salary cap

Adoption

Salary caps are used by the following major sports leagues around the world:

North America

The National Basketball Association, National Football League, National Hockey League, Major League Soccer, Major League Rugby, North American Rugby League, Canadian Football League, National Lacrosse League, Women's National Basketball Association, National Women's Soccer League, Professional Women's Hockey League, and minor leagues in various sports.

The National Basketball Association uses a soft cap plus luxury tax system, while Major League Baseball has no salary cap and instead implements a luxury tax only (see below).

United Kingdom:

In England, the top-level leagues in both rugby codes—the Gallagher Premiership in rugby union and the Super League in rugby league—have salary caps.

The four Welsh regional sides in the rugby union competition now known as the United Rugby Championship unilaterally adopted a salary cap effective with the 2012–13 season.

Australia and New Zealand: Most major leagues operating in the two countries have salary cap provisions:

The Australian Football League (Australian rules football), which operates only in Australia. The AFL Women's league, operated by the (men's) AFL, is also capped.

The National Rugby League (rugby league), A-League Men (association football) and National Basketball League, each of which is based in Australia but has one team in New Zealand.

The countries' national netball leagues—Super Netball in Australia and the ANZ Premiership in New Zealand—are capped. The trans-Tasman predecessor to both leagues, the ANZ Championship, was also capped.

Benefits

In theory, there are two main benefits derived from salary caps – promotion of parity between teams, and control of costs.

Primarily, an effective salary cap prevents wealthy teams from certain destructive behaviors such as signing a multitude of high-paid star players to prevent their rivals from accessing these players, and ensuring victory through superior economic power. With an effective salary cap, each club has roughly the same economic power to attract players. This results in roughly equal playing talent in each team in the league, and in turn brings economic benefits to the league and to its individual teams.

Leagues work to ensure a degree of parity between teams so that games are appealing for fans and not a foregone conclusion. This is what American football fans are referring to when they say anyone can win or lose on any given Sunday.

Leagues with salary caps generally believe letting richer teams accumulate talent affects the quality of the sporting product they want to sell: if only one or a few teams can win consistently and challenge for the championship, many contests will be blowouts by the superior team, reducing the sport's attractiveness for fans at the stadium and television viewers. Television is an important revenue source for many leagues worldwide; the more evenly matched and exciting the contests, the more interesting the television product, and the higher the value of the television broadcast rights. An unbalanced league will also threaten its weaker teams' financial viability: fans of the weaker clubs will gravitate to other sports and leagues if their teams have no long-term hope of winning.

One notable example of this occurring was in the Union Association, a baseball league that operated in 1884. The Association was dominated by the St. Louis Maroons, whose owner, Henry Lucas, was also league president (an obvious conflict-of-interest situation which is now banned), and bought all the best players for his own franchise, leaving the Maroons to easily win the pennant with a record of 94–19 (.832 winning percentage), 21 games ahead of their nearest rivals. The league folded at the end of the season.

Another famous example is the All-America Football Conference, which operated between 1946 and 1949. Despite starring many top players and innovative coaches, the AAFC was dominated by one team, the Cleveland Browns, who lost only three games in four years and won every championship in the league's four-year existence, being unbeaten in 1948, and winning three of the championships in blowouts. This resulted in a consistent fall in attendance and heavy losses after the league's second season, for the Browns as well as their rivals, and the league folded at the end of 1949.

Hard cap, soft cap and salary floor

A salary cap can be defined as a hard cap or a soft cap.

A hard cap represents a maximum amount that may not be exceeded for any reason. Contracts which cause a team to violate a hard cap are subject to major sanctions, including the voiding of violating contracts, and the stripping of championships won while breaching salary cap rules, which happened to the Melbourne Storm in the NRL. Hard caps are designed so that penalties deter breaking the cap, but there are numerous examples of clubs who have occasionally or systematically cheated the cap.

A soft cap represents an amount which may be exceeded in limited circumstances, but otherwise exceeding the cap will trigger a penalty which is known in advance. Typically these penalties are financial in nature; fines or a luxury tax are common penalties used by leagues.

A salary floor is a minimum amount that must be spent on the team as a whole, and this is separate from the minimum player salary that is agreed to by the league. Some leagues, such as the NHL, have a hard salary floor that requires teams to meet the salary floor every year, which helps prevent teams from using the salary cap to minimize costs. This also ensures that money from revenue sharing is used for player salaries instead of being pocketed by owners.

When the salary cap and floor are the same, the result is a standard form contract model of payment, in which each player is paid the same amount, sometimes varying by position. The standard form contract model is used extensively in North American minor leagues.

