A Guarantee of Sorts

With reports of pay cuts and unpaid wages among World Tour teams, a quick look at the bank guarantee that pro teams post with the UCI, how it works and what it can and can’t do. It’s a dry topic on the best of days but several readers have asked about it of late…

Het Nieuwsblad reports today that CCC has reached an agreement to pay riders a share of their unpaid wages but the sponsor, already in difficulty before the Covid-19 crisis hit, is likely to leave at the end of the year. It’s resolution for unpaid wages in the short term at the expense of a longer term problem and management’s chances of finding a replacement sponsor look tough, they landed CCC at the last minute during the good times. Bahrain-McLaren has reportedly cut wages for its top riders by 70% and title sponsor McLaren is in talks for rescue financing. Astana are in difficulty, Mitchelton-Scott’s future is said to be uncertain too and Patrick Lefevere has said his team’s future is in doubt too, voicing concerns that some other team owners must have in private too.

All World Tour teams, male and female, plus Pro Continental teams, have to lodge a bank guarantee with the UCI as a condition of their annual licence. This guarantee is a sum of money roughly equivalent to 25% of the team’s wage bill* and it is parked with a bank and can be drawn down by the UCI in the event it is called on, think a sort of escrow payment. It’s a lot of money, if you want take a modest World Tour team with an annual budget of €15 million and a wage bill of €12 million (roughly 75% of the budget, a common ratio) then an extra €3 million has to be lodged with a bank and sit idle just in case. So if your spend is €15 million a year you’d need roughly another €3 million on top, it’s a big hurdle to new teams coming into the sport.

  • * it’s 15% for women’s teams but will rise to 25% in the coming years, the lower rate is avoid an even bigger increase in costs of teams signing up to the new Women’s World Tour

It’s expensive but useful. In times past sponsors have vanished mid-season leaving riders and staff unpaid and if this happens the guarantee can be called on to help cover a portion of the unpaid wages. The hurdle of having to park money up front is also a test for team finances, being able to post the guarantee itself is also proof the team has funding.

Currently several pro teams have cut wages and there have been delays in wage payments. This is first a matter for team management, riders, agents and hopefully the CPA rider union to help with first. If riders have raced already this year and are being asked to train daily for an eventual resumption of racing then contractually they’re still fulfilling their bargain. Or superficially so at least which is why some teams have bargained down rider wages in recent weeks and months.

Calling on the guarantee is the last resort though. It signals unpaid debts can’t be reclaimed by normal means and the UCI will review the team’s licence and status. In other words if it cannot pay its wage bill should it be in the World Tour? Normally a team has a month to get its finances in order and reconstitute the guarantee or it risks being stripped of its licence and never races again. However under a new temporary joint agreement by the UCI, teams and CPA reached last month there’s more flexibility now, the UCI will be more indulgent of unpaid wages in order to help a squad stay afloat during 2020. When the Aqua Blue team stopped late in 2018 reports say it didn’t pay the remaining wages directly but left riders to claim the bank guarantee. It’s possible this is repeated later this year to cover any cash shortfalls but if a team wants to continue into 2021 and beyond it’ll have to post the guarantee and convince the UCI’s accountants at around the same time as licence reviews happen in October.

The UCI bank guarantee is a last resort for riders and staff to get back one quarter of their annual wages. It’s a useful policy in good times and bad, in good times it is a big hurdle for new teams but helps weed out sponsors and teams who don’t have the cash and in emergencies it provides some funding for out of pocket employees. Right now it’s an option but drawing down the guarantee in full is only ever sufficient to cover 25% of the wage bill, nobody will get paid in full. It also risks pulling the rug out from under a team, even if the UCI has temporarily relaxed the rules, it’s the final step. So we’re more likely to see riders calling for it later in the year if problems persist.

Photo credit: Chris Auld photo courtesy of the Tour Down Under

26 thoughts on “A Guarantee of Sorts”

  1. as i understand it, CCC are not using the bank guarantee. riders are taking a 50% pay cut and the guarantee will remain, hopefully rolling over into next year’s budget. if they are unable to find a new sponsor and the team folds, what happens to that money? it sounds like someone in the team management/sponsor structure pockets the guarantee as their golden handshake and the riders then get left in the cold – no contract for next year and out of pocket for this year?

