MLS 101

MLS 101: Allocation Money, Salary Budgets and Financial Rules

MLS 101 is your guide to the rules and regulations that will shape Charlotte’s Major League Soccer team. Here, we tackle the financial side of building the roster…

What is the MLS Salary Budget?

The Salary Budget is the amount that each MLS team is allowed to spend on their respective 30-man rosters.

In 2021, the Salary Budget will be set at $5,210,000.

Is there a Maximum Salary Budget Charge per player?

Yes, in 2021 the maximum that can be spent on any player is $651,250.

Designated Players are an exception to this rule. Their salaries may exceed the maximum charge.

How does the Salary Budget apply to Designated Players?

A Designated Player (DP) may be paid any amount by their club, but their maximum Salary Budget Charge will be $651,250. (That is 12.5% of the total Salary Budget, which is the same percentage that has been in place since the Designated Player rule was introduced in 2007.)

Any compensation for a DP above that maximum level is met by the club outside of the Salary Budget.

Clubs can have up to three DPs on their rosters. The first two DP slots are granted automatically, but the third must be purchased from the league using General Allocation Money (more on that shortly).

How does the Salary Budget apply to younger or Homegrown players?

There are some incentives to bring in younger DPs: those aged between 21 and 23 will only have a Salary Budget charge of $200,000, while those who are 20 and under will only take up a maximum of $150,000 of the Salary Budget.

There is no limit to the number of Homegrown Players a club may sign in any given year and their salaries only count against the Salary Budget if they are on the Senior Roster (roster slots 1-20).

“This usually only happens when a Homegrown player proves himself and earns a new contract—think Jordan Morris,” says Charlotte MLS Director of Player Personnel Bobby Belair.

If they are not in the Senior Roster Slots, Homegrown Players will be on the Supplemental Roster (slots 21-30). There, they may earn in total each year up to $125,000 above the Reserve Minimum Salary ($63,547 in 2020) or the Senior Minimum Salary ($81,375 in 2020).

Are additional funds available outside of the Salary Budget?

Yes: in addition to the Salary Budget, there are two additional mechanisms to increase a team’s total spend: General Allocation Money (GAM) and Discretionary Targeted Allocation Money (TAM).

In 2021, GAM is set at $1,900,000 and Discretionary TAM is $2,720,000, bringing the total available spend on the roster to $9,225,000.

What is General Allocation Money (GAM) and how is it used?

“GAM is used to ‘buy down’ Salary Budget charges, with no restrictions on which players it can be used on,” says Belair. “For example, if Player A is making $750,000, a club may choose to buy down half of the player’s salary using GAM, so that the player’s Salary Budget charge is $375,000 and below the maximum budget charge.”

This is another mechanism in which a player can be paid above maximum Salary Budget charge without taking a DP slot.

All GAM must be used in full each year, as it does not rollover. Clubs are also required to use their entire Salary Budget.

What is Discretionary TAM?

“While GAM must be used each season, Discretionary TAM is essentially extra money that a club can choose to spend,” says Belair. “They don’t have to use it, but it is available if a club would like to target an additional expensive player, outside of their DPs.”

This is not to be confused with non-discretionary TAM, which has been rolled into GAM as of the 2020 season.

Accordingly, levels of GAM are rising each season, while Discretionary TAM is diminishing. For example, in 2021 there will be $1,900,000 of GAM and $2,720,000 of Discretionary TAM. In 2024, there will be $3,093,000 of GAM and $2,125,000 of TAM.

The aim is to increase non-discretionary spending and quality of play across the league.

Will Charlotte MLS have access to any additional Allocation Money in its inaugural season?

Yes, expansion clubs are granted additional GAM in their inaugural seasons. “It has not been announced how much GAM the 2021 expansion clubs will receive, but Inter Miami and Nashville both received $2.5 million extra in 2020,” says Belair.