Reserve clause

Before the implementation of salary caps, the economic influence of clubs on player markets was controlled by the reserve clause, which was long a standard clause in professional sports player contracts in the United States. The clause forbade a player from negotiations with another team without the permission of the team holding that player's rights even after the contract's term was completed. This system began to unravel in the 1970s due largely to the activism of players' unions, and the threat of anti-trust legal actions. St. Louis Cardinal star Curt Flood started the ball rolling when he refused a trade to the Philadelphia Phillies. He had been a player for 12 years and felt he should have a voice in where he played baseball. Even though he lost his case in the Supreme Court, he was the first baseball player to try to end the reserve clause. Although anti-trust actions were not a threat to baseball, which has long been exempt from anti-trust laws, that sport's reserve clause was struck down by a United States arbitrator as a violation of labor laws.

By the 1990s, most players with several years' professional experience became free agents upon the expiry of their contracts and were free to negotiate a new contract with their previous team or with any other team. This situation, called Restricted Free Agency, led to "bidding wars" for the best players—a situation which inherently gave an advantage in landing such players to more affluent teams in larger media markets.

In North American leagues

National Football League

The new Collective Bargaining Agreement (CBA) formulated in 2011 had an initial salary cap of $120 million. While the previous CBA had a salary floor, the new CBA did not have one until 2013. Starting with that season, each team is required to spend a minimum of 88.8% of the cap in cash on player compensation, and 90% in future years. However, the floor is based on total cash spent over each of two four-year periods, the first running from 2013 to 2016 and the second from 2017 to 2020. A team can be under the floor in one or more seasons in a cycle without violating the CBA, as long as its total spending during the four-year period reaches the required percentage of the cap. This allows for unforeseen circumstances such as career ending injuries or unexpected player retirements to not result in an immediate penalty. As a result, teams are not forced to immediately take on a replacement for missing players which allows them to use more organic approaches such as a trade, free agency acquisition or the draft.

The NFL's cap is a hard cap that the teams have to stay under at all times, and the salary floor is also a hard floor. Penalties for violating or circumventing the cap regulations can include fines of up to $5 million for each violation, cancellation of contracts and loss of draft picks. Violating the salary floor regulations does not result in any fines or competitive penalties; instead, deficiencies are placed into a pool and distributed among all players who were on the regular roster of the offending team during a four-year floor cycle, prorated according to time on the roster in said period.

The cap was first introduced for the 1994 season and was expected to be $32 million, but an unexpectedly high bid from Fox and other networks increased the cap to $34.6 million. Both the cap and the floor are determined by a formula that is the league's revenue multiplied by the CBA percentage of the collective bargaining agreement to determine the player revenue share for the season. That value is then subtracted from the projected cost of player benefits for the season then divided by the total number of teams to determine the salary cap for a given season. Since its introduction the salary cap has increased each season (with the exception of the 2021 season due to a decrease of league revenues in the 2020 season due to the COVID-19 pandemic). In 2009, the final capped year under that agreement, the cap was $128 million per team, while the floor was 87.6% of the cap. Using the formula provided in the league's collective bargaining agreement, the floor in 2009 was $112.1 million. Under the NFL's agreement with the NFLPA, the effects on the salary cap of guaranteed payments such as signing bonuses are, with a few rare exceptions, prorated evenly over the term of the contract. During the offseason and preseason, only the top 51 salary figures are counted towards the cap. Once the 53-man rosters go into effect for the regular season the salaries of all players on the active roster, injured reserve, and practice squad, as well as unpaid bonuses and guarantees for former players count towards the cap.

National Hockey League

A salary cap existed in the early days of the National Hockey League (NHL). During the Great Depression, the league was under financial pressure to lower its salary cap to $62,500 per team and $7,000 per player, forcing some teams to trade away well-paid star players in order to fit the cap.

Prior to the resolution of the 2004–05 lockout, the NHL was the only major North American professional sports league that had no luxury tax, very limited revenue sharing and no salary cap.

During the Original Six era through to the early years of the expansion era, the NHL's strict reserve clause negated the need for a salary cap.

Player salaries first became an issue in the 1970s, when Alan Eagleson founded the NHL Players' Association (NHLPA) and the upstart World Hockey Association began competing with the NHL for players. Not all NHL owners were willing to engage in a bidding war, in particular, Harold Ballard of the Toronto Maple Leafs spent as close to the league minimum on rosters as he could. Since Maple Leaf Gardens was consistently sold out no matter how poorly the Maple Leafs played, economically it made more sense for Ballard to spend the least amount of money he could, with his team being by far the most profitable.

The 1994–95 NHL lockout was fought over the issue of the salary cap. The 1994–95 season was only partially cancelled, with 48 games and the playoffs eventually being played.

Eight NHL franchises were based in Canada at the time of the lockout. Until the 1990s, the Canadian teams usually paid player salaries in Canadian dollars, but with the rise of free agency and a decline in the value of Canadian dollar, players and their agents increasingly demanded to be paid in U.S. dollars. Canadian teams' revenues were, then as now, mostly in Canadian dollars, and the effects of the discrepancy were particularly acute for the small market franchises. The financial difficulties and uncertainties of competing in smaller Canadian markets led to two clubs moving to the U.S.; the Quebec Nordiques to Denver, and the Winnipeg Jets to Phoenix. NHL Commissioner Gary Bettman successfully persuaded the US-based teams to donate towards a pool to mitigate the adverse effects of the exchange rate.

National Basketball Association (soft cap + luxury tax)

The NBA had a salary cap in the mid-1940s, but it was abolished after only one season. The league continued to operate without such a cap until the 1984–85 season, when one was instituted in an attempt to level the playing field among all of the NBA's teams and ensure competitive balance for the Association in the future. Before the cap was reinstated, teams could spend whatever amount of money they wanted on players, but in the first season under the new cap, they were each limited to $3.6 million in total payroll. Under the 2005 CBA, salaries were capped at 57 percent of basketball-related income (BRI) and lasted for six years until June 30, 2011. The next CBA, which took effect in 2011–12, set the cap at 51.2 percent of BRI in 2011–12, with a 49-to-51 band in subsequent years. The salary cap for 2016–17 was set at $94.14 million, with the salary floor at 84.73 million and the luxury tax limit at $113.29 million. The current CBA took effect with the 2017–18 season.

The NBA uses a "soft" cap, meaning that teams were allowed to exceed the cap in order to retain the rights to a player who was already on the team. This provision was known as the "Larry Bird" exception, named after the former Boston Celtics great who was retained by that team until his retirement under the provisions of this rule. The purpose of this rule was to address fan unease over the frequent changing of teams by players under the free agency system, as fans became displeased over their favorite player on their favorite team suddenly bolting to another team. The "Larry Bird" provision of the salary cap gave the player's current team an advantage over other teams in free agent negotiations, thus increasing the chances that a player would stay with his current team. The provision tended to result in most teams being over the cap at any given time. Teams that violated the cap rules faced fines of up to $5 million, cancellation of contracts and loss of draft picks, and are prohibited from signing free agents for more than the league minimum. The NBA also has a salary floor, but teams are not penalized as long as their total payroll exceeds the floor at the end of the season.

The NBA also uses a "luxury tax" which is triggered if the average team payroll exceeds a certain amount higher than the cap. In this case, the teams with payrolls exceeding a certain threshold had to pay a tax to the league which is divided amongst the teams with lower payrolls. However, this penalty was levied against teams in violation only if the league average also breached a separate threshold.

Major League Baseball (luxury tax)

Instead of a salary cap, Major League Baseball implements a luxury tax (also called a competitive balance tax), an arrangement in which teams whose total payroll exceeds a certain figure (determined annually) are taxed on the excess amount in order to discourage large market teams from having a substantially higher payroll than the rest of the league. The tax was first instituted in 1997 and is paid to the league, which then puts the money into its industry-growth fund.

A team that goes over the luxury tax threshold for the first time in a five-year period pays a penalty of 22.5% of the amount they were over the threshold, second-time violators pay a 30% penalty, and teams that exceed the limit three or more times pay a 50% penalty from 2013 onwards. There is also an incentive to lower payroll; if in any year a team goes under the threshold, the penalty rate decreases to 17.5%, 25% or 40% (depending on prior record over the previous five years) for the next time the tax is paid.

The threshold for 2018 was $197 million, and rose to $206 million in 2019, $208 million in 2020, and $210 million in 2021.

The following teams have been subject to the luxury tax between 2003 and 2017:

As of 2017, the New York Yankees have paid 61.75% of all luxury tax collected by MLB.

Money collected under the luxury tax is apportioned as follows: The first $2,375,400 and 50% of the remaining total are used to fund player benefits, 25% goes to the Industry Growth Fund, and the remaining 25% is used to defray team's funding obligations from player benefits.

Measuring the success of the luxury tax in bringing the benefits of parity has brought mixed results. A team with a $100 million plus payroll won the World Series 12 times between 2004 and 2018 (the 2009 Yankees; the 2004, 2007, 2013 and 2018 Red Sox; the 2011 St. Louis Cardinals; the 2010, 2012 and 2014 Giants; the 2015 Kansas City Royals; the 2016 Cubs; and the 2017 Houston Astros). While a top tier payroll increases a team's chances of making the playoffs, it does not guarantee they will consistently win championships. On the other hand, the New York Yankees have consistently had the highest total payroll in MLB, and they have appeared in 40 of the 114 World Series for 27 wins as of 2018 (35.1% of all World Series for a 24.6% success rate). In the past 30 years, 18 different teams have won the World Series. In comparison, only 14 different teams won the NFL Super Bowl, 13 won the NHL Stanley Cup and 10 won the NBA championship in that same time frame.

