Under both the Premier League’s and The English Football League’s Rules and Regulations, a club signing an out-of-contract player under the age of 24 is (subject to the former’s club’s compliance with certain requirements) obliged to pay compensation to the former club for its training and development of the player.
It’s important to understand that the compensation is not due in lieu of the transfer fee that would be payable if the player were under contract. The compensation is of an entirely different nature and the player’s perceived ‘market value’ and transfer fee comparables are irrelevant. Rather, the compensation is payable solely to compensate the former club for its training and development of the player, the rationale being that clubs should be rewarded for bringing through talent and incentivised to continue doing so. This can however be considerably less than the value that would be obtained if the player was under a contract.
The compensation fee payable by the new club is such sum as is agreed between the two clubs or, in default of agreement, “such sum as the Professional Football Compensation Committee on the application of either Club shall determine.”
There is now building up a considerable amount of case law on the subject and it remains a hot topic among the football fraternity.
Beeston Shenton Sports Law represent players young and old, and have access to expert Counsel who can advise on this area of law.
For more information and help please call us on 01782 662424.