How does financial fair play work in soccer? Rules to know

Financial fair play regulations in soccer were created and installed to ensure clubs are responsibly managing their funds and avoiding the heavy-handed impact of bankruptcy. The regulations prevent clubs from spending more than they earn in the pursuit of success. This ensures they don’t get into financial problems that could potentially impact their long-term survival. The Premier League has its own regulations known as PSR (short for Profit and Sustainability Rules).

These are the most impactful and recognizable regulations in the sport. The stakes are high, too, with many leagues having dire consequences like relegation. Relegation is a process where clubs that finish the season with the lowest number of points are dropped to a lower league before the start of the next season.

Here’s a look at soccer’s financial fair play regulations, why they exist and how they work.

When was financial fair play introduced?

UEFA, the governing body of European soccer, uncovered in 2009 that more than half of the 655 clubs it audited suffered financial losses over the previous year.

The impetus to make sweeping changes came from clubs that were concerned about the runaway costs and sought guardrails to ensure the default payments from financially unstable clubs wouldn’t negatively impact soccer’s landscape.

“Financial sustainability” monitoring of club spending began during the 2011-12 season, with the first sanctions coming in 2014 following a three-year monitoring cycle.

What are UEFA’s key financial fair play or ‘financial sustainability’ regulations?

• Clubs are required over a three-year period to break even, which is calculated as the difference between relevant income and relevant expenses. However, clubs may have up to £5m (or about $6.5 million) in losses. The figure can balloon to as much as £60m (or about $77.5 million) if the rest of the cost is covered by the owners.

• Wages, transfer fees and the financial running of the club account for how financial fair play is calculated.

• Expenses on infrastructure, training facilities, youth training and other expenses like women’s soccer are not included.

• Clubs initially are allowed to spend as much as 90% of their total revenue on wages, transfers and agents’ fees during a three-year reporting period before it’s scaled back over time to 70%.

• If owners put money into their club through a sponsorship deal with a company the owners are related to, they get benchmarked against comparable deals and the benchmark is used.

• Clubs are required to pay transfer fees and taxes on time.

• Clubs must file reports annually and disclose any payments made to agents.

What are the Premier League’s current league-specific regulations, known as PSR (Profit and Sustainability Rules)?

• Clubs need to ensure they aren’t recording losses greater than £105m (or about $137 million) across their combined accounts of the previous three seasons.

• £90m (or about $117 million) must be covered by “secure funding,” meaning a club can lose up to £15m (or about $19.5 million) of its own money every three years. Any loss above that figure but below the £105m must be guaranteed by the club’s owners. If it isn’t, or the club exceeds the £105m limit, a club is in breach of the profit and sustainability rules.

• Expenses on infrastructure, training facilities, youth training and other expenses like women’s soccer are not included.

• Clubs are required to pay transfer fees and taxes on time.

• Clubs must file reports annually and disclose any payments made to agents.

Note: Both UEFA and the Premier League’s financial fair play regulations will change after the 2024-25 season.

What are possible Premier League punishments for failing to adhere to PSR?

Point deduction is the Premier League’s most frequent punishment. The 2023-24 Premier League season saw a number of teams violate the rules and be hit with point deductions, including Everton, which received a 10-point deduction. It was later reduced to six points following an appeal.

Additionally, Manchester City is currently being charged with 115 alleged breaches of the league’s profit and sustainability regulations. Manchester City strongly denies the allegations.

What are possible UEFA punishments for failing to adhere to financial sustainability regulations?

UEFA can hand out punishments depending on the severity of a club’s actions, which may include: