Training Compensation in Football
Article 20 of the FIFA Regulations of the Status and Transfer of Players (RSTP) states that:
“Training compensation shall be paid to a player’s training club(s): (1) when a player signs his first contract as a professional, and (2) each time a professional is transferred until the end of the season of his 23rd birthday. The obligation to pay training compensation arises whether the transfer takes place during or at the end of the player’s contract. The provisions concerning training compensation are set out in Annexe 4 of these regulations.” (FIFA)
This article has been included to encourage clubs to invest in their youth development system. It is vital for clubs to be motivated to produce footballers of a high quality and provide them with plenty of opportunities from a young age. By implementing the requirement of training compensation, if they are to sign a new contract or transfer to other clubs before the age of 23, ensures that the club who gave them their footballing education is able to reap the benefits of doing so.
In this blog, I will be analysing the importance of training compensation and will assess the extent to which it succeeds in its objective of promoting investment into youth football academies. I will also consider the legal implications that stem from training compensation as well FIFA’s plans to tackle and prevent disputes.
How Does it Work?
If a player reaches the level of professional football and is lucky enough to sign a professional contract, it seems reasonable that the club which trains the player should receive some monetary benefit from the role they have played in their development. This is why training compensation exist. The amount that is due to be paid is calculated by referring to the categorisation of clubs by member associations that corresponds to the financial cost of training a youth player annually and factors in the ‘number of youth players per professional produced’ average. The volume of investment that a club puts into a player at youth level should then be adequately reimbursed by the signing club.
Clubs can then continue to benefit from the player from any transfers they may be involved in up until the age of 23. However, the training compensation is only applicable to the years spent training with the club up until the age of 21, but the club is entitled to this payment
until the end of the season of their 23rd birthday. If there has been more than one training club during the player’s time as a youth player, the compensation is proportionately distributed based on the time spent at each different club.
FIFA relies on member associations to accurately categorise clubs into a ‘compensation bracket’ which determines how much compensation a club would be due to pay to the youth club. For example, UEFA category 1 clubs claim back an annual youth training cost of €90,000. Category 1 clubs include those that compete in the English Premier League, Spanish La Liga or the German Bundesliga. UEFA category 2 clubs such as those in the English Championship, are entitled to €60,0000 per year of training. However, for the four seasons from the ages of 12 until 15, all training compensation uses the category 4 obligations to prevent young players generating unreasonably high training compensation.
The process of training compensation and solidarity payments is most easily understood by considering an example. For the following example, it is important to note that different jurisdictions carry different compensation brackets. In this scenario the relevant jurisdiction is the South American Football Confederation (CONMEBOL) which places the Brazilian Serie Á in category 1. The signing of Flamengo’s rising star, Vinicius Jr, by Real Madrid in 2017 would play out as follows:
- From the age of 10, Vinicius Jr. was an academy player for Flamengo before making his professional debut aged 17 for his youth club in the Brazilian top flight.
- At 17, in theory, he was signed by Real Madrid which in reality didn’t come into effect until he was 18 – the minimum age for an international transfer.
- For the time spent coaching Vinicius since the age of 12, they could also claim training compensation. In Serie Á, a category 1 division, this was a sum of $50,000 per year of training since the age of 15, and $2,000 per year from the age of 12-15 ($6,000), as per the category 4 requirements. This results in an additional $156,000 that was owed to Flamengo as part of the deal.
- This fee is due within 30 days of Vinicius registering as a Real Madrid player. Any disputes are resolved by the Court of Arbitration for Sport (CAS) in their Dispute Resolution Chamber (DRC).
Further complications and regulations are added when a player moves between categories. The FIFA rules stipulate that if a player moves from a higher category club to a lower club, training compensation cost is based on the annual due fee of the lower category club. Alternatively, moving from a lower category club to a higher category club demands a training cost calculated as an average between the two categories.
It is easy to see why training compensation exists when youngsters like Jude Bellingham, Phil Foden, Mason Mount and Ansu Fati come through every age group at their respective clubs.
Bellingham moved from a category 2 club in Birmingham to Dortmund in category 1. Birmingham have produced a fantastic footballer and deserved to benefit from the investment and time spent on training him after losing him for a transfer fee of €23m.
The final part of training compensation that people should be aware of is that there are some conditions in which the compensation is not lawfully required. This is the case if the contract with the selling club has been terminated without a just cause, the player is moving to a category 4 club from a higher category or if they reacquire amateur status as a result of the transfer. These scenarios nullify the payable transfer compensation.
Areas of Discussion
First and foremost, FIFA needs to ensure that training compensation is enforced globally. There have been methods that clubs have used to take advantage of ‘loopholes’ in the system. Bridge or unusual transfers, short term loans and other ways of manoeuvring players to avoid having to pay training compensation are often reported. The difficulty is that FIFA has a restricted jurisdiction. The organisation can only tell member associations the rules to enforce, it is then up to the individual associations to govern the categories and for implementation of training compensation and solidarity payment requirements. If the transfer occurs within a single member association, such as between two Spanish clubs, then it is up to the governing body of Real Federación Española de Fútbol (RFEF) as to if and how training compensation might be required as a payment. FIFA only has the power to make training compensation compulsory if the transfer is international. This results in a lot of objections and unfair outcomes for clubs.
All disputes are reviewed and solved by the CAS, such as the controversy regarding Fiorentina’s signing of the French forward Matthias Lepiller in 2006. However, sometimes there is no dispute and the training compensation is just outright avoided. This is a significant issue that needs to be reconsidered by FIFA.
One way in which FIFA is attempting to tackle this issue is by creating a ‘transfer clearing house’ that is independent of the organisation. The role of the clearing house would be to centralise all transactions and transfers that take place in the footballing world. Using a transfer matching system, all transfers and fees are logged appropriately through the clearing house. This increases transparency and sums of training compensation can be independently calculated through the clearing house. Methods of escaping compensation obligations would also be removed as it would no longer be possible to cleverly manoeuvre players into transfers that undermine the system as they would all be logged. This is a positive move in tackling issues that arise from training compensation payments and should go some way in preventing future disputes.
Another area that FIFA may consider addressing for the future is the possibility that training compensation infringes on European Employment Law and the Free Movement of Labour legislation. This could be undermined in a scenario where a young player, aged under 23, has an expired contract at the club that they spent their youth years being trained by. The player
is technically a ‘free agent’, as established since the Bosman ruling in 1995 so can be bought and signed by a new club without a transfer fee. It is not clear as to whether the training club is entitled to claiming a training compensation despite this. This may prevent an interested club from signing the player once they are faced with an expensive training compensation bill. This could be seen as a new form of Bosman ruling and it goes against the free movement of labour laws as the young player will be deprived of an offer because of the demand for training compensation despite the club allowing his contract to expire.
My concluding remarks would be that article 20 of FIFA’s RSTP regarding training compensation is a valuable principle. It encourages clubs to train and invest in their youth systems and ensures they are rewarded for the fruits of their processes even if the player moves elsewhere. It is especially useful for smaller clubs that might produce but then lose rising stars to more formidable clubs. Importantly, FIFA is addressing issues that arise with these payments by creating a transfer clearing house. By centralising all transactions through a single system, I hope this will result in a more effective governance of article 20.