kevsev posted:
In fraggles post it states that the salary cap will rise from the £1.7m in 2005 to £1.75m in 2006
Is ML now saying it will decrease in 2007 ?????
Is this yet another ML got it wrong again ??????
This has been discussed elsewhere but since this is the salary cap FAQ thread I will try and explain it again here.
In 2007 some changes have been made to the salary cap. It will go down to £1.6m but according to the RFL this will make no practical difference to what clubs can pay players as National Insurance contributions won't count on the salary cap.
The implication of this is that currently national insurance contributions
do count on the cap.
I am not sure which ones count i.e. employee contributions (11% of wages) or employer contributions (12.8% wages) but lets say its employee contributions.
That means currently if you pay a player £100K a year you take a hit against your salary cap allowance of £111,000. (its actually a bit less than that due to the way NI is calculated but its not far out).
In 2007 as NI contributions won't count against the cap the hit you take for paying a player £100K is simply £100K. So you take a smaller hit against the salary cap in 2007 for paying the player the same wage.
This means the salary cap can be set to a lower figure without forcing clubs to trim their wage bill.
That is if you work out how much NI is payable on £1.6 million, you get 176,000 (11% of 1.6 million) and if you add that to 1.6 million you end up with £1,776,000 which compares to the £1.75m salary cap of 2006.
There are also other changes in 2007 in that the wages of junior (i.e. U21 and U18 ) players do not on the salary cap as they do now.
So to answer your question about ML he has got it wrong because the salary cap remains effectively the same in 2007 due to this fiddling about with NI contributions but also because with the wages of U21/U18 no longer counted in the cap he actually has a little more money to throw at other players.
Conclusion: he either does not know how the cap works or is telling porkies or the RFL are not being strictly accurate saying £1.6m minus NI contributions is equivalent to £1.75 million with them included.
For completeness sake the inflation increase to the cap that was applied in 2006 to take the cap from the 2005 level of 1.7 million to 1.75 million is not being applied to the figures for 2007. The reason for this is the change mentioned above of removing U21.U18 from the cap as that is an effective increase in the cap.
Dave