    • Yes, your interpretation of the CCC situation matches what I’ve read. If the team ends then the money is returned to whoever put it up… but if there are debts like unpaid wages then riders/staff can claim it first (and have until beyond next year to lodge a claim) before it is returned. It does cover a quarter of the wage bill but if by December 2020 we imagine one soigneur is for some reason unpaid for the whole year they can try to reclaim their dues in full before the money is returned, ie all debts or any debts have to be settled first before it is repaid.

  2. Small error in that the defunct team was Aqua Blue, not Acqua Blue – unless they merged with the equally defunct Acqua & Sapone.

    One question would be who owns the money? If the sponsor pulls out at the end of a contract, does the guarantee go with them and the new sponsor has to pony up the guarantee or would it stay with the team entity and be part of an original sponsorship agreement?

    • It depends who posts the money. For example at Groupama-FDJ, the accounts show sponsor FDJ has posted the money so they’d get it back if the team stops (NB its future is secure for several years). But for other teams it might be the team entity/team owner etc.

  3. Good article as always.
    Few questions. The term wage bill, is that defined as just riders? Or riders plus directors sportifs plus mechanics, bus driver etc ? (assuming they are FTEs)
    Out of interest does it set out an order of priority? Or how does it play out when called upon – if these detail even exists?
    For example, if a team has a lowly domestique on 50K and a super star on 500K. Does the superstar get 500k*.25 and the domestique the 50*.25 (even though this would drop the domestique below the minimum wage?).
    If all Full time employees are covered then are riders paid first and everyone else second?

    • As DaveRides points out it’s for everyone, domestique and superstar, manager and social media manager alike too… but things can get more complicated with the domestique on a plain salary deal while the superstar might have image rights components to their deals and other variable aspects which can complicate things but in a way they’re in a good position as they’re the ones who can move to a new team if the squad vanishes, eg a Van Avermaet or Trentin at CCC.

  4. The UCI regulations say it shall be allocated proportionally to all claimants if there isn’t enough money in the bank guarantee to pay out all the claims in full.

    So in theory this means everyone should get three months worth of their full monthly salary, whether they are a star team leader, mid-range grand tour domestique, minimum salary pack filler or non-riding team staff.

  5. World Tour with national teams going forward? By the sounds of it its getting a bit rocky. Lots of companies will be suffering and you’d think unable to finance the relatively pointless luxury of a professional cycling team.

    • As you say there must be concerns for several teams, but how much teams stop, or just see budget cuts remain to be seen. The World had gone up to the 19 this year from the standard 18 so if CCC stop for good we’d only be back down to the regulatory 18 teams. If another team stops Arkéa-Samsic could be promoted – they applied last time – we’d still be at 18. Below 16 teams and the concept would need to be reviewed because you can’t just promote the surviving Pro Conti teams, they won’t/can’t want to ride all three grand tours etc while doing other races at the same time.

      • If a WT place becomes available, I don’t think it would just go straight to Arkea-Samsic just because they applied last time around. There’s nothing in the regulations about failed applicants being put on a reserve list of some kind or given priority in future application processes. Any other team interested in applying would go to court immediately and demand the UCI be ordered to comply with their own internal regulations.

        It should therefore be opened as a fresh application process, using the sum of the last three years’ team points (i.e. 2018 + 2019 + 2020) which would significantly disadvantage Arkea thanks to their anonymous 2018 and 2019 seasons.

        Arkea have had a hot start to 2020 with 1704 points already which takes their running total on the three year ranking to 6210 points. There’s no way that there’s enough racing left this year for them to overhaul Circus (currently 11066 points) or Total (8689.67 points) but they might be able to pass Androni (7742 points).

        Therefore Arkea would need the following alignment of planets to have a hope of winning a 2021 WT licence:
        1. a WorldTeam closes without transferring to new ownership
        2. a second WorldTeam closes without transferring to new ownership
        3. Circus don’t apply for WT licence
        4. Total don’t apply for WT licence
        5. they overhaul Androni or Androni don’t apply for WT licence
        6. there is no pressure put on UCI by race owners to withhold the 18th WT licence for 2021 as payback for them accepting 19 WT licences plus automatic entries for the #1 ProTeam this year.

        Arkea do look set to win the ProTeam ranking for this year, which would give them automatic entries to WT races next year if there is no change to the regulations.