Major League Soccer

Here are some major points of the MLS rules and regulations for the 2017 season.

A team's roster can be made up of up to 30 players. They are eligible to be selected to the 18-player team for each game.

The salary cap is $4.035 million per team in 2018, not counting the extra salary of designated players. Players in the first 20 roster spots will count against the cap.

Roster spots 19 and 20 are not required to be filled, and teams may spread their salary budget across only 18 players. A minimum salary budget charge ($67,500 in 2018) will be imputed against a team's salary budget for each unfilled senior roster spot below 18.

The maximum salary for any non-designated player is $504,375.

A designated player counts $504,375 against a team's cap. However, if a player joins his team in the middle of the season, the charge against the budget will be $252,187.

Players who are in the roster spots from 21 to 30 will not count against a team's cap. They will be known as off-budget players.

Those in roster slots 21–24 must be a senior minimum salary player ($65,000 base salary – will increase to $67,500 in 2018) or Generation adidas player.

Those in slots 25–30 must be a reserve minimum salary player ($53,000 base salary – will increase to $54,500 in 2018). Additionally, those who earn the lowest possible league salary must be 24 or younger during the 2017 calendar year.

Those in slots 29–30 must also be homegrown players.

In addition to the salary cap, each MLS team can also spend additional funds on a player in the form of allocation money and homegrown player subsidy.

Canadian Football League

On June 13, 2006, a proposed salary management system featuring a Maximum Salary Expenditure Cap (SEC) was ratified at the Canadian Football League board of governors meeting in Winnipeg, Manitoba.

The CFL began enforcing strict salary cap regulation for the 2007 season and the cap was initially set at $4.05 million. The cap will be $6,062,365 for the 2025 season or an average salary of $131,791 per active roster player. However, most clubs spend more than the salary cap amount per season on salaries due to injury exemptions allowed under the cap. For instance, the Edmonton Eskimos spent $8.6 million on salaries in 2018, $8.8 million in 2017 season and $7.9 million in 2016, while still compliant with the then salary caps of between $5 million to $5.2 million.

Penalties for teams found to have breached the salary cap or salary floor regulations are:

The following breaches of the salary cap have occurred (no team has yet been penalized for violating salary floor regulations):

In 2007, the Montreal Alouettes were fined $116,570 and forfeited a first-round draft pick after a CFL investigation found that they had exceeded the salary cap by $108,285 during the season.

The Saskatchewan Roughriders were also fined in 2007 ($76,552) for a string of minor breaches in relation to benefit payments to injured players.

In 2008, the Saskatchewan Roughriders were fined $87,147 for exceeding the salary cap by that amount.

In 2009, the Winnipeg Blue Bombers were fined $44,687 for minor breaches in relation to player bonuses.

In 2010, the Saskatchewan Roughriders were fined $26,677 for exceeding the salary cap by that amount.

Major League Rugby

The current team salary cap in the Major League Rugby is $500,000.

Other North American leagues

Salary caps are common in other leagues.

The salary cap of the first Arena Football League was $1.82 million per team in its final season in 2008. In 2005, the Tampa Bay Storm were fined $125,000 for salary cap violations and their head coach Tim Marcum was suspended for four games (last two of the 2005 season and first two of the 2006 season) and fined $25,250; Marcum was suspended for a fifth game the next day for criticizing the decision at a press conference.

When the Arena Football League returned in 2010, it instituted a standard salary of $400 per game and a salary cap of $1.5 million, considerably lower than that paid by teams in the previous AFL; given that the new AFL had a 16-game season in 2010, this effectively means that its players are semi-professional.

The National Women's Soccer League, launched in 2013, was initially planned to have a team cap of $500,000, but that was later lowered to $200,000. However, the sport's three North American national federations—the United States Soccer Federation, which ran the league through the 2020 season; the Canadian Soccer Association (CSA); and the Mexican Football Federation (FMF)—committed to paying the league salaries of many national team players. For the league's first season, 23 US players, plus 16 players each from Canada and Mexico, had their salaries paid by their respective federations; these players' salaries originally did not count against the team cap. Mexican players have not been allocated since FMF launched Liga MX Femenil in 2017, but the CSA continued to allocate players to the league through the 2021 season, after which the national team allocation system was abolished.

