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Wages and Agents Fees
“Where’s the money gone?”
It’s a familiar refrain when talking about Blues finances and one that seems to be continually asked despite the same answer being given over and over again. With Portsmouth releasing details of how much money they owe players from their last administration I thought it would be a good time to show just how badly players wages and the football creditor rule hits clubs.
This list was published by the local press in Portsmouth, breaking down how £4.6million was being paid out to twenty-five players who were owed wages the last time the south coast club went bust. Two players connected with Blues are on the list – Erik Huseklepp who played for Blues on loan during Hughton’s tenure was owed £40,000 whilst Hayden Mullins is owed £632,281.32 which is being paid back over a period of over two years. This of course is Hayden Mullins who was made available for free transfer by Birmingham City because they couldn’t realistically afford his wages.
Two things need to be borne in mind when looking at that list. Firstly, that is the end result after compromise agreements were agreed with each player; the original debt was probably much, much higher than that and secondly that players were entitled to the full amount of money owed under the controversial football creditor rule. What this means is that when a football club goes into administration the first people who have to be paid off – even before the taxman, much to the consternation of HMRC – are football clubs and players. Transfer fees have to be paid in full and contracts have to be honoured unless compromise agreements can be sorted.
What does this have to do with Blues? Firstly, it shows why Blues have such a big problem with Nikola Zigic. For Blues to get rid of Zigic they would need to pay him off; his contract (which runs out at the end of the season) is potentially worth just under three million pounds and even if was to accept a compromise agreement of a third of that, that would require Blues finding a million pounds from somewhere to pay him. As the last transfer window evidenced, we don’t have that kind of cash.
Secondly, it’s further evidence of the crazy money going around in football. Although some of those players on Pompey’s list were signed in the Premiership times many weren’t. Wages even in the Championship have started to go crazy; Lee Clark himself said after the Leicester game that if you take out Zigic, Blues now have the second lowest wage bill in the Championship. When you consider that still includes a few relatively high earners such as Peter Lovenkrands, Darren Ambrose and Hayden Mullins that should tell you just how little money Blues spent in the summer window – the rumoured wage cap was £5,000 per week but there are quite a few players on less than that.
This list of agents fees last year also should give some idea as to how money is going crazy in this division. Blues spent only £200,000 on agents fees last year, the fourth lowest in the division. Compare that to Blackburn (£3.5mil), Cardiff (£1.8mil), Wolves (£1.6mil) and you can see the difference in scope – even Bournemouth (£688k) spent three times as much as Blues.
With more than £600mil being spent in the transfer window this summer by English teams one could justifiably say that spending in football has gone slightly outrageous. I do often wonder just how much further it can go before the bubble pops; the money coming in from TV rights surely cannot continue at its absurdly high levels for ever – what happens when the gravy train stops? My one positive in all this is that with Blues having low debt levels (relatively) and a wage structure that is sensible – and that will improve further at the end of this season – maybe if and when the collapse does come we’ll come out of it relatively unscathed.
Tags: Agents Fees, Wages
65 Responses to “Wages and Agents Fees”
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Good article, Are Ambrose, Mullins and Lovenkrands also out of contract at the end of this season?
I believe so, but I would like to check to make sure.
OP,
How did the football creditor work come into existence/ Always seems to me that the FA/FL just made up a rule saying players must be paid first and everybody agrees to it. If anybody else did the same then the HMRC would be all over them…just how did they manage to get that passed the authority
Good question and one I don’t know the answer to. Something to read more on…
Probably haven’t go the manpower to make a legal challenge at the moment. It could come in the future though. Currently every creditor should be treated equally in any other environment, 10p in the £1 etc.
I worked for what once was the biggest company in Canada which went bust in 2009. It was agreed by a tribunal judge that my entitlement after23 years service was £250k.(Unfair dimissal, redundancy, notice etc etc) This was limited to £125k by tribunal rules. I am still waiting for an outcome which is expected in 2014, however I am advised that I will be lucky if I get a couple of grand. This is all governed by UK Insolvency Law. Such a law determines that as an employee, I am limited to unsecured creditor. Administrators do not have the ability to change the rules on who is secure and who is unsecure, so how on earth do the players get secured status?
HMRC took this to court and lost!!
http://www.accountancyage.com/aa/news/2179734/breaking-hmrc-loses-football-creditor-rule-court-battle
This is something Parliament should change yet they don’t seem interested.
Thanks for this Dan as it clarifies just where the money goes.
On thing I cannot fully understand is why we are struggling to the extent we are financially, especially in relation to other Championship clubs. Our wage bill is low, even with Ziggy’s wages, probably lower than 50% of Championship clubs. We still have a parachute payment coming, something that most Championship clubs do not have. And you say that the club debt is relatively low. We also had £5m or so come in from the sales of Davies and Redmond, so have a net profit on transfers.
