Clubs in League One and League Two have voted to introduce salary caps with immediate effect.

The EFL’s Squad Salary Caps procedure will see a cap introduced of £2.5m per year for third tier sides and £1.5m per year for fourth tier teams.

The cap includes basic wages, taxes, bonuses, image rights, agents fees and other fees and expenses paid directly or indirectly to all registered players.

The cap does not include promotion and cup competition bonuses, while any income generated from players going out on loan is deducted from the calculations.

As part of the arrangements, clubs that are over the salary cap by up to 5% will face a financial penalty for every £1 by which they exceed the limit. Clubs who exceed the 5% figure, named an ‘overrun’, will be referred to an independent disciplinary commission for further sanctions. The EFL also stated that they will monitor the Cap on a real-time basis throughout the season.

The EFL has also introduced transitional deals for clubs moving between divisions, with relegated clubs permitted to cap all contracts at the divisional average prior to the Club’s relegation until those contracts expire.

The EFLCEO, David Baldwin said the move would help to contain the impact of the coronavirus crisis and was designed to help the sustainability of the lower leagues.

He said, “The term ‘salary cap’ is an emotive one, creating the impression of a restrictive measure but we are clear in our view that this is neither the objective nor the likely effect of these changes to EFL Regulations. The financial impact of Covid-19 will be profound for EFL Clubs and today’s vote will help ensure Clubs cannot extend themselves to the point that could cause financial instability.

“Over the last two weeks the discussions amongst Clubs in both Leagues One and Two have been healthy and constructive, allowing us to reach a clear consensus today and I am pleased that the Clubs have determined to adopt the new approach.

“We will now work with all Clubs, the PFA and, where appropriate, other stakeholders to implement the new rules and continue our efforts to bring long-term sustainability to the EFL.”

The move has received criticism from the Professional Footballers Association, who have criticised the proposals as unworkable.

In a statement, they said, “We are disappointed at the outcome of today’s votes. The EFL has ignored its legal obligation to consult with the PFA and the PFNCC.  

“As such, the legal advice we have received is clear that the salary cap envisaged by the EFL would be unlawful and unenforceable.

“The PFA has already served its Notice of Arbitration on the EFL and until such time that arbitration is determined one way or another the new regulations should have no effect.”