For 2021, the NWSL team salary cap was $682,500, with a cap of $52,500 and a floor of $22,000 for individual player salaries. In a practice similar to that of MLS, "allocation money" can be used to supplement salaries of selected players. Although the salaries of U.S. and Canada national team players allocated to league rosters were paid by the USSF or CSA, these players remained subject to a modified form of the cap. U.S. federation players had a specified cap value of $33,000, with Canadian federation players having a cap value of $27,500 or their actual salary, whichever is lower. The national team allocation system was eliminated after the 2021 season. The league and its players' union entered into their first collective bargaining agreement during the 2021–22 offseason. For 2022, the team cap was raised to $1.1 million, with standard player salaries limited to between $35,000 and $75,000. However, in a system similar to that of MLS, each team is also entitled to use $500,000 per year in "allocation money" (which can be traded) to supplement the salaries of select players. For 2023, the team cap was further raised to $1.375 million, and allocation money increased to $600,000. Also, the maximum salary was redefined as a "maximum cap charge", which includes all team-provided compensation in the player's contract, excluding benefits provided to all league players. The maximum cap charge was set for 2023 at $200,000.

In Europe

Salary caps are rarely used in Europe. However, several European rugby competitions, as well as ice hockey leagues, have successfully instituted salary caps. Rugby league's Super League, mainly in England with a team also in France (and formerly one in Wales), is capped. The league has used promotion and relegation for most of its history, though from 2009 through 2014 it operated on a licensing system with some similarities to the North American franchising model. Promotion and relegation returned to Super League in the 2015 season. In rugby union, two of the continent's three main domestic/regional leagues—the English Premiership and the French Top 14—instituted caps despite both being at the top of extensive pyramid structures with promotion and relegation throughout. The most notable European ice hockey league with a salary cap is the Kontinental Hockey League (which uses the franchising model), and that league implemented a cap despite currency issues.

Rugby union

The Premiership's salary cap has been in place since the late 1990s. By 2007–08, the cap reached £2.2 million. In the following season, it nearly doubled to £4 million, and remained at that amount through the 2011–12 season. A provision applicable only in seasons that run up against the quadrennial Rugby World Cup, such as 2015–16, gives teams a credit for each player in the squad participating in the competition, helping them to manage their reduced squads in the season's early weeks. This credit was £30,000 in the 2011–12 season, and rose to £35,000 for 2015–16. In addition, each club has a separate salary cap for its academy players (£200,000 prior to 2015–16, reduced to £100,000 thereafter, but with home-grown players no longer counting under this cap), and is allowed to provide an unlimited educational fund to enable its players to pursue university or vocational training. Finally, each club has a separate cap of £400,000 for use in signing replacements for players lost to long-term injuries (12 weeks or more).

Through 2011–12, the cap remained at £4 million. However, academy credits were introduced that season. Teams received a £30,000 credit for each home-grown player in their senior squads who was under age 24 at the start of the season and earned more than £30,000, with a maximum of eight such credits. This increased the effective cap to a maximum of £4.24 million (not counting World Cup roster credits).

Two substantial changes took effect for 2012–13. First, the cap increased to £4.26 million before academy credits and up to £4.5 million with credits. The most significant change was that each team could now sign one player whose salary did not count against the cap, similar to the Designated Player Rule in MLS. The player so designated, which the Premiership calls an "excluded player", had to meet one of the following three criteria:

Played at least two full seasons with his current club before his designation.

Played outside the Premiership in the season before his designation.

Included in the official squad of any participant in the 2011 Rugby World Cup final tournament.

For the 2014–15 season, the cap increased to £4.76 million before academy credits and up to £5 million with credits. Other features of the cap remained unchanged.

Kontinental Hockey League

When the Russian Superleague was dissolved to make way to the modern-day KHL, the Kontinental Hockey League Players' Trade Union (KHLPTU) agreed to the implementation of a salary cap. When first implemented there was a salary cap, as well as a salary floor. For the 2009-10 KHL season, the salary cap was 620 million rubles ($US 18.3 million) and the salary floor was 200 million rubles ($US 5.9 million).

The KHL's cap operates despite the KHL's multinational nature, with teams in Belarus, China, Finland, Kazakhstan, and Latvia, in addition to its primary base of Russia. The five non-Russian countries use four different currencies (two countries use the euro), with most floating against the ruble.

