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Training Compensation Fees and Solidarity Payments in the United States

Trying to understand the nuisances of training compensation fees and solidarity payments is not for the feint of heart. The more I learned, the less I understood. The rathole I climbed into uncovered a fascinating history of twists and turns, which would take many books to cover.

So I am going to try to keep this as simple as possible, noting that anything written has numerous exceptions depending on what country you are in, so the following content is just general “concepts” to grasp how this all works. Included will definitions, examples, some pros and cons, and how it sort of works in the United States.

This article will close with how the question of solidarity payments and training compensation fees impacts the US system and pay-to-play.

How a basic player trade (or transfer) works?

In most parts of the world, when a player is traded from one club to another club, the move is also considered a player “transfer”.  Every country and club has varying rules but a transfer basically includes the following pieces:

  • a transfer fee from one club to another club. this is usually the huge fee that you hear when a player is traded.
  • a separate negotiated salary (or wage) to that player from the buying club for the length of the contract
  • any specifics, such as a no-trade contract, bonuses for achievements, club promotion, etc,
  • training compensation fees to the players previous clubs/academies, usually paid by the buying club
  • solidarity payments to the players previous clubs/academies, usually paid by the buying clubGeneral flow of transfer payments for soccer player

What are Training Compensation Fees?

Training compensation fees are paid to a player’s training club(s) when the player 1) signs his first professional contract and 2) each time he is transferred between clubs of different national associations up until the season of his 23rd birthday. It is meant to reward and compensate clubs for the costs associated with training and educating young players.  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. (More explanation)

What are Solidarity Payments?

A solidarity payment is are a share of the transfer fee paid to a player’s former clubs from the proceeds of a transfer when a player is transferred before the expiration of his contract. The payments are distributed to the player’s former clubs to reward them for their role in his training and development. (More explanation)

Solidarity Payments Explained for a 10 year old

Solidarity payments in soccer are like saying “thank you” to the smaller clubs where a professional player used to play when they were younger. When a young player moves from one soccer club to a bigger one and becomes a professional, the new club has to give a little bit of money back to the smaller clubs that helped to train and develop the player. 

An example of a solidarity payment in soccer would be if a young player started their soccer journey at LAFC Academy youth club and then later moved to Barcelona. When the young player signed a professional contract with Barcelona, a portion of the transfer fee might be paid back to LAFC Academy as a solidarity payment. This helps the youth club continue to develop and support young players, creating a cycle of support and fairness within the soccer community.

Solidarity Payment Example

The actual percent of fees that a club gets can differ by country, but here is an example, using the general calculations from the English system. Say a player trained at California Athletic Soccer Club in Los Angeles from age 10-15. They moved to Amsterdam to train at the Ajax Academy from age 16-20. At age 21, he was transferred to Liverpool FC for 1 million. What would all the solidarity payment be each year?

First, 5% is taken from the 1 million., meaning $50,000 is the maximum total solidarity payment.

    1. Played at California Athletic Soccer Club (Los Angeles) from ages 12-15
      The club would get 5% of the $50,000 for each year between the ages 12-15 ($2,500 x 4 years)
      California Athletic Soccer Club would receive $10,000 for the move to Liverpool.

    1. Played at Ajax Academy (Amsterdam) from ages 16-18
      The club would get 10% of the $50,000 from ages 16-20 ($5,000 x 4 years)
      Ajax would receive $20,000 for that move to Liverpool.

    What are the main differences between Training Compensation Fee and Solidarity Payments?

    When it is Triggered:

    Training compensation fees are generally a one time fee that is triggered when a player:

    • signs their first professional contract between clubs of different national associations, and
    • is transferred any time between clubs of different national associations up until the season of his 23rd birthday.

    Solidarity payments are triggered when a player:

    • is transferred before the expiration of his contract.

    Who gets the Fees:

    Training compensation is paid to the player’s training club(s).

    Solidarity payments are distributed among the player’s former clubs.

    In summary, training compensation and solidarity payments serve to compensate clubs for their role in developing a player, with training compensation focusing on the initial training and education of the player, and solidarity payments rewarding all the former clubs involved in the player’s development when he is transferred.

    Note: although there are specific calculations, there could be variations depending on each country’s regulations and through player negotiations.

    What about when a player is loaned?

    Example: Mateo is put on loan from Portland Timbers to Madrid. Mateo trained at Portland from the age of 12 to 19 before being sent on loan to Madrid. During the loan period, Mateo played official matches for Madrid.

    Training Compensation Fees?
    – Since Mateo is still under contract with Portland while on loan at Madrid, no additional training compensation is usually paid during the loan period.
    -The payment of training compensation is typically triggered when a player signs his first professional contract, or when he is transferred internationally, not when the player is on loan domestically.

