The 2026/27 PREM Rugby season kicks off a significant regulatory change.
In addition to complying with a salary cap which limits the total they can spend on player salaries each year, PREM Rugby clubs will now also be required to spend a mandatory minimum amount on player salaries, following the creation of a ‘salary floor’.
This move, which is designed to close the spending gap between clubs, is unprecedented in English sport and raises a number of interesting legal questions, which form the subject of this article.
What is PREM Rugby’s salary floor?
PREM Rugby’s 2026/27 Salary Regulations provide that a club’s “Salary Floor Spend” must be at least equal to the “Salary Floor”, which is currently set at £5.4m.[1]
A club’s Salary Floor Spend is calculated by adding up all permitted salary payments to senior and academy players, including the club’s Excluded Player (commonly known as a ‘marquee’ player, whose salary is excluded from the salary cap); loan fees; any remuneration paid to long-term injured players (whose salary is excluded from the salary cap); and any fees for players’ training or further education (which are also excluded from the salary cap).[2]
If a club’s Salary Floor Spend is less than the Salary Floor (i.e., below £5.4m), then the club will be required to pay a tax that is equal to the amount of its underspend.[3] Clubs are therefore incentivised to comply with the Salary Floor. Sporting sanctions are not applicable for any underspend – rationally, given that an underspend would not give rise to any sporting advantage – but clubs do have the right to challenge any underspend tax imposed via a disciplinary process.
The theory is that requiring all clubs to invest in their playing squads will improve competitive balance in the league, as top talent will be more evenly distributed across the league. More valuable squads typically perform better on the field: in the 2024/25 season, for example, Newcastle spent less than £4m on its squad, whilst Bath spent around £8.5m[4] – Bath won the league, whilst Newcastle came a distant last, winning only two games all year.
By requiring clubs at the lower end of the table to spend more, it is hoped that the league will become more competitive. In turn, it is hoped that the commercial value of the league (and its clubs) will rise, as stronger on-field competition makes for more compelling viewing and, thus, a more valuable product for broadcasters, sponsors and potential investors.
Limitations of the salary floor
Although the salary floor may have a material impact on some clubs’ spending (given that at least Newcastle were recently spending significantly less than £5.4m), its impact should not be overstated. Most clubs already spend at least £5.4m, and the recent takeover of Newcastle by Red Bull means they were always likely to increase their spending.
Further, whilst the salary floor now imposes a regulatory minimum, there remains significant scope for differing budgets. Although the salary cap is formally set at £6.4m, the marquee player rule (which allows the salary of one player per club to be excluded from the cap) and the credits available for home-grown players, international players and injured players, means that clubs can permissibly spend in excess of £8m. Thus, some clubs could still spend over 50% more than others.
There are also three important regulatory exceptions to be aware of.
First, the Salary Regulations expressly provide that no underspend tax shall be imposed in respect of the 2026/27 season.[5] Therefore, the ‘salary floor’ will not be enforced in its first year.
Second, a lower “Transitional Salary Floor” of £4.05m will apply to any newly promoted club, provided that they have satisfied PREM Rugby that they “have a credible strategy in place to be able to meet the full Salary Floor in subsequent [years]”.[6] Thus, there could still be a difference of over £4m between the spending of established clubs and any club which may in future be promoted to the PREM.
Perhaps more significantly, it is striking that the regulations provide that the full Salary Floor will apply where the promoted club does not have a credible strategy to meet the full Salary Floor. Whilst this incentivises promoted clubs to develop a commercial strategy to enable them to compete for top playing talent, it has the potential to create financial instability for those unable to generate the necessary funds.
However, given that promotion to the PREM is now to be conducted via an application process (of which a commercial assessment will form part) rather than merely sporting merit, such issues are perhaps unlikely to arise in practice – as clubs without a credible plan for meeting the full Salary Floor are, presumably, unlikely to be promoted into the league.
Third, any club may apply for a lower Salary Floor to be applied to it on the basis of “exceptional circumstances”. The Salary Regulations list “natural disaster, pandemic or an agreed squad-wide salary reduction to support a Club’s financial sustainability” as non-exhaustive examples of such exceptional circumstances.[7]
It will be interesting to see how this rule is applied (if ever). Would, for example, a club in financial distress be able to plead “exceptional circumstances” if they cannot afford to budget for a squad that would meet the Salary Floor?