From 2011 to 2012, each team can sign up to two "designated players" whose salaries are not counted against the cap. Up until 2011, the KHL salary cap was a soft cap, with a luxury tax amounting to 30% of the payroll that is over the cap paid to the special stabilization account, which helps KHL teams facing financial hardship. From the 2012–13 KHL season onward, the KHL began using a hard cap, set at 1.25 billion rubles (at the time $US 36.5 million). The 2020–21 season was the first which used a hard cap and a hard salary floor; in that season. the cap was 900 million rubles ($US 12.0 million at then-prevailing exchange rates) and the floor was 270 million rubles (roughly $US 3.5 million)

In European football

Several European association football leagues have considered introducing salary caps in the early 21st century. In 2002, the BBC reported that the G14 group of 18 leading European football teams would cap their payrolls at 70% of team's income, starting from the 2005/2006 season, however this did not occur. Serie A, the leading Italian football league, and the English Football League (consisting of England's second through fourth levels) have also considered salary caps.

These measures would be implemented to ensure clubs spend responsibly rather than as a tool to create parity. Top executives in European football have acknowledged that a number of challenges not present in North America would confront anyone who tried to implement an effective cap across European football or even across a single league with a view to creating competitive balance:

The various national leagues are in competition with each other for the best players because there is free movement of players between the leagues. Football leagues in European Union countries have been forbidden from prohibiting the signing of EU players from other nations, or even from limiting their numbers. Therefore, if one league imposed a strict cap on its teams, the best players from the country in question would still be free to move to uncapped rival leagues.

The existence of lucrative and prestigious international club competitions encourage clubs to ensure dominance of their national leagues in order to play in the higher-level European leagues. For many top clubs, the domestic league is little more than a stepping stone to the European league. Success in European club competitions is not only a matter of national pride, as the number of places allocated to each country for these competitions is determined by that country's teams' past performances in Europe. Salary capped clubs in a franchise structure do not have to compete with teams in rival leagues where there is no salary cap.

Different governing bodies have authority over domestic and international competitions. For example, UEFA governs European football and organizes the prestigious Champions League, Europa League, and Conference League, but its authority over the domestic leagues is very limited. Although UEFA could, in theory, impose a salary cap, it would only apply to UEFA's club competitions and to the portion of each team's payroll paid to players registered with UEFA. A wealthy Champions League team could then sign players who would play exclusively in domestic competitions. In other sports that have a single governing body which oversees a single premier competition, the power to enforce salary cap rules is much greater.

In Australia and New Zealand

Australian rules football

The Australian Football League has implemented a salary cap on its clubs since 1987, when Brisbane and West Coast were admitted, as part of its equalization policy designed to neutralize the ability of the richest and most successful clubs, Carlton, Collingwood and Essendon, to perennially dominate the competition.

The cap was set at A$1.25 million for 1987–1989 as per VFL agreement, with the salary floor set at 90% of the cap or $1.125 million; the salary floor was increased to 92.5% of the cap in 2001, and to 95% of the cap for 2013 onwards due to increased revenues. The salary cap, known officially as Total Player Payments, is A$13,165,950 for the 2020 season with a salary floor of $12,507,652.50.

Both the salary cap and salary floor has increased substantially since the competition was re-branded as the AFL in 1990 to assist in stemming the dominance of other high membership clubs, such as Adelaide, Hawthorn and the West Coast Eagles.

Certain payments are excluded from the cap, and concessions are available for some players, in particular "veteran" players (those who have completed 10 seasons with their current club) and "nominated" rookie list players, who are discounted by 50% for purposes of the cap, depending on the number of these players at each club.

The AFL Players Association negotiates for players with the AFL on the topic of average salary.

The breaches of the salary cap and salary floor regulations are exceeding the TPP, falling below the salary floor, not informing the AFL of payments, late or incorrect lodgement or loss of documents relating to player financial and contract details, or engaging in draft tampering. Trading cash for players and playing coaches, formerly common practices, are also prohibited to prevent wealthier clubs from circumventing the restrictions of the salary cap and salary floor.

Penalties for players, club officials or agents could include fines of up to one and a half times the amount involved and suspension. Penalties for clubs include fines of up to triple the amount involved, forfeiture of draft picks or deduction of premiership points. As of 2022, no club has been penalised for breaches of the salary floor regulations, and no punishment has included the deduction of premiership points.

Rugby league

The National Rugby League has a salary cap of A$9.6 million in 2018, with a salary floor of A$9.12 million (95% of the cap). The salary cap keeps average annual player salaries at around A$364,800.

The National Rugby League adopted a hard salary cap model in its first season in 1998. The NRL's stated purposes for having a salary cap are "to assist in spreading the playing talent" and "ensure that clubs are not put into positions where they are forced to spend more money than they can afford in terms of player payments, just to be competitive."

Before the 2012 season, the NRL's then Chief executive David Gallop said "The cap's there to make sure that pure purchasing power cannot dominate the sport... It means we can genuinely say that all 16 teams ... have a chance. For the fan every week, every game is a contest. That's at the core of why rugby league is so successful."

