Ipswich Town are playing by different financial rules in League One - a guide to SCMP
- Credit: Archant
Andy Warren takes a look at the Salary Cost Management Protocol governing clubs in League One
While the Championship has been governed by Financial Fair Play rules since it was introduced for the start of the 2014/15 season, clubs in League One and League Two must adhere to Salary Cost Management Protocol (SCMP).
In short, SCMP is in place to ensure clubs in the third and fourth tier spend responsibly and don't get into financial trouble, while also trying to ensure something resembling a level playing field.
At a very base level the rules state that clubs can't spend more than 60% of their annual turnover on player wages, but of course it's a lot more complicated than that.
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What income is included in turnover?
Every penny counts in this regard.
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SCMP includes all matchday and commercial income such as season ticket sales, gate receipts, programme sales and catering as well as income from sponsorships, TV rights and non-football business activities.
On top of this is the Football Fortune, which is the figure relating to income from cup runs and incoming transfer fees. This is essentially the money the club generates itself through good work on the pitch and sales off of it.
A club's entire Football Fortune figure can be placed on top of turnover, creating the figure of which only 60% can be spent on player wages.
As a newly-relegated Championship club, the Blues are permitted to spend an extra 15% of their turnover on player salaries for their first season in the division, taking Ipswich's threshold to 75%.
So which salaries count?
SCMP takes into account player wages only, meaning Paul Lambert and his coaching team and the staff at both Portman Road and Playford Road don't have an impact.
All salary declarations must include all bonus payments (win, goal etc) as well as signing on fees, agent fees and expenses paid in regard to accommodation costs.
Wage costs of any players out on loan, in Ipswich's case Bartosz Bialkowski, are not included.
There's relief with young players' contracts, too, with any player under the age of 20 at the start of the season not counting towards the SCMP calculations. That means Flynn Downes, Andre Dozzell, Jack Lankester, Luke Woolfenden and Idris El Mizouni's contracts are not a factor.
Players who signed contracts for three years or more prior to September of the relegation season don't count, either. That means the salaries of Cole Skuse, Toto Nsiala, Jon Nolan, Kayden Jackson, Janoi Donacien and Emyr Huws do not count towards Town's total.
Can an owner invest without being subject to SCMP?
In short, yes.
The Ipswich Town accounts show an average pre-tax loss of £6.6m a year during Marcus Evans' 11 as owner, with the club's debt reaching £95m according to the last set of accounts (June 2018). That debt is exclusively owed to Evans.
Under SCMP owners can put in extra money to pay the bills but this would need to be in 'donations' rather than loans.
Teams deemed to have breached the rules can be subject to a transfer embargo, with any club forecasting a wage spend within 5% of their cap subject to close monitoring.
Points deductions are not part of SCMP.
So where do Town stand?
Town's last set of accounts, for the 2017/18 season, show a turnover of a little over £17million, with a wage bill of £18.5million. It must be noted that that figure also included the salaries of Mick McCarthy, his staff and other staff members at the club which would not be counted under SCMP.
But it does mean the club's wage bill was 108% of the club's turnover at that time, much higher than the 75% allowed in League One this season.
However, that wage figure is likely have decreased in the summer of 2018 as the likes of David McGoldrick, Martyn Waghorn and Joe Garner moved on and were replaced by Jackson, Nolan and Ellis Harrison, while it naturally decreased further when 15 senior players (including Will Keane, Collin Quaner Jonas Knudsen and Dean Gerken) left at the end of their contracts this summer.
Significant wage-reduction clauses were inserted in remaining players' contracts, at as high a level as 50%, meaning the current wage bill will be vastly reduced from that £18.5m at the end of June 2018.
Turnover will be down too, of course, with the Blues expected to be dealing with a drop in income of £9million in relation to television revenues, reduction in sponsorship from Magical Vegas and further knock-on effects of relegation.
Season ticket sales have increased from 10,200 to 12,600 this summer, with the reduction in price meaning this income stream has remained something of a constant for Ipswich. The last accounts showed £4.7m was brought in through the gate and that is now Town's most important mode of income.
When you then consider the fact so many of the players' contracts are excluded from the calculations and the Blues have the 75% threshold for the season, hitting the mark for SCMP is not expected to be an issue for Ipswich.
It will all become a little tougher next season, though, should the club fail to achieve promotion at the first time of asking.