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A Study Of Salary Cap In Sports Fields For Interview Study

1168 words - 5 pages

A STUDY OF SALARY CAP IN SPORTS FIELDS
Created by:
Vijayanandkrishnan.V
TABLE OF CONTENTS
Salary Cap
3
Reasons to Implement a Salary Cap
3
Governing Rules of a Salary Cap
3
National Rugby League(NRL) salary cap
4
National Basketball Association (NBA) Salary Cap
4
Indian Premier League (IPL) Salary cap
5
Comparison of Salary caps of NRL, NBA and IPL
6
Conclusion
6
Study of salary cap in sports field
Page 2 of 6
Salary Cap
A Salary Cap in sports field is the limit agreed upon by team owners on the amount of money that can spent on the player’s salaries.
Reasons to Implement a Salary Cap
The two major reason to implement salary cap is:
1) It helps keep the expenditure of the management in control : In the absence of salary caps, owners can be tempted to sign high cost contracts to select star players to achieve success. This may lead to financial instability and can cause the downfall of the team and invariably to the league as well.
2) It gives a level playing field for all the teams - It prevents a wealthy team from buying all the star players, thus dominating all their games : Without the salary cap, a wealthy team owner could buy all the available star players and ensure impeccable success for his team. The value of the league and the game can be lost if few of the dominant teams wins all the time. The fans of weaker teams can stop watching the game if there is no hope of winning in the long term.
Governing Rules of a Salary Cap
While each league has its own unique set of rules with respect to salary cap, the basic three forms are:
1) Hard cap: The league sets a maximum amount of money a team can spend on salaries which should not be exceeded for any reason. Any breach can lead to penalty of various forms - ranging from governance changes, fines, docking their points to stripping them of championships won during the breach.
2) Soft cap: The league sets a threshold which may be exceeded at certain circumstances otherwise incur penalties, luxury taxes are a form of penalties used majorly in American leagues.
3) Salary floor: The salary floor defines the minimum payment that has be paid to a player.This has been implemented majorly to prevent owners from underpaying the players.
Study of salary cap in sports field
Page 3 of 6
National Rugby League(NRL) salary cap
The salary cap of the National Rugby League(NRL) was adopted from its predecessor, the New South Wales Rugby League(NSWRL) which was implemented in 1990 to bring parity to the Winfield cup.
The NRL’s salary cap uses the hard cap and the salary floor rules predominantly.
Each club can decide to how much individual players are paid, providing that total payments do not exceed the various salary caps.
The NRL Salary Cap for 2016 is $7million and the minimum wage a player can be paid is $80,000 .
As the NRL predominantly follows the hard cap and salary floor, any major breach will result in heavy penalization, docking of points and stripping of titles achieved during the breach.
The major...

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