The breaches of the salary cap and salary floor regulations outlined by the NRL are exceeding the salary cap, falling below the salary floor, not informing the NRL of payments, late or incorrect lodgement or loss of documents relating to player financial and contract details or engaging in contract tampering. Trading cash for players is also prohibited to prevent wealthier clubs from evading the salary cap and salary floor regulations.

Penalties for players, club officials and agents could include fines of the one and a half times of the amount involved and suspension. Penalties for clubs could include fines of up to triple the amount involved ($10,000 for each document that is late or incorrectly lodged or lost) and deduction of premiership points.

The NRL is one of the few major leagues to implement a salary cap in a sport that has competing leagues in other countries where there is either no salary cap or a much higher cap per club. As a result, at times there has been a tradition of players from Australia moving to Europe where salaries for the elite, and even for average players, were considerably higher. This is often dependent on exchange rates or the rise and fall in the fortunes of international rugby league or union competitions.

Rugby union

Through the 2017 southernhemisphere season, the five Australian teams then playing in rugby union's Super Rugby competition were subjected to an A$5 million salary cap for a squad of 30 full-time players per Australian team. The Australian Rugby Union, now known as Rugby Australia, decided in 2011 to introduce the salary cap because of financial pressures.

Originally starting in 2012 as a cap of A$4.1 million, it was later raised to $4.5 million for the 2013 and 2014 seasons to take pressure off the teams' ability to recruit and retain players. The salary cap has been key component of negotiations between Rugby Australia and the Rugby Union Players' Association (RUPA) over the collective bargaining agreement.

The fact that the Australian teams in Super Rugby face a salary cap has been attributed as a factor that makes it more difficult for Australian teams to win the title.

The cap regulations had some small concessions:

Five players on each team could be paid $30,000 each per season by team sponsors; this amount was not included in the team cap.

The maximum cap charge for a non-Australian player was $137,000, regardless of his actual wages.

Rugby Australia and RUPA later negotiated a new bargaining agreement, running from 2018 to 2020, that made significant changes to previous cap schemes. The 2018 season, coinciding with the transition from five Australian Super Rugby sides to four, was uncapped, but the salary cap returned for 2019 and 2020, at A$5.5 million. Prior concessions for sponsor payments and non-Australian players were removed, while a salary floor was added at 90% of the cap.

The 14 teams participating in New Zealand's top domestic competition, now known once again by its historic name of the National Provincial Championship, faced a salary cap in 2013 that was the lesser of $NZ 1.35 million or 36% of the union's commercial revenue. Maximum player salaries are $55,000, and minimum salaries are $18,000. In August 2013, it was announced that the cap would be further reduced, with the team cap for the 2015 season set to $1.025 million.

Association football

Both national senior association football (soccer) competitions operating under the A-League banner, A-League Men and A-League Women, have salary caps.

A-League Men had a salary cap of A$2.5 million in the 2021–22 season, with the cap set to rise by $50,000 in each of the next two seasons. This value had reached $3.2 million in 2019–20, but was reduced to $2.1 million in 2020–21 due to financial fallout from COVID-19. However, the cap has numerous exceptions. First, then-current player contracts were honoured at their full values and not subjected to the cap. In the 2020–21 season, the league's two newest teams, Western United (which debuted in 2019–20) and Macarthur (which debuted in 2020–21), were allowed a higher cap of $2.433 million. The league also has a salary floor, set at 90% of the cap. The Salary Cap applies to the 20 to 23 Players that Clubs have registered to their A-League Men Player Roster. Unless specifically exempt, all payments and benefits (e.g. cars, accommodation, etc.) provided by a Club to a Player are included in the club's Salary Cap.

Each team can sign two "marquee players" and one "guest player", the latter of whom can only play for a maximum of 14 matches in a season, whose salaries are excluded from the team's salary cap. A-League Men has also introduced a "junior marquee" for eligible under-23-year-old players with the aim of keeping young talented players in Australia (or New Zealand for the Wellington Phoenix) for a longer period, similar to the Designated Player Rule in Major League Soccer in North America. Each team can also exclude the salaries of up to four "homegrown players", defined as under-23 players who have come from the club's youth system. Finally, once a player has been with a club for 4 consecutive years as a professional, he is considered a "loyalty player", and as long as he remains with that club, part of his salary is excluded from the cap. The percentage of exclusion starts at 12.5% in his fourth season with the club, increases to 25% in his fifth, and increases by 5% in each subsequent season until reaching its maximum value of 50% in his tenth season.

The breaches of the salary cap and salary floor regulations outlined by the A-League are exceeding the salary cap, falling below the salary floor, not informing the A-League of payments, late or incorrect lodgement or loss of documents relating to player financial and contract details or engaging in contract tampering.

