Salary Cap Issues

Back-ended contracts.

The problem with the back-ended contract is that it creates an unevenness within the competition that the salary cap is designed to stamp out. By signing a few star players for a minimal upfront cost, an NRL club can assemble a formidable team for one-to-two seasons. Of course, it is obvious to any fan that this style of management is unsustainable and not in the best long-term interests of the club. Unfortunately, there are some significant incentives for using this method of creative accounting:

1. Coaches hold volatile positions. They are acutely aware that their future at a club depends almost entirely on the short-term results. Failure in the first 2-3 seasons could end, or at least derail, a promising coaching career (think Stephen Kearney). On the other hand, early success can virtually ensure future employment (see: The Ricky Stuart Myth).
2. Players want to win premierships. Players with existing contracts want their club to sign the best players available on the market. Players on the market want to play with a team that they believe can win a premiership in the immediate future. All players realise that success on the field puts them in a better negotiating position for future contracts.
3. Management staff realise that the club’s financial performance will determine their future prospects. Success on the field can be the difference between a highly profitable season (higher crowds, finals appearances, prize money, sponsorship revenues) and a year in the red.

For example, in 2010, St George-Illawarra reportedly paid Mark Gasnier an absurdly low amount ($50,000 – $100,000) to return from rugby union. The Dragons explained that Gasnier’s contract was back-ended so that he would receive a significant increase in compensation in future years.  Gasnier walked into the star-studded Dragons line-up mid-season and helped Wayne Bennett’s men win their first ever premiership. The downside was that the Dragons were forced to release their gun forwards, Jeremy Smith and Neville Costigan. Ultimately, the Dragons got their premiership at the expense of their current team. (Of course, history shows that Gasnier retired after completing two season of his five-year contract.)

Exemptions

One of the best aspects of rugby league is ‘tribalism’. Fans love it when players are able to stay at one club for their entire careers (recent examples include Darren Lockyer, Andrew Johns and Nathan Hindmarsh). Fans identify with the characters within their teams and it is easy to understand how player cleanouts (e.g., the West Tigers, 2012/2013) are disillusioning. In 2003, the NRL introduced a Long Serving Player Allowance to encourage clubs to retain players who have provided 10 years of service. Since then, the time frame has decreased to 8 years of service. This is a great initiative, but perhaps it might work better as a sliding scale.  For example, a player could have a percentage of his payment exempt from the salary cap based upon the number of years he has represented the club:

• 4 years – 10%
• 7 years – 20%
• 10 years – 30%

The numbers provided are just examples, but the point is that loyalty should be encouraged throughout a player’s career. Some might argue that such a system provides an unfair advantage to clubs with large junior nurseries. Certainly, there is merit in such reasoning; however, the same logic implies that, under these conditions, clubs would be more likely to nurture, rather than neglect, their local juniors, which could only be considered a positive outcome.