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Agreement that limits athlete salaries
In professional sports, a salary cap (or wage cap) is an agreement or rule that places a limit on the amount of money that a team can spend on players' salaries. It exists as a per player limit or a total limit for the team's roster, or both. Several sports leagues have implemented salary caps (mostly Closed leagues), using them to keep overall costs down, and also to maintain a competitive balance by restricting richer clubs from entrenching dominance by signing many more top players than their rivals. Salary caps can be a major issue in negotiations between league management and players' unions because they limit players' and teams' ability to negotiate higher salaries even if a team is operating at significant profits, and have been the focal point of several strikes by players and lockouts by owners and administrators.

In theory, there are two main benefits derived from salary caps – promotion of parity between teams, and control of costs. Primarily, an effective salary cap prevents wealthy teams from certain destructive behaviours such as signing a multitude of high paid star players to prevent their rivals from accessing these players, and ensuring victory through superior economic power. With an effective salary cap, each club has roughly the same economic power to attract players. This results in roughly equal playing talent in each team in the league, and in turn brings economic benefits to the league and to its individual teams. Leagues need to ensure a degree of parity between teams so that games are exciting for the fans and not a foregone conclusion. Leagues with salary caps generally believe letting richer teams accumulate talent affects the quality of the sporting product they want to sell: if only one or a few teams can win consistently and challenge for the championship, many contests will be blowouts by the superior team, reducing the sport's attractiveness for fans at the stadium and television viewers. Television is an important revenue source for many leagues worldwide; the more evenly matched and exciting the contests, the more interesting the television product, and the higher the value of the television broadcast rights. An unbalanced league will also threaten its weaker teams' financial viability: fans of the weaker clubs will gravitate to other sports and leagues if their teams have no long term hope of winning. One famous example of this occurring was in the Union Association, a baseball league that operated in 1884. The Association was dominated by the St. Louis Maroons, whose owner, Henry Lucas, was also league president (an obvious conflict of interest situation which is now banned), and bought all the best players for his own franchise, leaving the Maroons to easily win the pennant with a record of 94–19 (.832 winning percentage), 21 games ahead of their nearest rivals. The league folded at the end of the season. Another famous example is the All America Football Conference, which operated between 1946 and 1949. Despite starring many top players and innovative coaches, the AAFC was dominated by one team, the Cleveland Browns, who lost only three games in four years and won every championship in the league's four year existence, being unbeaten in 1948, and winning three of the championships in blowouts. This resulted in a consistent fall in attendance and heavy losses after the league's second season, for the Browns as well as their rivals, and the league folded at the end of 1949. The need for parity is more pronounced in leagues that use the franchise system rather than the promotion and relegation system, which is used in European football. The structure of a promotion and relegation system means weaker teams struggle against the threat of relegation, adding importance and excitement to the matches of weaker teams. International club competitions such as the UEFA Champions League also means that the top clubs always have something to play for, even in the most unbalanced of national leagues. A salary cap can also help to control the costs of teams, and prevent situations in which a club will sign high cost contracts for star players in order to reap the benefits of immediate popularity and success, only to later find themselves in financial difficulty because of these costs. Without caps, there is a risk that teams will overspend for immediate victory at the expense of long term stability. Team owners who use the same risk benefit analysis used in business may risk both the fortunes of their own team and the reputation and viability of the whole league. Sports fans often seek to support a team for life, not merely for the short term. If teams regularly go bankrupt or change markets as businesses do, fans may deem the whole sport unstable and lose interest, switching support to a more stable sport in which long term stability is more likely.

A salary cap can be defined as a hard cap or a soft cap. A hard cap represents a maximum amount that may not be exceeded for any reason. Contracts which cause a team to violate a hard cap are subject to major sanctions, including the voiding of violating contracts, and the stripping of championships won while breaching salary cap rules, which happened to the Melbourne Storm in the NRL. Hard caps are designed so that penalties deter breaking the cap, but there are numerous examples of clubs who have occasionally or systematically cheated the cap. A soft cap represents an amount which may be exceeded in limited circumstances, but otherwise exceeding the cap will trigger a penalty which is known in advance. Typically these penalties are financial in nature; fines or a luxury tax are common penalties used by leagues. A salary floor is a minimum amount that must be spent on the team as a whole, and this is separate from the minimum player salary that is agreed to by the league. Some leagues, in particular the NFL, have a hard salary floor that requires teams to meet the salary floor every year, which helps prevent teams from using the salary cap to minimize costs. This also ensures that money from revenue sharing is used for player salaries instead of being pocketed by owners. When the salary cap and floor are the same, the result is a standard form contract model of payment, in which each player is paid the same amount, sometimes varying by position. The standard form contract model is used extensively in North American minor leagues.

