COUNCIL MEETING 14 OCTOBER 2016 PAYMENT OF PLAYERS 1. Club sustainability is becoming an increasing concern across the game with many clubs reporting a major challenge in remaining both competitive and financially viable in domestic rugby competitions. Financial pressures and the desire to remain competitive through financial inducements (i.e. player payments) are increasingly raised as contributing factors to this and is causing erosion of some of the traditional strengths of club rugby – volunteering, club loyalty and ability to sustain inviting and welcoming club facilities. 2. This theme has come through strongly in recent club and CB roadshows and in the consultation with clubs and players undertaken as part of the RFU’s review of adult competition, in which a strong desire was expressed for the RFU to review the situation. 3. Since the advent of professionalism in 1995 Rugby Union in England has become an open game and, assuming HMRC regulations are complied with and contracted players are registered, there is nothing in current regulations to stop players being paid at any level of the game. Calls for the RFU to take action to change this have been made and in response the RFU committed to the establishment of a review group to examine the current situation in more detail, to take views and to recommend (if appropriate) any changes to the current position. 4. The working group was chaired by Malcolm Wharton and consisted of the following: Steve Grainger, Adriaan Posthuma (CB Chairman – Yorkshire), Nigel Gillingham (Chairman of Game Development Sub Committee), Chris Cuthbertson (Council member for Middlesex) , Neil Hagerty (Chairman of Club Development Sub Committee), Norman Robertson (NCA), Nigel Heslop (CB Chairman – Surrey), John Cartwright (Club Representative – Lymm RFC – Level 5), Mark Dyche (Club Representative – Whitchurch RFC – Level 6 (Level 7) when working group met), Paul Bedford (Independent – England & Wales Cricket Board), Ed Warner (Independent – Chair, UK Athletics), Rob Walker (Ernst & Young), Trevor Nicholson (Club representative – Sevenoaks RFC – Level 6 (Level 7) when working group met), Brian Moore (Ex Player). 5. The working group met on a number of occasions and initially intended to report in the summer of 2014. However, this was delayed until all aspects of the Adult Competition Review were finalised. The group received “evidence” from a number of clubs and individuals. It did not prove any easy subject on which to reach agreement and the views of the group stretched from “ban all payments” to “clubs should be allowed to do as they wish” Broadly, the concerns of the group about the payment of players are categorised as follows: a. An uneven playing field – clubs with capacity to pay players disrupting the local league landscape and creating a culture of “journeymen” who move from club to club and undermine club loyalty. b. A lack of sustainability within clubs utilising scarce resources to pay players and often unable to maintain and modernise facilities and invest in the wider development of all players in the club. c. Clubs having an increased exposure to employment legislation and HMRC regulations. OCT 16: 84/105 6. The majority view within the group was that the RFU should take action to control the payment of players in the community game. It was also the view that it was not feasible or affordable to control this entirely by regulation and regular review by the RFU. Instead a system of self-declaration, supported by regulation for incorrect, false or misleading information, was considered to be the way forward. There was also acceptance that, as promotion and relegation between leagues remains an integral part of the game, there is a need to allow clubs to prepare for the point at which they may enter the professional level of the game where payment of players is necessary. Consequently, the group has developed a set of recommendations for consideration. 7. The recommendations have been seen and agreed by the Community Game Board (8th September), by the Governance Standing Committee (14th September) and the Board of Directors (28th September). The Board of Directors agreed that the recommendations are presented to Council for discussion at its meeting on October 14th prior to a more formal vote being taken at the December 2nd meeting. 