    Solidarity Payments?
    – If Mateo is transferred from Madrid to PSG while still under contract with Portland, solidarity payments will apply. 
    – PSG will be required to pay solidarity payments, and a portion of the transfer fee will be distributed to the clubs that trained Mateo between the ages of 12 and 23, including Portland and potentially Madrid, where he was on loan.

    What about free transfers?

    Solidarity payments and training compensation fees can still apply in the case of a free transfer. These mechanisms are designed to compensate clubs for their role in developing young players, regardless of whether a transfer fee is involved.

    Benefits of Solidarity Payments

    Solidarity payments bring several benefits to the youth soccer ecosystem.

    • Mainly, these payments provide a financial incentive for clubs to invest in youth development programs. Knowing that they will be compensated for their efforts if a player they develop is signed by a bigger club, clubs are encouraged to allocate resources to training and developing young players.

      For example, when Neymar was transferred from Barcelona to PSG, the 5% solidarity payments amounted to approximately $10 million  was designated as the official solidarity payment, with 80% of this amount going to Santos, where Neymar was trained between the ages of 12 and 23.

    • Secondly, solidarity payments ensure a fair distribution of the financial rewards generated by player transfers. By acknowledging the collective effort of multiple clubs in a player’s development, it promotes a sense of fairness and equity within the soccer community. Smaller clubs that contribute to a player’s development can benefit financially from their investment, enabling them to sustain their youth academies.

    • Lastly, solidarity payments contribute to the overall sustainability of the youth soccer ecosystem. By providing a source of income for clubs, it helps them cover operational costs, improve facilities, and invest in coaching and development programs. This, in turn, creates a nurturing and supportive environment for young players and increases the chances of discovering and developing future stars.

    How youth clubs can use the Solidarity Payments?

    A club that receives solidarity payments in soccer can use the funds in various ways to benefit its youth development programs and overall operations. Here are some ways in which a club might spend solidarity payments:

      1. Youth Development: Investing in coaching staff, training facilities, and equipment to further develop and nurture young talent within the club’s youth academy.
      2. Infrastructure: Upgrading facilities such as training grounds, locker rooms, and academies to provide a better environment for player development.
      3. Education and Support: Providing educational support and resources for young players, including academic tutoring and career development programs.
      4. Community Engagement: Using the funds to organize soccer camps, clinics, and outreach programs to engage with the local community and promote grassroots soccer.
      5. Operational Costs: Covering general operational expenses such as administrative costs, travel expenses for youth teams, and maintaining the overall infrastructure of the club.

      By reinvesting solidarity payments into these areas, clubs can continue to support and develop young talent, strengthen their youth development programs, and contribute to the growth of soccer at the grassroots level.

      How do we know these fees go to youth development?

      The distribution of solidarity payments is subject to regulations and oversight by FIFA,  which explicitly states that solidarity payments are intended to incentivize clubs that have contributed to the training and education of young players.  Clubs receiving solidarity payments are expected to utilize these funds for youth training, infrastructure, and overall development programs.

      This financial reward gives clubs a big incentive to develop young talent with the hope that players can receive a large transfer fee in the future.

      History of transfer fees 

      Training compensation fees and solidarity payments are regulated by FIFA. But they did not always exist. Before 1995, the club owners heavily controlled the players freedom of movement between clubs . The transfer system was characterized by very restrictive regulations regarding player movement, transfer fees, and player contracts.

      This all changed 1995 when the European Court of Justice approved the Bosman ruling. (read details here)

      The ruling, stemming from the 1995 legal case involving Belgian footballer Jean-Marc Bosman, brought about several significant changes to the transfer market

      • Freedom of Movement for Players
        The ruling established the principle of freedom of movement for players within the European Union at the end of their contracts. This meant that players were no longer bound by transfer fees when moving to a new club at the expiration of their contracts.

      • End of Transfer Fees for Out-of-Contract Players
        Players whose contracts expired were now able to move to a new club within the EU without a transfer fee being paid to their previous club. This significantly altered the negotiation dynamics for out-of-contract players.

      • Impact on Player Contracts
        The ruling empowered players by allowing them to seek new opportunities and negotiate contracts with clubs of their choice without the constraints of transfer fees, thereby providing them with greater freedom in choosing their next club.

      • Abolishing Nationality Quotas
        The Bosman Ruling also led to the abolition of nationality quotas, allowing clubs to field players from other EU countries without restrictions, thereby promoting a more diverse and open transfer market.

      Impacts of the Bosman ruling

      The ruling shifted the balance of power from the clubs to the players, giving players more control over their careers and providing them with increased leverage in contract negotiations. After the ruling, the clubs lost a lot of control over players on expiring contracts, as players on expiring contracts could enter into new contracts with other clubs. According to Sir Alex Ferguson,

      “Once the European Court of Justice ruled that clubs no longer had to pay transfer fees after the expiration of a player’s contract, all hell broke loose. Suddenly it was a free-for-all.”