Before the implementation of salary caps, the economic influence of clubs on player markets was controlled by the reserve clause, which was long a standard clause in professional sports player contracts in the United States. The clause forbade a player from negotiations with another team without the permission of the team holding that player's rights even after the contract's term was completed. This system began to unravel in the 1970s due largely to the activism of players' unions, and the threat of anti trust legal actions. St. Louis Cardinal star Curt Flood started the ball rolling when he refused a trade to the Philadelphia Phillies. He had been a player for 12 years and felt he should have a voice in where he played baseball. Even though he lost his case in the Supreme Court, he was the first baseball player to try to end the reserve clause. Although anti trust actions were not a threat to baseball, which has long been exempt from anti trust laws, that sport's reserve clause was struck down by a United States arbitrator as a violation of labor laws. By the 1990s, most players with several years' professional experience became free agents upon the expiry of their contracts and were free to negotiate a new contract with their previous team or with any other team. This situation, called Restricted Free Agency, led to "bidding wars" for the best players—a situation which inherently gave an advantage in landing such players to more affluent teams in larger media markets.

Prior to the resolution of the 2004–05 lockout, the NHL was the only major North American professional sports league that had no luxury tax, very limited revenue sharing and no salary cap. During the Original Six era through to the early years of the expansion era, the NHL's strict reserve clause negated the need for a salary cap. Player salaries first became an issue in the 1970s, when Alan Eagleson founded the NHL Players' Association (NHLPA) and the upstart World Hockey Association began competing with the NHL for players. Not all NHL owners were willing to engage in a bidding war, in particular, Harold Ballard of the Toronto Maple Leafs spent as close to the league minimum on rosters as he could. Since Maple Leaf Gardens was consistently sold out no matter how poorly the Maple Leafs played, Ballard's team was by far the most profitable. The 1994–95 NHL lockout was fought over the issue of the salary cap. The 1994–95 season was only partially cancelled, with 48 games and the playoffs eventually being played. Eight NHL franchises were based in Canada at the time of the lockout. Until the 1990s, the Canadian teams usually paid player salaries in Canadian dollars, but with the rise of free agency and a decline in the value of Canadian dollar, players and their agents increasingly demanded to be paid in U. S. dollars. Canadian teams' revenues were, then as now, mostly in Canadian dollars, and the effects of the discrepancy were particularly acute for the small market franchises. The financial difficulties and uncertainties of competing in smaller Canadian markets led to two clubs moving to the U. S.; the Quebec Nordiques to Denver, and the Winnipeg Jets to Phoenix. NHL Commissioner Gary Bettman successfully persuaded the US based teams to donate towards a pool to mitigate the adverse effects of the exchange rate.

The negotiations for the 2004–05 NHL Collective Bargaining Agreement revolved primarily around players' salaries. The league contended that its clubs spent about 75% of revenues on salaries, a percentage far higher than existed in other North American sports; NHL Commissioner Gary Bettman demanded "cost certainty" and presented the NHLPA with several concepts that the Players' Association considered nothing more than euphemisms for a salary cap, which it had vowed it would never accept. The previous CBA had expired on September 15, 2004, and a lockout ensued, leading to the cancellation of the entire 2004–05 NHL season, the first time a major sports league in North America had lost an entire season to a labor dispute.

The lockout was resolved when the NHLPA agreed to a hard salary cap based on league revenues, with the NHL implementing revenue sharing to allow for a higher cap figure. The NHL salary cap is formally titled the "Upper Limit of the Payroll Range" in the new CBA. For the 2005–06 NHL season, the salary cap was set at US$39 million per team, with a maximum of $7.8 million (20% of the team's cap) for a player. The CBA also mandated the payment of salaries in U. S. dollars, codifying what had been a universal practice for more than a decade. Revenues for the six Canadian teams that were in the league at the time of the lockout have all increased significantly since then, and because the US dollar fell to relative parity with its Canadian counterpart in the early 2010s, league wide revenues measured in U. S. dollars were inflated accordingly. As a result of these factors, the cap was raised each year of the 2005–12 CBA to $64.3 million for the 2011–12 season, with a cap of $12.86 million for a player. The CBA also contains a salary floor which is formally titled the "Lower Limit of the Payroll Range", the minimum that each team must pay in player salaries. The lower limit was originally set at 55% of the cap, but is now defined to be $16 million below the cap, therefore the 2011–12 minimum was $48.3 million. Since the current CBA was approved after a later lockout in 2012–13, league revenues have stagnated due to a significant fall in the value of the Canadian dollar against the U. S. dollar. The cap was $69 million for the 2014–15 season and will be $74 million for 2016–17. The difference between the salary cap and a team's actual payroll is referred to as the team's "payroll room" or "cap room". Each year of an NHL player contract, the salary earned contributes to the team's "cap hit". The basic cap hit of a contract for each year it is effective is the total money a player will earn in regular salary over the life of the contract divided by the number of years it is effective. This, in theory, prevents a team from paying a player different amounts each year in order to load his cap hit in years in which the team has more cap room. Teams still use this practice, however, for other reasons. Performance bonuses also count towards the cap, but there is a percentage a team is allowed to go over the cap in order to pay bonuses. A team must still factor in possible bonus payments, however, which could go over that percentage. Salaries for players sent to the minors, under most circumstances, do not count towards the cap while they are there. If a player has a legitimate long term injury, his cap hit is still counted; however, the team is permitted to replace him with one or more players whose combined salary is equal to (or less than) that of the injured player, even if the additional players would put the team over the salary cap. If the team's cap room is larger than the injured player's cap hit, they may take on as much as their cap room; however, the injured player may not return to play until the team is again compliant with the original cap. The NHL has become the first of the major North American leagues to implement a hard cap while retaining guaranteed player contracts. Guaranteed player contracts in the NHL differ from other sports, notably the NFL, where teams may opt out of a contract by waiving or cutting a player. NHL teams may buy out players' contracts, but must still pay a portion of the money still owed which is spread out over twice the remaining duration of the contract. This does not apply for players over 35 at the time of signing; in this case a team cannot buy out the player's contract to reduce salary. Any other player can be bought out for 1/3 of the remaining salary if the player is younger than 28 at the time of termination, or 2/3 of the remaining salary if the player is 28 or older. Trading cash for players or paying a player's remaining salary after trading him have been banned outright in order to prevent wealthier teams from evading the restrictions of the cap. Players, agents or employees found to have violated the cap face fines between $250,000 to $1 million or suspension. Teams found to have violated the cap can face fines of up to $5 million, cancellation of contracts, forfeiture of draft picks, deduction of points and forfeiture of games determined to have been affected by the violation of the cap.