8. The principles can be summarised as: 8.1 The RFU makes a clear statement that it believes payments for playing Rugby in the community game are having a detrimental effect on the game 8.2 Guidance amounts to be set for maximum payments at Levels 3, 4 and 5 with payments at Level 6 and below at zero (with the exception of one player coach) 8.3 Clubs will be free to exceed the maximum payments and to still pay at level 6 and below however in doing so will render them ineligible for RFU financial support 8.4 Clubs will be required to submit an annual declaration stating whether they make payments to players and if so to what extent. This will need to be signed by four key personnel from the club. 9. Further details relating to financial ranges, compliance, implications etc are set out, in draft, in appendix one. A working draft of the declaration is attached as appendix two. Additional work will be undertaken on these once the principles are agreed including future consideration and implications of the impact of women’s teams and payments may have on clubs.As an illustration of the impact in relation to travel funding Appendix 4 shows the funding paid at levels 3, 4, and 5 in 2015/16 – totals and ranges at levels 4 & 5 and full details at level 3 10. Timescales and Process 14 October Principles to Council for discussion 2 December Principles to Council for approval February 2017 Implementation documentation and regulations agreed by Governance April 2017 Final approval by Council of Regulations and supporting documentation September 2017 Communication to the game May 2019 Declaration requested based on payments made in 2018/19 season Season 2019-20 Implementation begins based on 2018/19 signed declaration FOR DISCUSSION Council is asked to review and discuss this paper along with the principles outlined within it. Author: Malcolm Wharton and Steve Grainger Date: October 2016 APPENDIX ONE – FURTHER DETAIL ON PRINCIPLES AND PROCESS 85/105 A. RECOMMENDATIONS OF PRINCIPLES 1. RFU proposed statement on the payment of players: “The RFU has determined that payments for playing Rugby in the Community Game are having a detrimental effect on the ethos of the game and the development of some clubs. Consequently it believes that there should be no payments for playing at Level 6 and below (apart for an element towards 1 player coach), with a guideline range for paying players between levels 3 and 5, and associated measures for those who choose to pay more than the guideline amounts and who to choose to pay anything at Level 6 and below” This does not preclude clubs from paying players and clubs can exceed these thresholds but in doing so will lose entitlement to RFU funding (see point 6 below) 2. Ranges: Indicative gross payments to players at 2016/171 including all employment costs and anything classed as Benefit in Kind  Level 3 - £150 0002  Level 4 - £100 0003  Level 5 - £50 0004 (Clubs at Level 3 - 5 permitted to employ a maximum of 2 player coaches – 50% of payment to be included in the above thresholds)  Level 6 and below – an amount to be included to allow for the playing element of one player coach (this amount to be decided and agreed) In setting these figures the group had to balance its concerns about the payment of players in the community game against allowing clubs to prepare to enter the professional game a Level 2, the Championship, where there is no salary cap. Please note that the above figures are indicative only at this stage and will be subject to review on an annual basis. 3. Exceptions:  Legitimate expenses as allowed under HMRC guidelines  Provision of reasonable amounts of playing kit  Provision of medical support/physi0 4. Basic Compliance  Full compliance with HMRC processes/rules  Full compliance with Home Office visa requirements  All clubs to submit annual declaration signed by 4 club officials (Treasurer, Chair, Secretary and President) 5. Declaration  Full amount of any payments or material benefits made to players  Statement on any players employed in another capacity by the club – e.g. bar staff, ground staff (to include name, role, average number of hours per week and amount) 1 These figures will need to be subject to annual review to ensure they remain relevant. 2 This would allow a club to pay 23 players £150 per match for up to 35 matches per season with an allowance of 14% for employers costs (NIC etc). 3 This would allow a club to pay 23 players £100 per match for up to 35 matches per season with an allowance of 14% for employers costs (NIC etc). 4 This would allow a club to pay 23 players £50 per match for up to 35 matches per season with an allowance of 14% for employers costs (NIC etc). 86/105  Statement on any other payments or material benefits made to players to play rugby by any other agencies – e.g. sponsors, individuals 6. Compliance and implications  Clubs failing to complete and submit a declaration will result in loss of entitlement to RFU funding.  Clubs submitting an incorrect or false or misleading declaration or accounts will be subject to potential 5.12 charges which shall be dealt with under RFU Regulation 19 and sanction shall be at large (i.e. at the discretion of the panel).  