How football transfers and transfer fees work

how football transfers work

Football transfers in club football have been the most talked about part of the football industry, with the European transfer window being one of the most popular. So it will be used as a reference for others since it’s the one that attracts the most concern.

Football transfer is the movement of players from one club to another or from one academy to another and could be in the following ways:

 

• Direct payment

• Swap

•.Paying buyout clauses

• Loan

• Free transfers

• Academy poaching

Transfers of players happen during a specific time. Although players can move at any time of the calendar, registration can only be done within the transfer window in the country’s calendar. This is twice in the European calendars, the Summer(July-August) and Winter (January).

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Other continents and countries have theirs. For instance, Asia (China) and MLS have theirs in February, African clubs don’t have a fixed date because their calendar is not fixed.

When players move from club to club, money exchanges hands between the clubs involved. The movement can be done by direct payment, swap, loan, paying buyout clauses, academy poaching, and free transfers.

DIRECT PAYMENT, SWAP, LOAN, PAYING BUYOUT, ACADEMY POACHING, AND FREE TRANSFERS

Before a player registered to a club can move to another, the buying club contacts the player’s agent (to check the availability of his client although this process is officially wrong). 

Once this is done, the buying club informs the selling club of their interest and the club will now decide if they want to sell or not. If they want to sell, they allow the club to meet with the player’s representatives and discuss with them.

As for the transfer fee, it is negotiated between the clubs, and based on factors like the player’s age, the structure of the contract left, the prevailing market value, the club’s financial situation, and other peculiar player attributes.

For example, the value of a player of Mbappe qualities could be 100m pounds, but factors that can increase or reduce the price are based on:

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  • The number of years remaining on his contract.
  • Does the club want to sell?
  • The COVID-19 pandemic has made a dent in the market, reducing the purchasing power of teams.
  • If the buying club is rich and is in serious need of a winger? (Inflation will come into play)
  • If there’s a sell-on clause from the selling club or the abolished third party arrangement in most European countries
  • The negotiating prowess of both parties
  • Unwritten rule(the nationality of the players)
  • The player’s agent
  • The player’s age.

All these factors will influence if Mbappe will be bought above or below his quality value.

Meanwhile, there’s a difference between quality value and market value.

The quality value is the relative value of a player with a player of similar quality. 

However, it’s not used because it is subjective. For instance, Cristiano Ronaldo is a player worth hundreds of millions, but his market value is £45m according to transfer market website valuation, that’s because of his age.

TRANSFER FEES

The fees paid by the buying club for a player are:

  • Selling clubs player worth
  • Agent fee
  • Sign-on fees to players ( not in all cases but depends on the deal. Neymar got this from Barca when he signed from Santos)
  • The FA of the club’s country ( depending on the law, to buy any foreigner into China you must pay the equivalent value to the Chinese FA)

BREAKDOWN OF FEES FROM SELLING CLUBS

Not all fees paid to the selling clubs go directly into the club’s coffers. Sometimes they end up getting below 50 percent of the quoted price.

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The breakdown is as follows:

  • Country tax: Every signing is like any other trade within the country, therefore you are obliged to pay taxes
  • Payment to the FA of the country where the club is located.
  • Payment to FA of the player’s country.
  • Payment to FIFA
  • Payment to the country’s continent’s football governing body
  • Optional payments*
  • Payment to the player’s agent (if the deal was struck before)
  • Loyalty payment to a player (if the player didn’t tender a transfer request)
  • Sell on clause to player’s former club(if inserted)

A Transfer request is when a player writes an official letter to the club demanding that he wants to leave.

Sometimes the buying club will pay the player’s clause (called the buyout clause or exit clause. It is a fee that buys you out of your legal contract with the club. For instance, Neymar’s £222m move to PSG

LOANS

Loans are slightly different from direct payment since they are a temporary movement of players. 

Some don’t involve cash movement and results in the non-payment of many of the fees listed above.

For instance, the signing-on fee, the fee to the FA of the player’s country, payment to the FA of the club’s country. However, taxes are paid if money is involved

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SWAP

A swap is another method that clubs take advantage of to move players. Payments could be made or not on some occasions. Regardless, swap deals are like a link between direct payments and loans depending on the structure of the deal.

FREE TRANSFERS

Nothing is free in Free transfers. It’s called a free transfer because money doesn’t exchange hands between clubs. 

Therefore, no fund goes to the FA. It is the transfer of a player that is not affiliated with a club. They could be players released from a club and players whose contracts with a club have expired.

Depending on the caliber of the player the fees paid can be high, low, or even nothing. However, no taxes are paid and none is paid to the FAs. The fees paid include:

Agent fees

Bosman fee; Money paid to players, it was introduced in 1995 and the first high profile player was Edgar Davis from Ajax to Milan

ACADEMY POACHING

It is the acquisition of an academy player who is under 18. Before a player can sign a contract, he must be 15 years, and it must be with the consent of his parents or guardians. 

He is eligible to sign a pro contract by 17 and can sign with an agent when he is 18.

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Therefore, the signing of an under 18 player is different from signing a pro. Y. You don’t pay a transfer fee but a compensation fee which will be agreed upon by both teams.

If they can’t agree, they will move to a tribunal. However, some countries have specific rules on how to go about this kind of player transfer. 

Regardless, the above method explains how the England FA conduct underage transfers

 

Post Credit – Banji Segun