National Basketball League

The National Basketball League has a salary cap of A$1.1 million for each of its eight teams as of the 2016–17 season. In addition, from 2003–04 through 2015–16, the NBL used a "points cap" to encourage spread of talent: players were assigned points on a 1–10 basis each season "based on their performance in the NBL or based on the league they have participated in for the season just concluded", and each team's player roster (of between 10 and 12 players) had to fall within a "Total Team Points" limit.

On May 9, 2014, in order to help attract high-calibre imports or offer financial incentive for local stars considering overseas opportunities, the NBL introduced a marquee player rule. It originally allowed a team to nominate one player whose salary was paid outside the cap, with a 25% Marquee Player levy applied to any payment made above the salary cap. The levy still applies to non-local marquee players (i.e., players who are neither Australians nor New Zealanders), with one exception introduced in 2016–17.

Effective with the 2016–17 season, several significant changes were made to the cap scheme. First, the cap was changed from a hard cap of A$1 million to a soft cap of $1.1 million. Teams exceeding the cap are required to pay "salary equalisation" (effectively a luxury tax) equal to the amount above the cap. Additionally, players' values for purposes of the cap are not based on their publicised salaries, but are instead determined by an NBL panel. Also, the points system in place for the previous 13 seasons was scrapped; in its place, a salary cap provision was added requiring that all teams have at least one group of five players with a collective cap value of no more than A$400,000. Second, the Marquee Player rule was modified with regard to "non-restricted" players; the cap charge for a qualifying player who fills the marquee player slot is now $150,000, regardless of his actual salary. Since that season, "non-restricted" players have been defined as all Australians and New Zealanders, plus one player per team from another country that is a member of either FIBA Asia or FIBA Oceania.

The 2018–19 season saw another significant change to the cap scheme with the introduction of the NBL's "Next Stars" initiative, targeted mainly at young American players seeking an alternative to U.S. college basketball, plus Australians and New Zealanders considering U.S. college basketball. The league identifies young prospects preparing to graduate from secondary school and offers them NBL contracts at a first-year salary of A$100,000, plus housing and transport allowances. Players who sign "Next Stars" contracts are then allocated among the league's teams, with each team receiving an extra import roster slot intended to be filled by a "Next Star". As these slots are funded by the NBL, they do not count against the salary cap.

Netball

In netball's now-defunct ANZ Championship, which featured five teams each from Australia and New Zealand, each franchise was restricted to a NZ$380,000 salary cap (as of 2013) from which player salaries were paid. Salary amounts varied among players, but each player received a retainer of at least NZ$12,000 per season; high-profile players were expected to earn up to NZ$50,000.

Following the 2016 season, Australia's national governing body of Netball Australia broke away from the trans-Tasman championship and launched its own national league, Super Netball. The initial team salary cap in the new league was A$675,000, with minimum player salaries of A$27,375. This latter figure was more than double the minimum wage of A$13,250 in the final season of the ANZ Championship. New Zealand rebranded its now-domestic league as the ANZ Premiership, presumably retaining its prior salary cap provisions.

Since then, Super Netball's salary cap has risen modestly. The original team cap of A$675,000 had been structured with a $500,000 cap on playing payments, plus an additional $150,000 for club-related employment, educational, and ambassadorial roles, and the balance for health insurance and technology allowances. For the 2019 season, the minimum player wage (not including the health insurance allowance, set at $1,635 for that season) rises to $30,000, and the team cap on playing payments rises to $515,000.

Chinese Super League

Following a 2020 season financially rocked by COVID-19, the Chinese Super League saw major turmoil. In February 2021 alone, the reigning champions Jiangsu F.C. folded; Shandong Taishan were expelled from the AFC Champions League for "overdue payables"; and Tianjin Jinmen Tiger were reportedly at risk of collapsing, with Chinese media reporting that the club had not paid players in 10 months. In 2020, then-current Super League member Tianjin Tianhai folded, as did Liaoning F.C., which had been the first Chinese club to win the AFC Champions League before dropping to the country's lower levels.

In December 2020, the Chinese Football Association imposed a salary cap on the Super League. Effective in 2021, total player wages are capped at RMB 600 million (US$91.7 million at March 2021 exchange rates), with a separate cap of €10 million (US$12.1 million) on total wages of foreign players. Individual player salaries are also capped at RMB 5 million (US$765,000) before tax for Chinese players and €3 million (US$3.63 million) for foreign players.

In rugby union

Salary caps and currency conversions accurate as of July 2020.

Notes:

In cricket

Salary caps and currency conversions accurate as of January 2018.