Loss of entitlement to funding may include: (this list is not exhaustive and will be worked up further prior to final approvals) o Travel funding o RFU and RFF Loans and Grants for Facilities o Supplemental Ticket Fund o AGP host club o Subsidised use of RFU AGPs o any other RFU cash grants or such other loans/grants/projects as decided by the RFU (including those associated with sponsor programmes – e.g. O2 Touch, All Schools, NatWest Rugby Force) o further considerations to be worked up regarding repayment of any grant/loan during a defined period for clubs. (eg a club that has received grant funding for floodlights in year 2 and then provides a declaration in the following year that is above the threshold) B. PROCESS 14 October Principles to Council for discussion 2 December Principles to Council for approval February 2017 Implementation documentation and regulations agreed by Governance April 2017 Final approval by Council of Regulations and supporting documentation September 2017 Communication to the game May 2019 Declaration requested based on payments made in 2018/19 season Season 2019-20 Implementation begins based on 2018/19 signed declaration C. IMPLEMENTATION PROPOSALS The key implementation mechanism will be the regulations, declaration and funding conditions. Set out below are some ideas of how recommendations could be implemented if the principles are agreed. Regulations Regulations to be amended to include the following principles: a) All clubs at Level 3 and below (including women’s clubs) playing in the RFU Men’s or Women’s Leagues will be required to submit an annual declaration every year, to include the newly relegated Level 2 club. b) Submission of declaration will be mandatory regardless of whether a club is paying players or player coaches or not. c) Submission of completed declaration by a defined date after the end of the season eg 31 May 2019 for a retrospective view of that season. Therefore, the figures for the 2018-19 season will determine if a club qualifies for funding in the subsequent season and so on. 87/105 d) Submission of declarations should be to a central RFU point, with a copy to the CB or NCA as applicable. e) Submission could be done via GMS by clubs uploading the signed declaration onto GMS. The IT Department has confirmed that this is possible although there would be a cost implication. f) We propose that the RFU has the general power, to: i. Request that club supply such accounting/financial information and documents as they so require, including copy of printout of club’s Government Gateway account showing club’s current liabilities in relation to PAYE/NI and VAT; and ii. Audit its club and carry out spot checks upon reasonable notice (or to instruct a third party to do so on its behalf). g) We propose that the above general power together with the declaration replaces the current ongoing obligation for all clubs to provide financial statements every year. Instead, each CB/NCA could decide what financial obligations it wishes to impose on its local clubs by using the power set out in h). h) We propose to include a regulation stating that breach of the regulations, persistent breaches or providing false or inaccurate information would be dealt with pursuant to Rule 5.12 and sanction shall be at large (i.e. any such sanctions as the panel considers appropriate). i) Include regulation to make it clear that non-compliance or paying outside the thresholds will result in the club’s loss of entitlement to RFU funding. j) Lastly, it is likely that the definition of Material Benefit set out in Regulation 7.3 will need to be reviewed. 1. Declaration (see Appendix 2) It is proposed that the declaration includes the following key areas:  Name of club and any associated entities.  Full amount of ‘Material Benefit’ paid to players and player coaches in the current season, whether directly or indirectly.  Statement on any players employed in another capacity by the club – e.g. bar staff, ground staff (to include name, role, average number of hours per week and amount).  Confirmation as to whether inside or outside of the thresholds.  Self-certification that club has complied with its various statutory obligations and liabilities in relation to PAYE, NI and VAT. 88/105  Self-certification that club has complied with its various other legal and immigration law obligations.  Declaration to be signed by four club officials to include chairman, president, treasurer and honorary secretary.  Guidance notes to accompany declaration, which will include table of thresholds, definition of material benefit and will cross-reference with other supporting materials etc. 2. Funding Conditions  All funding documentation will need to be amended to state that payment is conditional upon compliance with the regulations, and in particular submission of the declaration within the regulatory timeframe.  All funding documentation will need to be amended to state that eligibility for funding can be lost if declaration is found to be false, misleading or incorrect, including mechanism for claw back of paid funding.  Finance Department to check and chase declarations prior to issuing funding.