Measuring the success of the luxury tax in bringing the benefits of parity has brought mixed results. A team with a $100 million plus payroll has won the World Series 12 times (the 2009 Yankees; the 2004, 2007, 2013 and 2018 Red Sox; the 2011 St. Louis Cardinals; the 2010, 2012 and 2014 San Francisco Giants; the 2015 Kansas City Royals; the 2016 Chicago Cubs; and the 2017 Houston Astros). While a top tier payroll increases a team's chances of making the playoffs, it does not guarantee they will consistently win championships. On the other hand, the New York Yankees have consistently had the highest total payroll in MLB, and they have appeared in 40 of the 114 World Series for 27 wins as of 2018 (35.1% of all World Series for a 24.6% success rate). In the past 30 years, 18 different teams have won the World Series. In comparison, only 14 different teams won the NFL Super Bowl, 13 won the NHL Stanley Cup and 10 won the NBA championship in that same time frame. Other pundits, such as Michael Lewis, the author of the bestseller Moneyball, have argued that using World Series championships as an example of parity may be misleading, and playoff appearances may be a better indicator of relative team strength. The playoff system used in baseball comprises a small number of games compared to success over a long season, and has been described as a "crapshoot" by Oakland A's General Manager Billy Beane (the central figure of Moneyball). In fact, teams with consistently high payrolls, including the New York Yankees and Boston Red Sox, have secured high numbers of playoff berths (the two teams have combined to win the AL East 19 out of 25 seasons from 1994–2018). In contrast, teams with low payrolls are far less likely to make the playoffs: for example, the Pittsburgh Pirates went 20 years without a winning season before making the 2013 playoffs. A number of the small market teams, notably the Milwaukee Brewers, have called for the introduction of a salary cap, but any introduction is opposed by the MLB players' union and the Yankees' ownership group; the latter have threatened legal action if such a cap is implemented. Although some saw the success of NHL owners in their 2004–05 lockout as an opportunity for MLB to reform its collective bargaining agreement, baseball owners agreed to a new five year deal in October 2006 that did not include a salary cap. Unlike the other three major North American sports, MLB also has no team salary floor: the only minimum limits for team payrolls are based on the minimum salaries for individual players of various levels of experience that are written into MLB's collective bargaining agreement. The players' union has also historically been vehemently opposed to a team salary floor, considering any floor proposal to be a prelude to a later request for a cap.

Here are some major points of the MLS rules and regulations for the 2017 season. A team's roster can be made up of up to 30 players. They are eligible to be selected to the 18 player team for each game. The salary cap is $4.035 million per team in 2018, not counting the extra salary of designated players. Players in the first 20 roster spots will count against the cap. Roster spots 19 and 20 are not required to be filled, and teams may spread their salary budget across only 18 players. A minimum salary budget charge ($67,500 in 2018) will be imputed against a team's salary budget for each unfilled senior roster spot below 18. The maximum salary for any non designated player is $504,375. A designated player counts $504,375 against a team's cap. However, if a player joins his team in the middle of the season, the charge against the budget will be $252,187. Players who are in the roster spots from 21–30 will not count against a team's cap. They will be known as off budget players. Those in roster slots 21–24 must be a senior minimum salary player ($65,000 base salary – will increase to $67,500 in 2018) or Generation adidas player. Those in slots 25–30 must be a reserve minimum salary player ($53,000 base salary – will increase to $54,500 in 2018). Additionally, those who earn the lowest possible league salary must be 24 or younger during the 2017 calendar year. Those in slots 29–30 must also be homegrown players. In addition to the salary cap, each MLS team can also spend additional funds on a player in the form of allocation money and homegrown player subsidy. Since the 2012 season, the cap number for designated players has depended on the players' ages. Since the 2013 season, players 20 or younger have counted $150,000 against the cap and those age 21 to 23 have counted $200,000, with older players remaining at the standard cap number ($368,750 for 2013, $387,500 for 2014, $436,250 for 2015, $457,500 for 2016, $480,625 for 2017, and $504,375 for 2018). For the purpose of determining a cap number, the player's age is determined solely by his year of birth.