Not arguing that money is tight, but can’t get my head round why we are struggling more that most of the Championship clubs.
Simply – cashflow.
We have no overdraft and no one to put money in, so we have to ensure we have cash to last throughout the season. As simple as that.
Thanks. Now I understand.
Just out of interest, if we deducted Pannu’s expenses, consultant fees and salary and replaced it with a normal salary for a Managing Director say £80,000, would BCFC Ltd have made a healthy profit last year?
Dan H, Dont think 80k is sufficient for type of MD CEO we need probably more like 200K but obviopusly you would expect a top person for that dough.
but i thought under FFP owners could only put in £5 million which is less than our parachute payments.
Look at QPRs squad, must be costing a fortune in both fees and wages. What’s the connection between them and Portsmouth, Harry Redknapp. He came out of the Portsmouth fiasco relatively unscathed and to prove he hasn’t learnt his lesson he’s doing it again.
My thoughts on Redknapp are unprintable.
Same reason I did not comment on this. Very tempting but prudent to stay stum on this subject.
If blues were to actually become financially stable they would be in a great position because our wage bill is so low once we get rid of Zig. Lets hope that Blues can do some good business in the loan market, that United lad looks very decent.
The gravy train will end when the top 4-6 PL teams join a European super league .
The EPL will then have been mugged of its prize possessions & media interest will be adjusted accordingly.
I’m thinking Ziggy is out of contract at the end of this season so will probably want to start looking for a new club. I doubt he’ll get an offer from blues for another season.
Nothing against Ziggy and recognize that it was in fact Pannu that agreed his contract but I wouldn’t be surprised if there is a loyalty bonus due to Ziggy at the end.
If there is…. no wonder he’s parked the bus!
Not fair to pick on Ziggy.
we all go to work for reward.(salary).
if i was your boss and i came to you asking you to accept a 50% paycut for the rest of your time spent working at my company, i doubt you would be too eager to agree to it either
To be honest, I’m long past caring about Zigic or his wages. This time next year, he’ll be gone (please God,) then we can all move on. While (if) he’s wearing the shirt, I’ll support him 100%, just like the other players and the manager.
Well Said!
Well said indeed , but I wish there was a fast forward button we could press ! He’s painful to watch ( when ‘fit’ )
Even if Ziggy left today it would make no difference to Blues financial plight. The problem is the owners not the players.
Read this on Saturday. This is the kind of bloke we need running the game.
http://www.teamtalk.com/championship/8911535/Blackpool-chairman-Karl-Oyston-says-he-has-nothing-against-using-agents
That would be the Karl Oyston who paid himself 11mil in director fees when Blackpool were in the Prem.
AT least his club is well run and he doesn’t pay too many agents fees.
It also has to be acknowledged that Oysten was somewhat fortuitous that he had a manager who succeeded in developing a league 1 side into one that got promoted to the Prem. Players on L1 salaries, who Oyston refused to pay promotion bonuses, something the club was contractually obliged to do, left a lot of spare Sky cash for Oyston to pay into his companies. This is all documented and in the public arena. Charley Adams successfully sued the club to get his bonus.
Oyston and his father have made the news quite often for the wrong reasons, some of it proven and some of it conjecture. While i support his stance on agent fees, I would not like his sort to be associated with our club. I find him as objectionable as CY.
I agree.
and Blues is well run, has no debts except to owner, wages are affordable and Pannu only takes £700k not £11 million.
A model club we are!!
Seriously though, i worry for any new owners as some fans think we’ll spend millions but with FFP and reduced parachute payments the scope to spend isn’t there.
Look at Leeds and Forest with new owners and neither of them could afford £600k for Chris Burke.
In the seasons that we were promoted with Sullivan and co, they overspent on the budget, gambling on winning promotion. If a lot of clubs do that and again the following season, it’s easy to see how they build up the debt and pawn the ground.
poor zigic, we all give him stick about his wages and the fact hes always injured, doesemt
give 100% in training, dont score enough goals, dont pull is weight in games and that no one
wants him….. the guys suffering just like we are. ( and if you believe that your believe anything )
its ironic that we pay 150k to get caddis and would have to pay propably 1 million to get rid off
zigic….. no wonder weve got cashflow problems but i for one will still be putting my money
into helping the club by turning up for ALL home games.KRO.
i commend you for helping the ‘young’ appeals fund.
i had 3 season tickets last year, sat next to ‘almajir’ so he will vouch for me. i unlike you won’t put more cash into the crime fund. with no cash the current regime will lose out one way or the other and we get our club back and start again ( just like after the kumars’
Once we get a new owner, there should be no excuses for getting into trouble again. With Zigic gone and our wage bill one of the lowest, the club should be able to operate soundly for many years to come.
