Training Compensation in Professional Soccer

The concept of “training compensation” is acknowledged by many but – unsurprisingly – completely understood by few. The concept of training compensation is not terribly difficult to understand in theory. Still, it can be hard to understand and apply in practice, given all of the factors and variables that come into play when determining whether training compensation is due and what amount of compensation is due.

Let’s first start by remembering that the FIFA Regulations on the Status and Transfer of Players “lay down global and binding rules concerning the status of players, their eligibility to participate in organized football, and their transfer between clubs belonging to different associations.” The transfer of players between clubs belonging to the same association is governed by specific regulations issued by the association concerned; “such regulations should also provide for a system to reward clubs affiliated to the relevant association investing in the training and education of young players.”

Remembering that FIFA is focused on regulating the “international” transfer of players, let’s start with the rule, which is found in Article 20 of the FIFA Regulations on the Status and Transfer of Players:

Training compensation shall be paid to a player’s training club(s): (1) when a player is registered for the first time as a professional, and (2) each time a professional is transferred until the end of the calendar year of his 23rd birthday. The obligation to pay training compensation arises whether the transfer takes place during or at the end of a player’s contract.

FIFA has acknowledged that Article 20 does no more than summarize the main principles of the training compensation system. This system is designed to reward clubs that invest in training and educating young soccer players whenever a player that they train becomes a professional. Clubs that do not invest in training and educating young players are made to reimburse the clubs who trained the players that becomes a professional (the “training clubs”), as in principle, they are profiting from the training and education provided by those training clubs.

The technical details of training compensation are set out in Annexe 4. Here is what you need to know:

In Article I of Annexe 4, FIFA provides :

A player’s training and education takes place between the ages of 12 and 23. Training compensation shall be payable, as a general rule, up to the age of 23 for training that occurred up to the age of 21, unless it is evident that a player has already terminated his training period before the age of 21. In the latter case, training compensation is payable until the end of the calendar year in which the player reaches the age of 23, but the calculation of the amount payable is based on the years between the age of 12 and the age when it has established that the player actually completed his training.

Let’s break this down a little bit to make it more understandable.

First, clubs that train players between the ages of 12 and 21 (up to and including the calendar year of the player’s 21st birthday) may be entitled to receive training compensation payments.

Second, clubs that employ players up to the age of 23 may be required to pay training compensation to training clubs.

Third, if a player has clearly finished their training before turning 21, the calendar years to be taken into consideration for the purposes of training compensation will be those between the player’s 12th birthday and the calendar year in which they completed their training period. The club that is liable to pay training compensation (and hopes to reduce that payment by showing that training was completed early) must prove that the player completed their training early. The fact that a player has signed the first professional contract alone does not automatically indicate that they have completed their training. Other, more persuasive indications, according to FIFA, which show that a player has completed their training might include: having played regularly in official matches for their training club’s first team; having been called up to the “A” team of the national association, or the Under 21 representative team (i.e., having “national team” experience”); having been loaned, in return for transfer compensation, to a club at the same level as the training club or above; having reached a certain age threshold; or having previously been transferred as a professional player in return for significant transfer compensation.

The next important concept is understanding exactly when training compensation is due. Article 2 of Annexe 4 provides:

Training compensation is due when, before the end of the calendar year of a player’s 23rd birthday, that player is (a) registered for the first time as a professional or (b) transferred between clubs of 2 different associations. Training compensation is not due if (a) the former club terminates the player’s contract without just cause; or (b) the player is transferred to a “category 4” club; or (c) a professional reacquires amateur status on being transferred.

In simple terms, training compensation is due if either of the following situations occurs:

A player is registered for the first time as a professional before the end of the calendar year of their 23rd birthday, and their training clubs are affiliated to a different national association than that of his current club – the “First Registration as a Professional”; or

A professional is transferred between clubs affiliated to different national associations before the end of the calendar year of their 23rd birthday – the “International Transfer as a Professional”.

Where the player’s first registration as a professional is with the same club where they have been trained their whole career (i.e., they are simply promoted through the ranks from an amateur youth player until they earn a professional contract), no training compensation is payable. However, if this professional player then goes on to transfer from their training club to a club affiliated to a different national association before the end of the calendar year of their 23rd birthday, their training club will be entitled to training compensation for the period they were trained, both as an amateur and as a professional. For a training club to be able to claim training compensation pursuant to the regulations in the case of a first registration of the player as a professional, that registration must have been for a club affiliated to a different member association from the one to which the training club is affiliated. So, for instance, if a player is part of a MLS club’s academy, then signs with the MLS club as a professional, and then is transferred to a club overseas, the club overseas would pay the MLS club training compensation for the entire time the player was being “trained” by that MLS club – whether in the MLS club’s academy or even while signed under a professional contract with that MLS club (so long as their still considered to be undergoing training and education and not considered as a professional as explained above).

