A £2.5m salary cap introduced for League One after EFL clubs vote in favour of proposals

The changes, which are effective immediately, mean both Blackpool and Fleetwood Town will be limited to a fixed cap of £2.5m.

Clubs in League One, meanwhile, will have a ceiling of £1.5m, while discussions with Championship clubs are ongoing.

“The decision follows extensive and comprehensive consultation with all clubs in respect of addressing sustainability and wage inflation issues across the EFL which were initiated prior to the suspension of football in March following the COVID-19 outbreak and have continued during the course of the summer,” the EFL said in a statement.

When calculating total salary spending, the cap includes basic wages, taxes, bonuses, image rights, agents’ fees and any other fees and expenses paid directly or indirectly to all registered players.

Payments directly linked to a club’s progression in cup competitions or promotion are excluded from the cap, while any income generated from players going out on loan is deducted from the club’s salary cap calculation.

Any signings made before Friday’s vote will be capped at an agreed divisional average until the contract expires.

An ‘overrun’ concept is also included if a club’s total squad salary payments exceed the cap by up to five per cent, whereby dependent on the percentage level of the overrun, a financial penalty would be payable for every £1 in excess.

Clubs exceeding the ‘overrun’ would be referred to an Independent Disciplinary Commission, although the EFL will monitor the cap on a real-time basis throughout the season.

The EFL’s proposals had faced opposition from the PFA, who argued the wage cap is “unlawful” and “unenforceable”.

There had also been vocal opposition from some of League One’s bigger clubs such as Sunderland, Portsmouth and Ipswich Town, who argue the wage cap should be a percentage of income.

EFL CEO David Baldwin said: “The term ‘salary cap’ is an emotive one, creating the impression of a restrictive measure but we are clear in our view that this is neither the objective nor the likely effect of these changes to EFL regulations

“The financial impact of Covid-19 will be profound for EFL clubs and today’s vote will help ensure clubs cannot extend themselves to the point that could cause financial instability.

“Over the last two weeks the discussions amongst clubs in both Leagues One and Two have been healthy and constructive, allowing us to reach a clear consensus today and I am pleased that the clubs have determined to adopt the new approach.

“We will now work with all Clubs, the PFA and, where appropriate, other stakeholders to implement the new rules and continue our efforts to bring long-term sustainability to the EFL.”