of the prevailing economic situation in fleecing clubs earnings.
On certain occasions, a board in the club places restrictions of the cap for each team depending on the prevailing economic conditions. In 2015, for instance, the spending of each team was restricted to £56 million. Failure to which, the team would incur a fine restricting some of its operation. At the club level, teams were allowed to increase the value by £450, 000 after three seasons. Using the case of Manchester United, for instance, the team just like other clubs has employed various methods in facilitating compensation of the stakeholders of the club over the years. However, according to the Guardian, the club prefers increasing pays for players with high stature since their retention is integral to the overall success of the club. Similar to the situation in other leagues, many teams in the English league are bound by the decision of other teams in the European region. Even though the football association puts in place a cap on teams spending, the decision does not prevent clubs from increasing pay for individual players (Conn, 2013). Instead, the team pegs decision on factors such as the productivity of the player, the image he creates in the club and his role in ensuring the economic sustainability of the club. As opposed to using a complicated structure, most English clubs emphasize the need for a simple structure that amplifies the trickle-down effect for parties involved in the sporting activity.
Strategies for designing the pay structure
Several factors influence the decision of clubs in England when it comes to determining the earnings for the stakeholders of the sport. This is because there is a direct correlation between the preference of compensation method and the degree of change in the external environment. For example, when there is an increase in viewership for English premier league games, the stakeholders in the game invest more in the sports. The decision in turn culminates in the increased spending on players, consequently escalating the wages. As a factor, the urge to increase viewership forces clubs to engage in tactics that ensure retention of best players in the league. The clubs also use funds to attract professional players from outside the league. Another external factor that contributes to the augmentation of wages in England is the desire to forge a partnership with well-known broadcasting channels and brands (Buraimo & Simmons, 2014). The aim in undertaking the initiative is to make the clubs more marketable but in turn, the decision affects the compensation of teams in England. Sponsors on their part, provide more funds that encourage teams to pay players vast sums of money.
Aside from seeking relevance in the market in order to strengthen the brand of a club, broadcasters also influence the activities of clubs. In choosing to charge people highly for premiership games, the stakeholders force clubs to spend highly in staffing as a way of capitalizing on advertisement costs. Other external factors that influence the growth of the league include the perception of fans towards the activities of the team and global events such as the world cup (Bose, 2012). When ticketing, the management of the league evaluates the impacts of global events such as world cup as the guide to restructuring pay in the subsequent league season. The reason for the decision is that any slight change in earnings due to an advertisement on the internal arena affects the compensation in the Barclays Premier League. In the case of clubs whose players shined during the competition, the individuals acted as the ambassadors of the team, which earned them fairer remuneration in the subsequent season. Teams also increase payment for players as an attempt to lure them to stay with their clubs after the event.
Factors influencing selection of different pay structures
Factors that influence the level of play of an individual player in the Barclays Premier League are the expected profits from the inclusion of a player in the league. Teams also measure pay using the celebrity status of an individual. Among the top-flight teams, for instance, investing a player of high caliber necessitates augmentation of the wage bill. While enacting the change, the expectation is that the process of restructuring could contribute immensely to the profitability of the club. The situation explains why teams take many risks by investing in star-studded players. Although there is no guarantee that high compensation to a player of celebrity status will propel the performance of the team to greater heights, is a proof that external factors influence the decision of clubs.
Unlike footballers, the earnings of other stakeholders in the league vary to a small extent. In the case of coaches, for example, the average earning for a team manager in England is affected by the demands of the coach and the perception of fans towards the coach. For the referees, the compensation model is slightly different since activities in the external environment rarely make the professionals adorable. Nevertheless, participation in international competitions contributes to the increase in remuneration for the official. The football association in England also considers the experience of the official and the magnitude of the games supervised by the officials in the determination of the remuneration for the official. A referee with vast experience of making a fair judgment is likely to receive high pay for games.
The activities of agents among many other third party stakeholders who operate outside England also influence the overall earnings of the league. With reference to the activities of agents in Spain, for instance, one would demand higher wages for a client used to receiving higher wages. Therefore, in order to attract and retain such a player, an English league team will invest highly in the player, as it was the case with Manchester United buying Angel Di Maria (. As the merchandise of the sport, the demands of the footballer also determined the wages issues by the club. The same applies to the agent negotiating for a transfer of footballers from other European leagues. It is unlikely that an agent would negotiate for lower wages that the initial wages offered for a player seeking transfer to England. In the event an English team is interested in the player, the club will alter its compensation structure to accommodate such a person.
In conclusion, several externalities influence the selection of pay structures for clubs in England. From the activities of advertisers to increase in viewership, the activities affect the selection of mode of compensation. Additionally, the activities taking place in places like Spain contributes to changes in England. An example in case is an English club luring a player to England by promising a contact of higher pay. Therefore, when designing pay structures that apply the break-even principles, it is advisable considering numerous factors before decision-making. With the introduction of a cap on television fees, the teams ought to limit the impact of external factors despite the difficulties entailed.
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