The current team salary cap in the Major League Rugby is $500,000.

Salary caps are common in other leagues. The salary cap of the first Arena Football League was $1.82 million per team in its final season in 2008. In 2005, the Tampa Bay Storm were fined $125,000 for salary cap violations and their head coach Tim Marcum was suspended for four games (last two of the 2005 season and first two of the 2006 season) and fined $25,250; Marcum was suspended for a fifth game the next day for criticizing the decision at a press conference. When the Arena Football League returned in 2010, it instituted a standard salary of $400 per game and a salary cap of $1.5 million, considerably lower than that paid by teams in the previous AFL; given that the new AFL had a 16 game season in 2010, this effectively means that its players are semi professional. The National Women's Soccer League, launched in 2013, was initially planned to have a team cap of $500,000, but that was later lowered to $200,000. However, the sport's three North American national federations—the United States Soccer Federation, which ran the league through the 2020 season; the Canadian Soccer Association (CSA); and the Mexican Football Federation (FMF)—committed to paying the league salaries of many national team players. For the league's first season, 23 US players, plus 16 players each from Canada and Mexico, had their salaries paid by their respective federations; these players' salaries originally did not count against the team cap. Mexican players have not been allocated since FMF launched Liga MX Femenil in 2017, but the CSA continued to allocate players to the league through the 2021 season, after which the national team allocation system was abolished. For 2021, the NWSL team salary cap was $682,500, with a cap of $52,500 and a floor of $22,000 for individual player salaries. In a practice similar to that of MLS, "allocation money" can be used to supplement salaries of selected players. Although the salaries of U. S. and Canada national team players allocated to league rosters were paid by the USSF or CSA, these players remained subject to a modified form of the cap. U. S. federation players had a specified cap value of $33,000, with Canadian federation players having a cap value of $27,500 or their actual salary, whichever is lower. The national team allocation system was eliminated after the 2021 season. The league and its players' union entered into their first collective bargaining agreement during the 2021–22 offseason. For 2022, the team cap was raised to $1.1 million, with standard player salaries limited to between $35,000 and $75,000. However, in a system similar to that of MLS, each team is also entitled to use $500,000 per year in "allocation money" (which can be traded) to supplement the salaries of select players. For 2023, the team cap was further raised to $1.375 million, and allocation money increased to $600,000. Also, the maximum salary was redefined as a "maximum cap charge", which includes all team provided compensation in the player's contract, excluding benefits provided to all league players. The maximum cap charge was set for 2023 at $200,000. The cap does not include healthcare, which is funded fully by the team; housing, provided by the team either directly or via a stipend of up to $3,000 per month; or transportation, specifically by allowing teams to provide each player with a car with a maximum value of $50,000. The Premier Hockey Federation, the main women's professional ice hockey league in the US and Canada, has a team salary cap of US$750,000 and a floor of $562,500 in its 2022–23 season. This was a dramatic increase from the $300,000 cap in the 2021–22 season.

Salary caps are rarely used in Europe. However, several European rugby competitions, as well as ice hockey leagues, have successfully instituted salary caps. Rugby league's Super League, mainly in England with a team also in France (and formerly one in Wales), is capped. The league has used promotion and relegation for most of its history, though from 2009 through 2014 it operated on a licensing system with some similarities to the North American franchising model. Promotion and relegation returned to Super League in the 2015 season. In rugby union, two of the continent's three main domestic/regional leagues—the English Premiership and the French Top 14—instituted caps despite both being at the top of extensive pyramid structures with promotion and relegation throughout. The most notable European ice hockey league with a salary cap is the Kontinental Hockey League (which uses the franchising model), and that league implemented a cap despite currency issues.

