A Simple(r) Guide to MLS Roster Rules

NOTE: The following is very helpful, explanatory post on some of the most basic — but still confusing — facets of the world of MLS roster rules and regulations, brought to you by Mike McGrew (follow Mike on Twitter, here) to accompany the knowledge he dropped on the Dec. 12, 2017 podcast(s)about Targeted Allocation Money.

MLS is one of the toughest leagues in the world to understand in terms of player transactions. One only needs to look at the mystified faces of folks in YouTube videos trying to navigate MLS transfer rules on Football Manager, or serious discussions between American soccer journalists unaware of key transfer rules to know that following as a fan isn’t as simple as looking at a list of potential transfer targets. This is largely because MLS operates in a unique space between two worlds: the world soccer system of open transfers, and the North American sports system with its trades and drafts.

For a long time this confusion didn’t matter much: even if you were willing to explore and understand the nuances of MLS player transactions, it was rarely gratifying. MLS continues to live with the reputation of being opaque with its own rules, and for most of the league’s history it lacked the cash to make transfer season interesting. 

In recent years the league and the MLS Players Union have made strides in providing better rules transparency. The league finally has the money —including the new infusion of $2.8 million dollars in discretionary Targeted Allocation Money (TAM) announced last weekend — to make following offseason transactions interesting. 

So what does this all mean, and how does it work?

Before we go into MLS Roster Rules we need to set out a big qualifier: this is very generalized review of player acquisitions and the cap. There are a lot of generalizations, and for every claim made below you can “well, actually…” an example of a player or general manager move where claim rings false. Still, if you understand the stuff below, you will know most of what teams can and can not do in MLS.

So how are MLS rosters structured? There are about 26-30 players on a typical MLS roster with very different pay scales. These pay scales dictate everything when it comes to a General Manager or Technical Director assembling a roster. It’s easiest to think of players grouped into four different categories (note that these are shorthand references and not necessarily official designations by the league):

  • Designated Player (DP) – These are players that make the most money on the team—now, following the new TAM, $1.5 million or more. They have the skills to be dominant, impact players, and often the name recognition to generate public interest and jersey sales in their community. If your DP’s aren’t regular starters, then they are a waste of money. Most teams have 2 or 3 Designated Players on their roster.
  • TAM players – These are guys that make between $500,000 and $1.5 million dollars that are in the next tier of quality. All should be starters, but they are most likely people you have not heard of if you’re a casual world soccer fan. In 2017, most teams had 2 or 3 TAM players. The big news with last weekend’s announcement is that most teams should have an additional 2 to 5 guys that are TAM-level. 
  • Standard Senior Roster Spot – These guys make up the majority of the roster, typically making between $100,000 and $504,000 (DP threshold in 2018) per year. These are a mix of starters, rotation players and depth guys. Most teams carry a dozen-isa guys at this level.
  • Supplemental/Reserve Roster – Two different roster designations, but you can group these guys together. These are typically younger players or draft picks that make around $60,000 per year and make up the remainder of the roster. 

All of these players are arranged through a series of mechanisms to get under a salary cap of about $4 million. Just $4 million?! I’m doing the math for 30 roster spots, and…

Even though the cap was around $4 million in 2017, MLS teams spent anywhere from $5 million to $22.5 million on player salaries.

The salary cap is not — I repeat not — a hard cap. Only the Standard Senior Roster Spots count dollar-for-dollar against the cap (i.e. a Standard Senior Roster Spot guy making $200,000 will count $200,000 against the cap).  

Designated Players and TAM salaries count less against the cap than their actual salary. DP’s automatically count less against the salary cap regardless of how much they earn. TAM players count $500,000 or less against the salary cap through the use of Allocation Money (TAM, and the highly similar general allocation money — GAM). You “buy down” their salary with Allocation Money. For example, a guy making $1.1 million dollars can have his salary “bought down” with $700,000 in Allocation Money and his salary will only count $400,000 against the Salary Cap. Buying down doesn’t take away money from the player, it’s just a salary cap roster tool. Supplemental/Reserve Roster player salaries count $0.00 against the cap. These “free” roster spots are a way the league tries to induce teams to invest in youth development.

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So, why are MLS rosters structured the way they are? MLS has operated with a salary cap from the very beginning of the league. The league was founded in the ‘90s with the lessons learned of the failed North American Soccer League of the 1980s. The NASL overspent, underdeveloped, and folded when the money ran out. The league uses a salary cap, a typical device used in North American sports to contain labor costs, to prevent a wild ‘80s NASL-style owner spending millions on players without a sustainable business model. 

When people talk about ”MLS 1.0, MLS 2.0, and MLS 3.0” they’re really talking about three different eras in which player wages were structured. 

In MLS 1.0, the salary cap was rock solid: if the league said you could spend $1,000,000 on players, you could spend exactly that and not a penny more. With MLS 2.0, they introduced the DP, which meant 95 percent of the players had to operate under a hard cap, but teams were allowed to have a couple of guys that could go over the cap limit. With MLS 3.0, the salary cap has effectively stopped being a hard cap, and more of a way of ensuring the rosters and teams are generally balanced and financially sustainable. 

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What about Homegrown Players, International Roster Players, General Allocation Money, Young DP’s? I’ve heard of them. These are other mechanisms MLS uses for cap compliance. It doesn’t affect how much money a player makes, it only affects how their salaries count against the certain restrictions the league puts in place. If you simply want to follow the MLS offseason without a calculator and rule book handy you can just know they are used to reduce player’s salary cap number.

This is unnecessarily confusing. Why doesn’t the league just get rid of the cap, or just make it a bigger number, or simplify some of these rules? MLS can only change roster rules with the consent of the MLS  Players Union. A lot of these rules were set in a Collective Bargaining Agreement signed in 2015. The Allocation Money system is a bit of CBA workaround by which players and owners have injected more player salaries into the league. It’s a rare instance in North American sports where owners are wanting to pay “more” to players, so the Union is content to work under these rules until 2020 when a new CBA has to be signed. That’s not to say the Players Union doesn’t have a lot of grievances with MLS owners, but don’t except significant changes to MLS roster rules until 2020. 

OK, so why is TAM even a thing? See above: the CBA sets in stone the salary cap number. TAM is a way both players and owners have of circumventing their own CBA to give more money to players. Simply put: without TAM, owners could only spend only $2.5 million on 17 players. With TAM, owners can now spend $7 million on 17 players without having a major renegotiation with the labor union.

So, why should I be excited about another $2.8 million being allocated to TAM? If you watched Thierry Henry in the early 2010s with the Red Bulls, you saw a man frustrated with the talent surrounding him. His teammates didn’t have the skills to anticipate his play and he had to restrict his talents to suit the play around him. While U.S. and Canadian soccer has continued to develop, MLS has realized that without improved salaries they can’t attract improved quality to really make their investments in DP’s pay off, or keep the quality players that have emerged in the league from moving to Europe.

TAM has allowed the Henrys of today (these are your David Villas and Bastian Schweinsteigers) to have a couple players who can play soccer at a higher level. The extra $2.8 million now means over half of the starting eleven of a roster could play at a higher level. Imagine if Henry could rely on over half the guys on the field to connect on the plays he was capable of making with the Red Bulls? It would have been incredibly fun soccer to watch, which would have drawn eyeballs and dollars into the stadium. That is what the owners are banking on. 

We should be seeing fun soccer in the near future.