But who actually pays football agents?
Now, it may sound simple enough to suggest that an agent gets a
commission of 5% – or, if they are lucky, 10%. The difficult part to explain is usually who pays the agent. You’d think it would be the player, right?Wrong.
The majority of Premier League and top-end Football League transfers
involve the buying club paying the player's agent. Details can vary. A number of different structures are set out below. Brace yourself, it involves tax!
Player Pays
In very limited circumstances when dealing with Premier League players,
a player may pay his agent for finalising a transfer. Under a player’s
representation contract with this agent, the player is obliged to pay his agent say, 5%, of his gross basic wage. This doesn’t happen too often in practice.
Example 1: A player is paid £2m per year. The agent receives £100,000
(5%) from the player per year in one annual payment.
Club pays as part of the transfer arrangement
In practice, even if the player is required to pay his agent, as set out in their
representation contract, the player’s agent will usually negotiate that the club pays the agent's commission on the player’s behalf. This benefit means the player doesn’t need to pay his agent. However, the club paying an amount on a player’s behalf is classed as a benefit in kind by the tax authorities and the player will pay tax on the payment made by the club to the agent.
Example 2: A player is paid £2m per year. The agent receives £100,000
(5%) from the club paid on the player’s behalf as a benefit to the player.
Club pays agent for player services and club services
Sometimes the buying club will pay the player’s agent to act on its behalf too during the transfer. You may think this is could be a conflict of interest – and you’d be right. In such a scenario, the player has to agree that his agent can work for both sides and sign a waiver.
Example 3: A player is paid £2m per year. The agent will be paid for the
work he does for the club and for the work he does for the player. The agent may then receive £50,000 (2.5%) from the club for the work done on their behalf and £50,000 (2.5%) from the club, as a benefit to the player, for the work done on the player’s behalf.
Without getting too complicated, many deals are variations of
Example 3. In Example 2, the player is required to pay tax on the £100,000
paid by the club on his behalf. In Example 3, the player will be paying tax
only on £50,000 for the portion of the work done on his behalf – thus
reducing his tax bill. To justify his £50,000 fee, the agent will have to
demonstrate that he did work on behalf of the club, and this is usually
set out in a separate representation contract between the player, the club
and the agent.
The latest fees paid by clubs to player's agents totalled over £260m with Liverpool top of the charts paying £43.7m for the period February 2018 to the end of January 2019.
At the time of writing, the Premier League is reported to be considering scrapping this approach and simplifying matters so that a player pays their agent the commission due. There has been additional reporting that FIFA is proposing a cap on agents fees. This would be a radical change and with the later cap likely to be challenged by agents in the courts.
My book Done Deal discusses these topics and many more player transfer and contract issues. You can buy a copy via Amazon, as well as download it as an ebook or listen to it via Audible.