In December 2009, Ligue Nationale de Rugby (LNR), operator of the Top 14, announced it would impose a cap of €8 million, effective with the 2010–11 season. Previously, the only restrictions on team salaries were that wage bills were limited to 50% of turnover and that 10% of the salary budget had to be held in reserve. The Top 14 salary cap was set at €9.5 million for 2012–13. For 2013–14, the cap was increased to €10 million, and in addition youth players are excluded from the cap unless their salaries are more than €50,000. The €10 million total cap remained in place for three seasons (through 2015–16); the agreement allowed for the threshold for exclusion of youth players to be adjusted before any of those seasons, but no such adjustment was made. The €10 million cap was later extended through the 2018–19 season. Additionally, each club that has a member of the France national team on its roster (more specifically, one of the 30 players named by the French Rugby Federation to the so called "elite squad") is allowed to exceed the cap by a set amount per national team member. This amount was fixed at €100,000 through the 2015–16 season, and increased to €200,000 starting in 2016–17.

On 20 December 2011, the four Welsh regional sides that participate in the competition then known as Pro12, later as Pro14, and now as the United Rugby Championship announced that they would impose a salary cap of £3.5 million, effective with the 2012–13 season. The cap covers only the registered squad for European competitions—at the time of announcement, the Heineken Cup and European Challenge Cup, and from 2014–15 the European Rugby Champions Cup and European Rugby Challenge Cup. It does not cover players in the regions' academies. This cap was unilaterally instituted only on the Welsh teams. The URC is uncapped, and none of the other three European countries involved in the URC (Ireland, Italy, and Scotland) are known to have formally instituted such a system. South Africa maintains a cap and floor on individual player salaries but does not impose a separate team cap. The operation of the cap was modified for select Wales national team players in 2014 by agreement between the Welsh Rugby Union and the Welsh professional players' trade union. This agreement introduced "National Dual Contracts", which make signatories available for all Wales national team matches regardless of whether they fall within an official World Rugby window for Test matches. The WRU funds 60% of the salary of NDC players, with the region covering the other 40%, with only the latter amount included in the salary cap.

When the Russian Superleague was dissolved to make way to the modern day KHL, the Kontinental Hockey League Players' Trade Union (KHLPTU) agreed to the implementation of a salary cap. When first implemented there was a salary cap, as well as a salary floor. For the 2009 10 KHL season, the salary cap was 620 million rubles ($US 18.3 million) and the salary floor was 200 million rubles ($US 5.9 million). The KHL's cap operates despite the KHL's multinational nature, with teams in Belarus, China, Finland, Kazakhstan, and Latvia, in addition to its primary base of Russia. The five non Russian countries use four different currencies (two countries use the euro), with most floating against the ruble. From 2011–12, each team can sign up to two "designated players" whose salaries are not counted against the cap. Up until 2011, the KHL salary cap was a soft cap, with a luxury tax amounting to 30% of the payroll that is over the cap paid to the special stabilization account, which helps KHL teams facing financial hardship. From the 2012–13 KHL season onward, the KHL began using a hard cap, set at 1.25 billion rubles (at the time $US 36.5 million). The 2020–21 season was the first which used a hard cap and a hard salary floor; in that season. the cap was 900 million rubles ($US 12.0 million at then prevailing exchange rates) and the floor was 270 million rubles (roughly $US 3.5 million)

Several European association football leagues have considered introducing salary caps in the early 21st century. In 2002, the BBC reported that the G14 group of 18 leading European football teams would cap their payrolls at 70% of team's income, starting from the 2005/2006 season, however this did not occur. Serie A, the leading Italian football league, and the English Football League (consisting of England's second through fourth levels) have also considered salary caps. These measures would be implemented to ensure clubs spend responsibly rather than as a tool to create parity. Top executives in European football have acknowledged that a number of challenges not present in North America would confront anyone who tried to implement an effective cap across European football or even across a single league with a view to creating competitive balance:

