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