        • A good walk-through of the rules but I’d add that the points system is on hold this year so far, it could be for the whole season and the UCI could, if the teams agree, unilaterally just award Arkéa a top spot given the whole situation is fluid. But not sure Arkéa really need it, they’ll have invites anyway without the costs and their sponsors, beyond the bike suppliers, don’t have business interests outside of Europe.

          • The UCI document says the points system is only suspended until competition resumes, not for the whole year or indefinitely.

            Unilaterally awarding a WT licence to a team which hasn’t earned it ahead of more deserving teams would have a couple of potential results:
            1. Other interested teams get a court order annulling the UCI decision and awarding the licence to the top applicant team on the three year ranking.
            2. Other interested teams get a court order which does not annul the award to Arkea but does order the UCI to create extra licence/s for the team/s ranked ahead of them.

            Keeping it at 17 teams would be a safer move for the UCI, and a good way to give something to the race organisers after the special accomodations they gave to help the UCI sort out their incompetence last year.

  6. I think top riders are going to see salaries cut massively over the coming years. I can’t see the same amount of money rolling into Pro cycling as currently. I don’t think we’ll see massive structural changes just market dynamics meaning riders take huge pay cuts.

    Bernal and his 5 year contract looks like a better and better deal for the rider.

    • Seems likely, team budgets have gone up a lot in recent years, well beyond inflation, largely because rider wages have jumped. If the economy heads south they’ll likely fall back, especially as oil and gas have provided for chunk of the extra money that has come into the sport.

  7. If salaried members of the team agree pay cut then a part of the UCI guarantee should immediately return to the team, thus allowing for smaller pay cuts, and so on and so forth 🙂

  8. Imagine I am late to the game on the Zwift racing, but I generally surprised at the broadly negative reaction. Although I imagine that the current format is pretty dull (it doesn’t sound great and there’s plenty of opportunity to abuse the technology) some clever bean could add algorithm’s for the drag coefficient’s on slip streaming, require some add-on accessory that records your weight and works better to unify the network speed to make it much more appealing and realistic. The pandemic is probably an optimal basis for kick starting a platform to include this. That’ll make it more realistic and compelling. You’ll be able to include more tactics then.

    At the moment Zwift etc is simply a virtual training platform and the demands for something more realistic has not been there.

    A Mario kart option could be fun, but it’s unlikely to really drive true cyclists to get involved because where’s the fun in having all your actual hard work ruined by a koopa shell to the virtual chamois, but there maybe some fun for those just starting out which might encourage more exercise which can’t be a bad thing.

  9. Could any of the pro teams put their riders and staff on any national furlough schemes, as we’ve seen in the U.K.?
    And, if so, would this affect their obligations with the bank guarantee money?

    • I’m sure they could if they run a UK payroll. This would not be particularly appetising to the riders. £2,500 a month may not cover their overheads. I think it might also be an own goal for the cycling team as it wouldn’t look very good if their millionaire riders are getting subsidised by the state.

      • I’m sure that any pro riders who are still UK residents for tax purposes would have their contracts structured so they are contractors rather than employees.

        • May be part of their contract. But I would think that they are under contract subject to supervision, direction and control and would easily be called employees as a result. They cannot substitute themselves with another rider.
          It would largely depend on where the accounts are submitted as to whether a U.K. payroll is required and therefore if they were eligible. I don’t know if any other countries have the furlough grant, but imagine so.

    • It probably depends on the country and the nature of the contract which ties the rider to the team.
      In France, we’ve seen teams file for partial unemployment for their staff (a system in which the state covers a share of your wages when you are a temporary surplus to requirements), but riders were still expected to work (train) so it wouldn’t apply.

      Many teams hire riders and much of their staff as contractors, in that case a furlough is complicated, but you might be able to access sole trader/small business benefits.

    • A person has to actually apply for the bank guarantee to be called up, it’s not automatic.

      In the event of a rider making that sort of application after being put on such a scheme, I would expect the team to respond to the application by submitting documentation showing that arrangements had been made to have them partially paid and only the remainder was outstanding.

  10. Teams could certainly save money by using their regular bikes in TT’s. Seriously what is the point of having each team rider using a separate bike, most of which have not a cats chance in hell of winning, the damn thing anyway. At best, for most of the riders, the TT is just a stage to “get through”.

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