The various national leagues are in competition with each other for the best players because there is free movement of players between the leagues. Football leagues in European Union countries have been forbidden from prohibiting the signing of EU players from other nations, or even from limiting their numbers. Therefore, if one league imposed a strict cap on its teams, the best players from the country in question would still be free to move to uncapped rival leagues. The existence of lucrative and prestigious international club competitions encourage clubs to ensure dominance of their national leagues in order to play in the higher level European leagues. For many top clubs, the domestic league is little more than a stepping stone to the European league. Success in European club competitions is not only a matter of national pride, as the number of places allocated to each country for these competitions is determined by that country's teams' past performances in Europe. Salary capped clubs in a franchise structure do not have to compete with teams in rival leagues where there is no salary cap. Different governing bodies have authority over domestic and international competitions. For example, UEFA governs European football and organizes the prestigious Champions League, Europa League, and Europa Conference League, but its authority over the domestic leagues is very limited. Although UEFA could, in theory, impose a salary cap, it would only apply to UEFA's club competitions and to the portion of each team's payroll paid to players registered with UEFA. A wealthy Champions League team could then sign players who would play exclusively in domestic competitions. In other sports that have a single governing body which oversees a single premier competition, the power to enforce salary cap rules is much greater. The pyramid structure of European leagues means the number of small clubs in the various lower divisions can run into the thousands. The promotion and relegation system which allows transfers between these divisions presents challenges to a cap system. A club that is relegated to a lower league after a poor season may find themselves significantly over the lower division cap. Similarly, a promoted club might have to face the challenge of hastily finding players who it could then pay under a higher cap. A salary cap exacerbates the problem of players switching clubs along with the clubs' movement between tiers. European tax systems and rates vary greatly from country to country. One prominent club, AS Monaco, plays in Monaco, a principality with no income tax at all. A flat payroll limit would therefore equate to aggregate take home pay that varied greatly from one club to the next, which would make it difficult for teams in countries with higher taxation to attract the best players. By comparison, the differences between the tax systems and tax rates of Canada, the US and between their respective provinces and states are not nearly as great. Europeans use multiple currencies and football wages are usually paid in the local currency. Although the countries hosting all but one of the most prominent European leagues now use the euro, the one exception, England, has the richest league. Even if a hypothetical UEFA wide cap were denominated in Euros, fluctuating exchange rates would make it difficult for the cap to be fairly administered in the United Kingdom since its salaries are paid in pounds sterling. By comparison, most player salaries paid to players on Canadian major sports teams are paid in U. S. dollars; in fact this is now mandated in the NHL to ensure that payrolls do not fluctuate with exchange rates. On the other hand, prior to Brexit, trying to force British clubs to pay wages in Euros so that their payrolls could not exceed a cap would have met with opposition from clubs since their revenues are collected in pounds, and could have provoked political opposition from Britons determined to prevent the Euro from replacing the pound.

The Australian Football League has implemented a salary cap on its clubs since 1987, when Brisbane and West Coast were admitted, as part of its equalization policy designed to neutralize the ability of the richest and most successful clubs, Carlton, Collingwood and Essendon, to perennially dominate the competition. The cap was set at A$1.25 million for 1987–1989 as per VFL agreement, with the salary floor set at 90% of the cap or $1.125 million; the salary floor was increased to 92.5% of the cap in 2001, and to 95% of the cap for 2013 onwards due to increased revenues. The salary cap, known officially as Total Player Payments, is A$13,165,950 for the 2020 season with a salary floor of $12,507,652.50. Both the salary cap and salary floor has increased substantially since the competition was re branded as the AFL in 1990 to assist in stemming the dominance of other high membership clubs, such as Adelaide, Hawthorn and the West Coast Eagles. Certain payments are excluded from the cap, and concessions are available for some players, in particular "veteran" players (those who have completed 10 seasons with their current club) and "nominated" rookie list players, who are discounted by 50% for purposes of the cap, depending on the number of these players at each club. The AFL Players Association negotiates for players with the AFL on the topic of average salary.

The breaches of the salary cap and salary floor regulations are exceeding the TPP, falling below the salary floor, not informing the AFL of payments, late or incorrect lodgement or loss of documents relating to player financial and contract details, or engaging in draft tampering. Trading cash for players and playing coaches, formerly common practices, are also prohibited to prevent wealthier clubs from circumventing the restrictions of the salary cap and salary floor. Penalties for players, club officials or agents could include fines of up to one and a half times the amount involved and suspension. Penalties for clubs include fines of up to triple the amount involved, forfeiture of draft picks or deduction of premiership points. As of 2022, no club has been penalised for breaches of the salary floor regulations, and no punishment has included the deduction of premiership points.

The VFL/AFL's salary cap has been quite successful in terms of parity: since the cap was introduced in 1987, 17 of the 18 teams have reached the Grand Final, and 14 teams have won the premiership. Another major statistic in regards to the success of the VFL/AFL's cap is that the three richest and most successful clubs, Carlton, Collingwood and Essendon, who won 41 of the premierships between them from 75 Grand Finals in the 90 seasons between 1897 and 1986 (83.3% of all Grand Finals for a 45.6% premiership success rate), have only won six of the premierships between them from twelve Grand Finals since (32.4% of all Grand Finals for a 16.2% premiership success rate). Of note in this regard is that the Sydney Swans, playing as South Melbourne until 1981, mostly struggled in the 50 seasons between 1946 and 1995, and made the finals on just four occasions in that time (a finals success rate of 8%). They had not won a premiership since 1933 and had not appeared in a Grand Final since 1945, but since 1996, have qualified for the finals in 23 of 27 seasons (a finals success rate of 83%) and played in six Grand Finals, winning the premiership in 2005 and 2012.

Originally, the cap was only for the Total Player Payments of each club and not the club's football department. This has caused concern in recent years; for instance, three of the four top spending clubs played in the Preliminary Finals in 2012 and 2013, and the last team to win the premiership outside the top eight spending teams was North Melbourne in 1999. There had been calls for a separate cap for the football department, or to reform the salary cap to include football department spending, but these had been opposed by the wealthier clubs, with Sydney CEO Andrew Ireland saying that the AFL needed to examine the gap between football department spending for these teams. In 2014, the AFL and its clubs accepted a luxury tax on football department spending (excluding the salary cap) to take effect in 2015 and an overall revenue tax to take effect by 2017. Clubs that exceed the football department cap will pay the AFL the lesser of $1 million or 37.5% of the excess, and repeat offenders will pay the lesser of 75% of the excess or $2 million.