The last concept which we address here is who has the responsibility to pay training compensation. Article 3 of Annexe 4 provides that upon registering as a professional for the first time, the club with which the player is registered is responsible for paying training compensation to every club with which the player has previously been registered and that has contributed to his training starting from the calendar year of his 12th birthday. In the case of subsequent transfers of that professional, training compensation is only owed to his former club for the time he was effectively trained by that club.

There are two different scenarios, again – the First Registration as a Professional and the International Transfer as a Professional. The key principle to remember for both situations is that any club that trained a player between the calendar year of his 12th and 21st birthday is only entitled to receive training compensation once, if at all.

The first registration as a professional is relatively straightforward. A new club must pay training compensation when a player is registered for the first time as a professional before the end of the calendar year of their 23rd birthday, and the training clubs are affiliated to a different national association than that of his current club. Put simply, the first registration must be with a club that is in a different national association than the training clubs.

Training compensation can get tricky with international transfers as a professional. If a professional transfers internationally prior to the end of the calendar year of their 23rd birthday, training compensation will only be owed to the releasing club for the time it was responsible for training the player. This feature of the system is, according to FIFA, encapsulated in the phrase “the first registration of a player as a professional breaks the chain.” This principle is applied in a strict manner. This is reflected in the fact that if an amateur player is transferred nationally (i.e., between clubs affiliated to the same national association) and acquires professional status at their new club, the chain is considered to have been broken. If the player then goes on to be transferred internationally to a third club, as a professional player, before the end of the calendar year of their 23rd birthday, only the players last club prior to the international transfer will be entitled to claim training compensation. None of the previous training clubs will be entitled to training compensation from this second transfer. This is because the national transfer will not trigger the application of the provisions on training compensation. Any compensation or rising from the national transfer will be governed by the national regulations issued by the member national association concerned.

In this regard, FIFA has encouraged national associations to draft regulations that include provisions rewarding clubs for investing in the training and education of young players; the principle that the first registration breaks the chain is based on the presumption that member associations will have such a system in place. The amounts provided by national schemes may differ markedly from those payable under the regulations.

So let’s try to recap all of this using examples.  

Example 1: an MLS club academy player signs a professional contract with that same MLS club, and the MLS club eventually transfers that player overseas. Here, the overseas club would need to pay training compensation to the MLS club for the time they trained the player from 12 to 21 years of age.

Example 2: a youth soccer player in the USA is part of an MLS Next academy that is not affiliated with an MLS club (the “training academy”). That player then leaves that training academy for an academy that is part of an MLS club when he is 18 years old. If that player then signs a professional contract with that MLS club before he turns 23 (and is a true “professional” and not still training), the training academy is not entitled to training compensation because that transfer is not between clubs of different national associations. We’re still dealing with 1 national association – the U.S. Soccer Federation.

Example 3: Using the same player from Example – if that player then is transferred from the MLS club to a club in Europe before he turns 23, the European club would need to pay the MLS club training compensation if the player was still “training” with the MLS club even though he signed a professional contract. The MLS Next academy club is not entitled to transfer compensation.

Note that in Examples 2 and 3, the MLS Next academy club that is not affiliated with an MLS senior club is completely cut out of any transfer compensation. In order for that training club to be entitled to training compensation, the first transfer of that player as a professional needs to be to a club of a different national association. Using our prior examples, in order for the training academy to receive training compensation, the first transfer of the player needs to be directly from the training academy to the European club (with no stop in between with the MLS club). Once the player transfers from the training academy to the MLS club, that training academy forever loses its right to transfer compensation.

Why does a player need to know about training compensation? Most importantly for the player, training compensation can affect how marketable the player is. If the player we discussed above trained at an academy for 8 years, and then wants to sign as a professional overseas, clubs overseas would need to pay 8 years of training compensation to the training academy, on top of whatever wages they agree to pay the player. If there is another player who is available to an overseas club for less or no training compensation, then that player can be signed for less money than the player with the 8 years of training compensation. The professional club can save money and invest in other players instead of paying 8 years of training compensation.

The final question is how much training compensation must be paid. The amount depends, and it is not something we will discuss here. But feel free to contact us if you’d like to know more about this.

For more information, contact Mario Iveljic, who is a Partner and one of the Founders of Mag Mile Law. He is also a registered soccer agent (intermediary) with the U.S. Soccer Federation. He can be reached at [email protected], or (708) 576-1624.

 

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