My thoughts and wish, are that the ” gravy-train ” bubble will burst, !!. The obcene wages being paid are frankly disgusting, [ Including Agents fees ] in many cases.
The mainn hope for the Blues, is that IF we get new owners soon, We will maintain a closer a tighter hold on expenditure in the future, ?. YES, We all want us to be able to attract really good footballers to our club, but surely now that the lesson has been learned about what high wages/contracts, has brought us too, Memories of Gold,Sully and Brady’s stewardship was/is the correct route to follow for the sake continuing our existance, ??.
I know of wba fans moan about pearce but their club is run soundly…….
That is the most important thing in this day and age. I’d rather have a club that’s going to be around for the next 50-100 years, than break the bank trying to get to the premier.
I have believed for many years that the money in the Premier League has created nothing but greed, players salaries, agents fees transfer fees etc etc. This has also filtered down to the championship in a small way as owners seem willing to throw money at reaching the promised land. The bubble will burst and more Portsmouth, Leeds type scenarios will be common place. I have commented on this blog that I also believe the FA/FL/PL would like to see fewer clubs operating and therefore appear to be ok with clubs hitting the financial wall. Graham Taylor made a viable comment on the BBC site that many owners buy into football in order to gain celebrity status, something that I think can be attributed to our illustrious leader. The question is what can be done. Right now nothing because whilst the money keeps rolling in the powers that be will continue to bury their heads in the sand, so we must wait in my opinion for one of the big clubs to go under before any changes will take effect. I realize many will say that the FFP rules should help but I think it will only help a select few, the rest of us will continue to feed off the scraps for many years.
What would be nice, is a real “Fit and Proper Persons” policy that actually does what it says on the tin… not this make-believe thing they have that’s not fit for purpose. There are far too many bad apples getting through and the clubs and fans are the ones paying for it in the long run.
A change to the Fit and Proper Person test is a good start, I would go further and say should the owner then prove not to be fit and proper the FL/PL/FA (whoever conducts this farce of a test) should be made to be accountable in some way for protecting the club, after all it is their test and their criteria that allows some of these rogue owners in so shouldn’t they be accountable if a certain substance hits the fan (pipe dream I know). Maybe if there was some accountability the test would be more stringent.
Yet another interesting article from Almajir. I would like to make a couple of comments (opinions) though.
Firstly. You suggest that even if Ziggy was to accept a third of his contract value, we still couldn’t afford to pay him the £1M it would cost. However, this ignores the fact that, if he doesn’t accept this cut, we have even less chance of affording the £3M to which he entitled. Whichever way you look at it, not being able to afford £1M has got to be better than not being able to afford £3M, so I really don’t see the point in your argument over this. (Apart from the fact that Ziggy is obviously not going to accept a pay-off anyway so, either way, it is all a bit of a red herring).
Secondly. Regarding the pay-out arrangements ensuring players are the first to get paid if there is any disposable assets, I think I am in two minds over this aspect. I spent many years working as an Insolvencies Co-ordinator and, as Bluenosesol mentioned in his response, under UK law workers are usually just treated as “Unsecured Creditors” if their company goes into insolvency and, as such, they are usually the last to get paid. This was something that I always used to find upsetting and felt the law should be changed to ensure that the workers employed by a company should at least get their wages/salary if there was any money to share out after their company went bust. Whichever we look at it, players are employees of the company, even if they are on inflated salaries – although they should be subject to the same “cap” in any payment.
Having said all that, whilst not suggesting that there has been any dodgy dealings at the Blues, many large companies that go into insolvency are also responsible for some very interesting accounting procedures. It doesn’t seem to matter what happens to the creditors, the directors usually land on their feet and are soon back in business under another name, it is common practice in the construction industry.
The extent of Agents’ fees is bad enough, but what really winds me up is that clubs are cajoled into paying Agents fees rather than the player paying them directly [I realise this is not the only source of Agents fees]. Surely in any other walk of life this would not be possible owing to potential ‘conflict of interest’ issues? If the player wants an Agent to advise him then he should pay the bill.
Does anyone know if the PFA still offer their services to players? If they do, it seems to me that this is not widely used and I’d be interested to know why that is. Either the players do not trust their own union to get them the best deal or they do not market themselves well; but perhaps there’s another reason?
I think that’s a brilliant idea, although one I’ve heard before. Why SHOULD clubs pay the agent. It’s the player that hires the agent, it should be the player who pays him.
I think I remember Gordon Taylor saying once, that the PFA is there still if the players want to make use of their services. It’s just that the modern player has been conned into think that agents have their best interests at heart. As if.