The AFL salary cap is occasionally controversial, as it is a soft salary cap and can sometimes be slightly different for each club. Clubs in poor financial circumstances have not always used their full cap, in some circumstances not even reaching the salary floor. The AFL has also used the cap to pursue its policy of supporting clubs in non traditional markets such as Sydney and Brisbane.

Apart from the AFL, several regional leagues also have salary caps which although widening between them and the AFL and overall less than national competitions, are substantial enough to dictate the movement of semi professional and professional players between states and the overall playing quality and spectator attendance of the state leagues.

In 2017, the AFL launched a semi professional women's national league, known as AFL Women's: all of its teams are fielded by AFL clubs. The salary cap (Total Player Payments or TPP per club) rose from $474,800 in 2019 to $717,122 in 2023 with the total competition cap increasing more than 10 times in 6 years from $2.3 million in 2017 to $32.3 million in 2023. Before the 2012 season, the NRL's then Chief executive David Gallop said "The cap's there to make sure that pure purchasing power cannot dominate the sport It means we can genuinely say that all 16 teams have a chance. For the fan every week, every game is a contest. That's at the core of why rugby league is so successful." The breaches of the salary cap and salary floor regulations outlined by the NRL are exceeding the salary cap, falling below the salary floor, not informing the NRL of payments, late or incorrect lodgement or loss of documents relating to player financial and contract details or engaging in contract tampering. Trading cash for players is also prohibited to prevent wealthier clubs from evading the salary cap and salary floor regulations. Penalties for players, club officials and agents could include fines of the one and a half times of the amount involved and suspension. Penalties for clubs could include fines of up to triple the amount involved ($10,000 for each document that is late or incorrectly lodged or lost) and deduction of premiership points. The NRL is one of the few major leagues to implement a salary cap in a sport that has competing leagues in other countries where there is either no salary cap or a much higher cap per club. As a result, at times there has been a tradition of players from Australia moving to Europe where salaries for the elite, and even for average players, were considerably higher. This is often dependent on exchange rates or the rise and fall in the fortunes of international rugby league or union competitions. The NRL chooses to continue with the cap, believing that any reduction in quality of the sporting product due to the loss of these players is less than allowing richer clubs to dominate. In practice, the goal of parity has been quite successful, with 12 different clubs winning the 19 premierships between 1998 and 2019.

The 14 teams participating in New Zealand's top domestic competition, now known once again by its historic name of the National Provincial Championship, faced a salary cap in 2013 that was the lesser of $NZ 1.35 million or 36% of the union's commercial revenue. Maximum player salaries are $55,000, and minimum salaries are $18,000. In August 2013, it was announced that the cap would be further reduced, with the team cap for the 2015 season set to $1.025 million. New Zealand first implemented the salary cap in the 2006 season. The purpose of the salary cap was to ensure an even spread of players to produce competitive matches and higher television audiences for the new, fully professional competition. The salary cap had been as high as $2 million in 2008. However, the competition had generated losses of approximately $9.6m in 2007, and salary payments had increased by 75% in the previous four years. Some teams were reported to be in dire financial position, with four teams having payrolls of $1.75 million or more. The salary cap was cut in 2008, converting what was then known as the ITM Cup into a semi professional competition, with players not under national team or Super Rugby contracts needing to find other part time jobs.

