Incentive for Youth Development Investments from FIFA: Training Compensation

In order to explain the function of the Clearing House, it is first necessary to understand the concept of “training compensation/reward”. Pursuant to article 20 of the FIFA Regulation on Transfer and Status of Players (“RSTP”), a player's first professional contract and every professional transfer up to the age of 23 a payment shall be made to the former club or clubs under the name of training compensation. Training compensation is paid if the transfer of the player takes place while the contract is in progress or when it is terminated.

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What changes does FIFA foresee in the calculation of Training Compensation?

Although the effective date has not been announced yet, it is aimed to make a new categorization of the training fees in accordance with the new training compensation payments system that FIFA plans to introduce in the near future. This categorization will be carried out in two criteria as (1) the revenue generated and (2) the use of the said income as an investment in the development of young athletes.

It is observed that the training compensation fees expected to be announced by FIFA at the end of the year are in an increasing statistic.

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What is Clearing House?

Clearing House is the new system that FIFA has announced that it will put into practice in order to ensure the correct and full payment of training compensation between clubs and to follow up the payments.

How to Pay the Training Compensation?

In the current system, the clubs are under the obligation to pay the training compensation directly to the deserving clubs while performing the transfer. However, it is not possible to follow the transfers of the players trained by each club. For the payment of training compensation, it is generally seen that the clubs that are entitled to the compensation give notice to the clubs that are obliged to pay and they initiate legal proceedings. Some clubs have assigned their receivables to some companies or law firms in order to obtain the amount they deserve, and they prefer to receive a lesser amount than they deserve in return. Although Training Compensation appears to be significant amounts in large transfers, for relatively small amounts in transfers that create smaller economic volumes, it causes difficult and long-lasting legal processes for clubs to follow. Although training compensations can be an important source of income, especially for clubs in financial difficulties, they are often overlooked due to the labor and expenses they create.

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How Does the Clearing House Work?

The Clearing House system, which FIFA plans to implement in the near future, aims to save clubs from the expense and overtime required to receive training compensation. With the Clearing House system, the process will run automatically, and the training fees will be paid to the qualifying clubs in line with the system explained below when the transfer takes place, without any demand.

1. Transfer contract/player signing his first professional contract

In case a player is registered as a professional football player for the first time or after the signing of the contract for the transfer of the football player between the two clubs training compensation may be incurred in accordance with RSTP articles 20 and 21.

2. Preliminary Player’s Passport

All registration information is obtained from the registration systems of the member associations and a preliminary player’s passport is generated by FIFA. This preliminary player’s passport or the accuracy of the information it contains can be reviewed, verified or disputed by the member associations where the player was trained.

3. Distribution Statement

Upon verification of the Preliminary Player’s Passport, payment instructions are sent to the FIFA Clearing House in a distribution statement form, including the contact and bank information of the relevant club and member organizations.

4. Invoicing

FIFA Clearing House invoices the player's new club in line with the distribution statement. FIFA Clearing House checks whether the amount paid by the new club to which the player is transferred, the amount paid is distributed in accordance with national and international financial regulations, including the regulations on money laundering, and whether there are countries that are subject to sanctions such as embargo on any side of the transaction.

In case of non-payment, it is the responsibility of FIFA Clearing House to follow up the process. After the FIFA Clearing House reminds for the payment, the enforcement processes are carried out by the FIFA Management.

5. Debiting

The player's new club pays the training compensation and solidarity compensation in accordance with the distribution statement.

6. Crediting

FIFA Clearing House distributes the amount stipulated in accordance with the distribution notification to the training club or clubs. FIFA Clearing House is responsible for confirming and verifying the bank information of the relevant club or clubs and associations or institutions.

7. Control and Enforcement

FIFA obtains the necessary information from the FIFA Clearing House regarding the payments paid or owed, as part of the financial monitoring of the clubs and monitoring their compliance with the financial regulations. In case of any infringement of the clubs, FIFA will be the responsible authority for imposing sanctions

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Why was a Clearing House system established outside of FIFA needed?

With FIFA's announcement of the Clearing House system, the question was raised as to why this distribution and follow-up was not done around FIFA's own organizational network. FIFA stated that they preferred to receive a Clearing House service from outside and to meet this need with an industry-specific know-how, since there are many legal, financial and operational requirements for the establishment and management of the aforementioned system, and these are not within FIFA's area of ​​expertise.

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What can clubs expect from FIFA Clearing House system?

With the Clearing House system, which has not been implemented yet, it is foreseen that clubs that have difficulty in tracking training and solidarity compensations will not have to incur any burden in order to receive these payments. The system will both create an income source for the clubs without spending any expense or labor, and the facilities provided to obtain these incomes will pave the way for the clubs to focus on youth development investments. Moreover, once you are in the position of the new club where the transfer took place, as we believe according to our findings, it will become impossible, to delay the payment of the solidarity and training compensations already available to the clubs or to avoid making such payments altogether.

Following the implementation of the Clearing House, more detailed information and analyzes regarding the application will be evaluated by us and presented to your information.

 

Fore more information please contact:

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