      As a result, incentives to develop players disappeared. Some clubs found it cheaper to sign pro players than it would be to develop footballers themselves. Not only did this allow for greater freedom of movement for players, but smaller clubs in the business of developing players were now deprived of a critical source of revenue.

      The club representatives brought these concerns to with FIFA, requesting fairer transfer provisions that ensured the clubs’ financial rights when players changed clubs.

      In response, FIFA establish guaranteed compensation for players who eventually signed professional contracts. The compensation plan was split into solidarity contribution and training compensation.

      How did the Bosman ruling impact soccer in the United States?

      The impact of the Bosman ruling on soccer in the United States was not as direct as in Europe. The ruling primarily affected the transfer market within the Europe. The United States operates under a different soccer structure. However, the Bosman ruling did have indirect effects on the global transfer market, which had implications for the US soccer landscape.

      The Bosman ruling and rising transfer fees raised the profile of soccer as a global sport and increased the interest in American players. European clubs started scouting American talent more extensively, leading to an increase in player transfers from the United States to Europe. While this opened up new opportunities for American players to compete at higher levels, it also posed challenges in terms of retaining and developing talent domestically.

      it soon became more challenging for American clubs to keep American talent. European clubs could offer higher wages and financial incentives, making it tempting for American players to make the move across the Atlantic. This meant that American clubs and academies had to work harder to retain their talents and develop them into professional players.  Or ignore the rules surrounding solidarity payments and other fees.

      How did US Soccer differ from the world concerning Training Compensation and Solidarity Payments?

      The United States Soccer Federation (USSF) and Major League Soccer (MLS) have taken a different approach compared to the rest of the soccer world regarding training compensation and solidarity payments. Unlike many other countries, the USSF and MLS had not fully acknowledged the importance of these fees in youth development and have not implemented them as mandatory regulations.

      This divergence stems from the unique structure of soccer in the United States.  In the pay-to-play model, young players and their families are responsible for covering the costs associated with playing for an academy or club, including training, coaching, and competition fees. This model creates financial barriers for many talented young players, limiting their access to quality training and development opportunities.

      Because parents pay for their child’s fees, some higher clubs argue that development is not paid by the youth clubs and do not need to be compensated.

      Although MLS has adjusted its position on its own MLS academies,  the lack of training compensation and solidarity payments for non-MLS clubs further exacerbates the challenges faced by non-MLS clubs and academies. 

      See MLS Roster Rules and Regulations for a mind-numbing explanation of MLS roster rules for Senior Roster, home grown players, designated player, etc.

      Has the USSF and MLS adjusted their view on Training Compensation Fees and Solidarity Payments?

      Yes. Before 2019, the USSF and MLS have been resistant to implementing these fees, citing “concerns” such as legal complexities, potential conflicts with labor laws, and has usually the pushed the model down the road to discuss in the future.

      This indecision left youth clubs and academies at a disadvantage, as they do not receive the financial support needed to maintain their development programs, continuing the pay-to-play system that has hurt player development in the United States.

      In MLS’ early years, the lack of training compensation  and solidarity payments wasn’t an issue. MLS almost exclusively acquired players from abroad who were out of contract, and  argued that no solidarity payments were required since no transfer fee  was usually involved. 

      In 2019, however, MLS changed gears and adopted a new policy concerning Training Compensation Fees and Solidarity Payments.  

      Consistent with the FIFA Regulations on the Status and Transfer of Players, MLS clubs will assert training compensation claims for any MLS academy product who signs his first professional contract with a non-MLS club outside the USA and Canada.

      MLS clubs will also seek solidarity payments when players developed in MLS club academies are transferred, for a fee, between two clubs belonging to different international federations.

      With rising salaries for American players, MLS has recognized the importance of these fees in supporting the MLS academies…but not non-MLS clubs. 

      Also, for the legal curious,  see Fraser vs MLS (2002) ruling for one of the first lawsuits by the players claiming a MLS monopoly over player contracts and opportunities. The court decided that Major League Soccer (MLS) was not breaking any laws by having players sign contracts with the league instead of individual teams. This meant that the league could control player contracts instead of individual teams, which was an important decision for how the league operated. A lot has changed since 2002.

      The case of Christian Pulisic

      Take the case of US national team player, Christian Pulisic. Pulisic began his youth career in Pennsylvania at PA Classics, a non-MLS club, before joining the Borussia Dortmund academy in Germany.

      When Pulisic was signed by Chelsea FC in 2019 for a reported transfer fee of £58 million, PA Classics did not receive any training compensation or solidarity payment.  Despite the role PA Classics played in Pulisic’s development, they did not benefit financially from his transfer.

      This case underscores the need for a fair and comprehensive system of training compensation and solidarity payments in the United States. It is crucial to recognize and reward the efforts of clubs and academies that contribute to the development of young talents like Pulisic.