Both national senior association football (soccer) competitions operating under the A League banner, A League Men and A League Women, have salary caps. A League Men had a salary cap of A$2.5 million in its most recently completed 2021–22 season, with the cap set to rise by $50,000 in each of the next two seasons. This value had reached $3.2 million in 2019–20, but was reduced to $2.1 million in 2020–21 due to financial fallout from COVID 19. However, the cap has numerous exceptions. First, then current player contracts were honoured at their full values and not subjected to the cap. In the 2020–21 season, the league's two newest teams, Western United (which debuted in 2019–20) and Macarthur (which debuted in 2020–21), were allowed a higher cap of $2.433 million. The league also has a salary floor, set at 90% of the cap. The Salary Cap applies to the 20 to 23 Players that Clubs have registered to their A League Men Player Roster. Unless specifically exempt, all payments and benefits (eg. cars, accommodation, etc) provided by a Club to a Player are included in the Club's Salary Cap. Each team can sign two "marquee players" and one "guest player", the latter of whom can only play for a maximum of 14 matches in a season, whose salaries are excluded from the team's salary cap. A League Men has also introduced a "junior marquee" for eligible under 23 year old players with the aim of keeping young talented players in Australia (or New Zealand for the Wellington Phoenix) for a longer period, similar to the Designated Player Rule in Major League Soccer in North America. Each team can also exclude the salaries of up to four "homegrown players", defined as under 23 players who have come from the club's youth system. Finally, once a player has been with a club for 4 consecutive years as a professional, he is considered a "loyalty player", and as long as he remains with that club, part of his salary is excluded from the cap. The percentage of exclusion starts at 12.5% in his fourth season with the club, increases to 25% in his fifth, and increases by 5% in each subsequent season until reaching its maximum value of 50% in his tenth season. The breaches of the salary cap and salary floor regulations outlined by the A League are exceeding the salary cap, falling below the salary floor, not informing the A League of payments, late or incorrect lodgement or loss of documents relating to player financial and contract details or engaging in contract tampering. Penalties for players, club officials or agents could include fines of up to one and one half times the amount involved and suspension. Penalties for clubs could include fines of up to triple the amount involved ($7,500 for each document that is late or incorrectly lodged or lost) and deduction of competition points. In the 2006–07 season, Sydney FC were fined $174,000 and deducted three competition points after it was found that they had exceeded the salary cap by $110,000 and failed to declare third party payments during the 2005–06 season in which they were premiers. In 2014–15, Perth Glory were fined $269,000, deducted nine points and ruled ineligible to compete in the finals series after it was found that they had exceeded the salary cap by $400,000 during the season. A League Women had a cap of $450,000 and floor of $315,000 in the 2021–22 season. The floor is set to rise to $390,000 by 2025–26, with the cap level to be reviewed annually. On May 9, 2014, in order to help attract high calibre imports or offer financial incentive for local stars considering overseas opportunities, the NBL introduced a marquee player rule. It originally allowed a team to nominate one player whose salary was paid outside the cap, with a 25% Marquee Player levy applied to any payment made above the salary cap. The levy still applies to non local marquee players (i. e., players who are neither Australians nor New Zealanders), with one exception introduced in 2016–17. Effective with the 2016–17 season, several significant changes were made to the cap scheme. First, the cap was changed from a hard cap of A$1 million to a soft cap of $1.1 million. Teams exceeding the cap are required to pay "salary equalisation" (effectively a luxury tax) equal to the amount above the cap. Additionally, players' values for purposes of the cap are not based on their publicised salaries, but are instead determined by an NBL panel. Also, the points system in place for the previous 13 seasons was scrapped; in its place, a salary cap provision was added requiring that all teams have at least one group of five players with a collective cap value of no more than A$400,000. Second, the Marquee Player rule was modified with regard to "non restricted" players; the cap charge for a qualifying player who fills the marquee player slot is now $150,000, regardless of his actual salary.

In netball's now defunct ANZ Championship, which featured five teams each from Australia and New Zealand, each franchise was restricted to a NZ$380,000 salary cap (as of 2013) from which player salaries were paid. Salary amounts varied among players, but each player received a retainer of at least NZ$12,000 per season; high profile players were expected to earn up to NZ$50,000. Following the 2016 season, Australia's national governing body of Netball Australia broke away from the trans Tasman championship and launched its own national league, Suncorp Super Netball. The initial team salary cap in the new league was A$675,000, with minimum player salaries of A$27,375. This latter figure was more than double the minimum wage of A$13,250 in the final season of the ANZ Championship. New Zealand rebranded its now domestic league as the ANZ Premiership, presumably retaining its prior salary cap provisions. Since then, Super Netball's salary cap has risen modestly. The original team cap of A$675,000 had been structured with a $500,000 cap on playing payments, plus an additional $150,000 for club related employment, educational, and ambassadorial roles, and the balance for health insurance and technology allowances.

Salary caps and currency conversions accurate as of January 2018. + Comparison of Salary Caps Country Competition Cap (in local currency) Cap (adjusted to USD) Cap Introduced Exclusions from cap Australia Big Bash League $1.86m $1.37m 2011–2012 19th marquee player Bangladesh Bangladesh Premier League ৳125,182,771 $1.5m 2012 India Indian Premier League 90 Crore $12m 2008 West Indies Caribbean Premier League US$350,000 $350,000 2013

Competition Sport Country Hard cap (US$) Hard cap (original currency) Soft cap (US$) Soft cap (original currency) Ref Major League Baseball Baseball 211 mil National Football League American football 208.2m + $40 million per team in player benefits National Basketball Association Basketball 136.6m 112.4m Chinese Super League Association football 91.7m ¥ 600m Indian Premier League Cricket 12.4m ₹ 800m Kontinental Hockey League Ice hockey 12.0 m ₽ 900m – – Premiership Rugby Rugby union 6.8m £5.0m Canadian Football League Canadian football 4.0m CA$5.2m Major League Soccer Association football 4.9m + Designated Player Rule exception Indian Super League Association football 2.7m ₹ 175m Women's National Basketball Association Basketball 1.34m National Women's Soccer League Association football 1.1m