PREM Rugby’s Financial Monitoring Regulations allow the league to assess clubs’ financial stability and, in particular, whether they have sufficient financial resources to complete the next season. If it is determined that a club is financially at risk, the Financial Monitoring Panel can impose conditions on the club’s signing of new players and to limit the club’s spending. Presumably, a spending limit on player salaries imposed by the Financial Monitoring Panel due to financial instability would amount to “exceptional circumstances” warranting a lower Salary Floor, given PREM Rugby’s overriding concern for financial stability, it would – else a club could be driven into insolvency.
These are sensitive issues, which PREM Rugby will hope never fall to be considered.
Notably, there is a right of appeal to the Salary Cap Governance Monitor against any decision not to apply the Transitional Salary Floor to a promoted club, or not to apply a lower Salary Floor to any club on the basis of exceptional circumstances.[8]
Is the salary floor legal?
Whilst PREM Rugby’s salary floor is unprecedented in English sport, such measures are common in North American sports leagues, such as the NFL, NBA and NHL. EuroLeague Basketball and Australia’s NRL also operate a salary floor.
The legality of a salary floor – specifically, its compliance with competition / anti-trust law – has never been tested in court. That is, primarily, because the salary floor rules in North America, the NRL and EuroLeague Basketball are all the product of collective bargaining between the leagues and the relevant players’ associations; and collective bargaining agreements are exempt from competition / anti-trust law. Although the Rugby Players’ Association may have been consulted, PREM Rugby’s Salary Regulations are not part of a collective bargaining agreement. Thus, they may be more vulnerable to legal challenge.
But who might bring such a challenge? Whilst a significant majority of the PREM Clubs, presumably, support the salary floor, it is possible that some may be less supportive and that clubs’ positions may change in future as a result of changes in financial circumstances, changes in ownership, or if the salary floor rises, and business models are put under strain.
Perhaps more importantly, the salary floor could be seen as a barrier to entry into the PREM for clubs wishing to be promoted.
Under both EU and UK competition law, sport regulations that restrict competition can be justified – but only if they pursue a legitimate (sporting / public interest) objective and go no further than is necessary to achieve it. This proportionality test, applied recently in the cases relating to the European Super League and FIFA’s agent regulations, requires courts to consider the impact on competition and, assuming there is a legitimate objective, assess whether it could be achieved by less restrictive means.
PREM Rugby would likely argue that the salary floor pursues a legitimate objective, of ensuring a competitive sporting competition and that, even if it produces any anti-competitive effects, such effects can be justified as necessary and proportionate in pursuit of that legitimate objective.
However, a potential challenger might argue that the objective of the salary floor is ultimately a commercial one, which necessarily restricts competition and cannot be justified. Aspiring PREM clubs might also point to the removal of automatic promotion/relegation, the other non-sporting criteria for entry into the PREM (such as the minimum stadia capacity requirements), and the systematic under-funding of the Championship, in order to build the case for a competition law infringement. Moreover, it might be argued that even if a salary floor could be justified in principle, the level is set too high for promoted clubs, given the funding disparities, and is therefore disproportionate. Such an argument would necessarily require careful financial analysis. However, notably, PREM Rugby’s salary floor is not expressly linked to league revenues.
PREM Rugby may, though, point to the need for a commercially viable league in order to ensure financial stability and thus to protect the sport as a whole (which would more readily be accepted as a legitimate objective). It would also likely point to the exceptions that can be made to the Salary Floor for promoted clubs and in “exceptional circumstances”, as modicums of proportionality.
Certainly, there would be arguments on both sides.
Article by Ben Cisneros. Ben is an Associate at Morgan Sports Law with a dedicated rugby practice. This article reflects only the author’s personal views. Please email ben.cisneros@morgansl.com with any enquiries.
References
[1] See Regulations 3.40 and 3.42
[2] See Regulation 3.41
[3] See Regulation 10.1
[4] See the 2024-25 Salary Cap Report
[5] See Regulation 3.50
[6] See Regulation 3.43
[7] See Regulation 3.44
[8] See Regulation 3.45