      The case on Weston McKennie and other MLS players

      Weston McKennie, another talented American soccer player, provides another example of the impact of training compensation fees and solidarity payments within the MLS system. McKennie came through the FC Dallas academy before joining the Bundesliga side Schalke 04.

      When McKennie made the move to Schalke 04, FC Dallas received a training compensation fee for their role in his development. This shows that training compensation fees can be implemented within the MLS system, albeit on a limited scale. However, the absence of solidarity payments means that FC Dallas did not receive any financial benefit when McKennie was later transferred to Juventus in Serie A.

      The case of McKennie highlights the need for a more comprehensive system that includes both training compensation and solidarity payments within the MLS framework. This would ensure that clubs and academies within the MLS system receive fair compensation for their investment in player development.

      Do any leagues outside MLS have Training Compensation Fees and Solidarity Payments?

      The only league outside MLS to have any luck with solidarity payments is National Independent Soccer Association (NISA) which has been a proponent of these payments to incentivize youth development.  

      In 2021,  Southwest Premier League (SWPL),  a NISA affiliated league, announced its first player solidarity payment from NISA pro club.

      The first such payment to a SWPL club from a professional NISA side occurred following the transfer of a player,  Jonathan Garcia, to the L.A. Force. The SWPL sees this as an essential part of a healthy system and a sign of future developments in the relationship between the amateur league and NISA. 

      Overall, there has been a two-tiered system that has developed in the United States.  There is one set of rules for MLS and another  set of rules for the non-MLS. See U.S. soccer correspondent Jeff Carlisle’s article discussing this complicated system.,  

      The MLS Players Union view on Training Compensation Fees and Solidarity Payments

      The Major League Soccer Players Union (MLSPU) is the representative body for professional players in the MLS.  The MLSPU recognize the importance of supporting youth teams, but does not agree with certain aspects related to training compensation fees and solidarity payments in the United States. The payments are viewed as transactional taxes that may diminish the compensation received by the players, and could limit employment opportunities for American players. 

      How does Training Compensation Fees and Solidarity Payments impact non-MLS academies?

      One of the major challenges faced by non-MLS academies and youth clubs is the pay-to-play model that dominates youth soccer in the United States. 

      Under this model, families are required to pay substantial fees in order to participate in club soccer. These fees often excludes talented players from lower-income backgrounds, limiting the pool of talent available for development. This is not just club fees, but include other costs such as lodging,  gas, and other transportation and travel costs. This is especially the case for higher level teams that travel more often.

      The pay-to-play model is not only expensive and can limit the accessibility of youth soccer, but it also places a heavy financial burden on non-MLS academies. These academies invest significant resources in training and developing young players, but without a system in place to compensate them for their efforts, many struggle to stay afloat. 

      Training compensation fees and solidarity payments provide a potential solution to this problem, but there is still a challenge to put an end to pay-to-play. 

      How does a club stop or reduce pay-to-play until solidarity payments  have brought revenue to a club? 

      How can Training Compensation Fees and Solidarity Payments help youth development?

      • Providing Financial Stability for Non-MLS Academies
        One of the primary benefits of training compensation fees and solidarity payments is the financial stability they provide for non-MLS academies. These academies often operate on tight budgets and rely heavily on sponsorships, donations, and player fees to cover their expenses. By receiving compensation for the players they train and develop, these academies can ensure their financial sustainability and continue to invest in the growth of youth soccer.

      • Encouraging Investment in Youth Development
        Training compensation fees and solidarity payments also serve as a powerful incentive for non-MLS academies to invest in youth development. With the potential for financial gain through these payments, academies are motivated to allocate resources towards developing talent and providing high-quality training programs. This not only benefits the individual players but also contributes to the overall improvement of youth soccer in the United States.

      • Fostering a Competitive Environment
        By implementing training compensation fees and solidarity payments, youth soccer in the United States can foster a more competitive environment. Non-MLS academies will have the resources to attract top talent and provide them with the necessary training and development opportunities. This competition will ultimately benefit the players and the sport as a whole, as it drives the standards of youth soccer higher and increases the chances of producing elite players.

      Can this model work in the United States?

      The advances in US soccer in the last 20 years has brought a lot of debate about the US model. Does a closed pyramid centered on MLS work? Is pay-to-play developing soccer talent? There has been a much greater interest in American players, there are larger transfer fees for American players, and alternate leagues in the United States have brought questions about the MLS way.  With a mediocre men’s national team, and a stagnant women’s national team, are we doing something wrong?

      Training compensation fees and solidarity payments alone cannot fix the pay-to-play or youth development in the United States. These are part of a soccer model that has been successful around the world, but only when incorporated within an open pyramid where clubs are competitive and have the opportunity to rise to the top level. 

      See other articles:  Explaining the US Pyramid