Does the MLS have a salary cap?

In February 2021 Major League Soccer (MLS) and the MLS Players’ Association (MLSPA) came to an agreement on a new collective bargaining agreement that will be in effect until 2027.

How much do MLS players earn?

The deal set in stone various aspects of the organization and running of the league, including the salary cap and two other forms of expenditure available to MLS clubs, known as General Allocation Money (GAM) and Targeted Allocation Money (TAM).

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The most important number for any club in MLS is $4.9 million: that is the salary cap, or salary budget, imposed on all 27 clubs in the league, which will be in place for the 2021 and 2022 season before an incremental increase over the course of the remainder of the collective bargaining agreement to $7 million by 2027. This money is the amount teams can spend on salaries for the 20 players inscribed on their senior rosters over the course of a single season. However, MLS teams have the option to use only 18 players on their senior roster, leaving slots 19 and 20 open, thereby being able to spend their entire salary budget on 18 players.

As such, the maximum a non-designated MLS player can earn in a single season is $612,500.

2021 MLS player salaries and compensation (Top 10)

Source: MLSPA

Beyond the senior roster is the supplemental roster, roughly the equivalent of a reserve team in European football. These rosters consists of 10 players who are split into three separate categories: Senior Minimum Salary Players, who earn a minimum of $81,375 per season in 2021 and 2022; Reserve Minimum Salary players, who earn $63,547; and Homegrown Players, who earn a base wage equivalent to Reserve Minimum Salary players.

What is the full MLS budget in 2021?

According to the terms of the collective bargaining agreement, the full budget allocation for each MLS team in 2021 and 2022 stands at $9,225,000, split between the Salary Budget ($4.9m), General Allocation Money, which can be used on any player on a roster ($1.525m), and Targeted Allocation Money, which is often used on homegrown players and renewing existing contracts ($2.8m).

This will increase year-on-year to $13.01m by 2027.

MLS Designated Players: the “Beckham Rule”

In order to attract big-name signings to MLS, the so-called Beckham Rule for Designated Players was introduced. This allows MLS teams to sign up to three players as designated players, who can earn more than the maximum allowed under the salary cap. The system also allows MLS to compete for star names on the market by bending their salary caps via higher wages for the player or a fee paid to the selling club. The overall cost of the acquisition was originally split between the purchasing team, the MLS (via the league-wide pool of Allocation Money) and, if necessary, the team’s owner. The player’s image rights can also be factored in to increase his earnings.

The rule was made famous, and given its unofficial name, when LA Galaxy agreed a deal to sign David Beckham as a free agent after his contract at Real Madrid expired in 2007. Beckham, then still England captain and one of the biggest names in the game, joined the Galaxy on a reported annual salary of $6.5 million.

While Beckham’s arrival in MLS set the bar for designated players as high as it would go, teams rarely fork out more than $2m for a designated player. The highest-paid designated player to have joined MLS in the 2021 season is Atlanta United winger Luiz Araújo, who earns $3.9m.

As can be seen in the above table, among active designated players in MLS, LAFC forward Carlos Vela is the highest earner on $6.3 million, followed by LA Galaxy striker Javier Hernández ($6m) and Gonzalo Higuaín, who is on a guaranteed annual salary of $5.79m at Inter Miami. Check out all salaries and guaranteed compensation amounts.