If clubs refused to negotiate with “Players Agents” then surely they would soon become surplus to requirements.
I must admit I find it difficult to get my head round that a club pays someone to negotiate a contract for someone they want to employ or someone who wants to BE employed by that club.
I want to be employed by A. N. Other so an agent negotiates for me and A.N.Other pays the bill, brilliant, why have I spent hours in interviews trying to sell myself.
At the end of the day you can’t blame the players for their over inflated wage demands or transfer fees, the blame has to lie with the clubs and their chairmen.
Now the lower league clubs are having to be more astute and financially sensible, the sooner the bubble busts the better in the long term for the future of our beautiful game in bringing it back to the real people THE FANS.
yes i too wish players paid the agents but then the player would just ask for more money which would then be diverted to his agent.
many of us sign up to agency’s to find us work and the employers pay their bill not the workers, so the same as football.
We might be free from big Zigs contract come the seasons end, but until the club is sold we will still have Mr Pannu draining funds via his contract, expenses, consultancy fee etc etc. How I wish I’d never heard that persons name.
http://www.birminghammail.co.uk/sport/football/football-news/shane-ferguson-injury-worry-birmingham-5859958
Little bit there (below the Fergie injury part) about Blues’ concerning agent’s fees and such
As far as I know the FPP rules only apply if a person has been barred from being a director already, not if he has any other sort of dodgy background.
I am not sure that you can stop someone buying a football club if it has shares available and he/she has the cash to buy them.
In my opinion the only way to secure football clubs’ futures is to have a rule about fans organizations having to own at least a 51% share of a club. That way the fly boys would keep off.
Fan ownership seems to work pretty well in Germany so why not here?
It’s certainly worth thinking about.
I agree with this 100%!
Fan ownership is a great idea and, as stated, works very well in Germany. However, I would not advise you to hold your breath while you are waiting for it to happen over here. There is no way on God’s earth that a British government (of whatever colour) is going to enact legislation that appears to take power and control away from the businessmen and put it in the hands of mere mortals like us. Fans are only there to PROVIDE the money not control it.
The 51% ownership works because football brings a community together. To be a Blues fan at the moment you’ve gotta be pretty die hard cos the football isn’t great and I can actually understand parents not wanting to spend £40 for his family to go to a game that we will probably lose or best draw. To go and see Dortmund however it is £8.95 on average for an adult, there’s not as much risk factor there and it brings everyone a chance to see the game so the average person wouldn’t have to fork out a loan to see their local team play. There are so many pluses to having a fan based ran club, that I think it would be great to push the idea.
Very true article. At Pompey, that is one thing we can thank the past 3 years of hell for. At least having to work with in our means, when that bubble pops,we will be one of few clubs that should be unscathed. Glad to hear Birmingham are also in the right financial position when that happens, as I expect majority of wealthy owners to jump ship when tv rights dry up. And it will happen, as more and more people decide sky is getting to expensive to justify the sports and movie packages. With BT now offering free sport to is customers,sky will have to follow and with out fleecing people, where will the £3bn tv rights money come from
Most sports clubs are run by committees and they usually struggle to get it right. The best of those are where there is a powerful and hardworking figurehead, just ask Moseley Rugby Club. I think that stewardship of Blues and other clubs should be a much bigger concern of the FL/PL/FA (those last initials are appropriate) and drawing from the North American models.
i agree entirely about ‘Arry, was he not also involved in struggles at West Ham and Bournemouth.
I think that, to be fair to Redknapp, he asks the questions, it’s the board that gives the answers. Just like Lee Clark is doing to our owners. They have the option to say yay or nay. Obviously, the manager of a club is going to want to get the best players he can, that’s not a crime.
I agree Staffs, but then ‘Arry goes on to manipulate the media and other tricks to put the board in no win situations. Crowd pressure is immense, even Sullivan blanched when confronted by an angry crowd.
He ain’t the first, he won’t be the last. He does it, and most times it works. Tony Pulis did it… and got the bullet. You pays your money and you takes your chance.
And with ‘Arry you certainly pays your money
didn’t realise Marcel Henry-Francis had left Blues
http://nonleague.pitchero.com/news/hamlet-snap-up-young-birmingham-striker-25176/?
Released around january I think
When Ian Holloway was at Blackpool, he had an arrangement whereby he would get a fee for spotting a player and coaching him into a valuable asset for the club. Some would say that was wrong, but why shouldn’t he? I’d much rather a percentage go to the manager than an agent any day.
Not sure if Holloway has the same deal at Palace.
If I recall correctly Barry Fry had that arrangement at Blues.
Really? I don’t remember that. But like I said, I’d rather a fee go to the manager than an agent.