The Major League Soccer Salary Cap
Summarizing a really fluid rule
The Major League Soccer Salary Cap
American conventional wisdom holds that the North American Soccer League folded in the mid-1980s because the teams spent too much money on big name players.
This isn’t quite accurate, actually. For example, most of those players abandoned the NASL teams a few years before the league folded. It’s likely true that unfettered optimism, the lack of quality television coverage, and constant expansion to areas uninterested in the sport had a lot more to do with its financial woes than salaries. But that’s another topic for another day.
When the powers that be came together to form the MLS in the lead up to the 1994 World Cup, they decided to implement the strictest salary cap in all of American sports.
However, this cap has loosened quite a bit over the years. The MLS now indulges quite heartily in the old NASL sin of signing expensive players who are past their prime. As cool as it might be to say that Wayne Rooney was once a striker for D.C. United, the truth is that the investment the league made in him really has never borne much fruit. But, again, this is another topic for another day.
So how does that salary cap work?
Well, it’s complicated. Per this excellent blog post, the basic rules are like this:
You’ve got 30 roster spots.
Roster spots 1 through 20 combined must not exceed $5,470,000.
Roster slots 21 through 30 don’t count, and are usually reserved for lower wage or younger players.
There is a quirk, though: you can use up to 3 “designated players” whose salaries don’t count against that minimum wage. In other words, 3 of those “1 through 20” roster slots can be players that make more than $5,470,000 individually. They will only count as $683,750 against the salary cap.
Players in roster slots 1 through 20 can’t receive more than $683,750 per year. Meanwhile, most of the young players in roster slots 21 through 30 are on prestructured contracts, including those making the senior minimum salary ($89,716) and those making the reserve minimum salary ($71,401).
Now, if you’re paying careful attention, you’ll see the problem right away. Let’s say you’ve got 3 designated players making insane money. Because of that designated player rule, each is only actually making $683,750. $683,750 times 3 is $2,051,250 — which is almost half your entire salary cap.
In other words — if you assume that you’ve got 3 players on the max, you can only spend $189,930 per player for the 18 other “1 through 20” roster slots you’ve got left. Stock up on the big guys and the rest of your team will stink.
But, of coruse, there are exceptions. There are always exceptions; after all, this is the United States of America.
There are two confusing things you can use to pay down the salary cap hit. One is called “General Allocation Money,” or GAM.
GAM is a league wide allocation pool. In 2024, each MLS club received $2,585,000 in GAM. GAM basically allows you to pay off the salary cap hit of any player, including designated players. So, even though you’ve got that $2,051,250 hit from your 3 designated players, you can use all your GAM to pay it down.
You can get extra GAM if your team doesn’t play well. I suppose this is designed to increase parity in the league. And you can also trade GAM with other owners, which is something you can use to your advantage in Football Manager.
The other bizarre exception to this cap is called “Target Allocation Money,” or TAM.
You can’t trade TAM. Each team receives the same amount — $2,400,000 in 2024 — and basically can only use it to pay down the salary of Designated Players to under $683,750, which effectively can remove their Designated Player status.
Sound complicated? That’s because it is. And keep in mind that this entire structure exists to consolidate the power that the league has over each team — all in the spirit of mythical “competitive balance.”