Mauricio Pochettino’s exit as Chelsea manager will deepen their already precarious financial fair play situation.
The Argentine has left the club by mutual consent, less than one year into a lucrative two-year contract. Chelsea are now looking for what will be the fourth manager of the Todd Boehly era.
It was another turbulent season on and off the pitch for the West London side, although Pochettino had overseen something of a revival in the second half of the campaign to secure a 6th-place finish.
That is still, to put it lightly, a meagre return on the circa £1billion that Boehly, whose business empire is worth an estimated £4.8bn according to Forbes, has invested in the club to date.
Their eye-watering expenditure in the transfer market has saddled the club with huge issues in terms of financial fair play (now called Profit and Sustainability Rules, or PSR).
And with Pochettino set to receive a substantial pay-off which will be deducted from the club’s FFP quota, the club’s issues off the pitch could be about to deepen.
How much is Pochettino’s compensation package after Chelsea sacking?
The former Spurs boss signed a two-year contract worth an estimated £20m in total, meaning he will be likely be entitled to over half of that figure having been dismissed less than a year into the deal.
The exact terms are not known, but it is common for manager contracts at elite clubs to include a provision for full payment until the contract’s expiry date.
In other cases, a manager or their agent will agree a specific figure for the event of early termination with the club when first signing the contract. Either way, the figure will likely be eight figures.
Pochettino received a reported £12.5m pay-off following his dismissal at Spurs in 2019, slightly higher than the £8.5m compensation package he got from Paris Saint-Germain three years later.
How does Pochettino exit affect Chelsea’s financial fair play situation?
The cost of Pochettino’s dismissal will come out of Chelsea‘s allowable losses under FFP, just as a new signing’s transfer fee would.
In fact, as transfer fees are generally amortised over the length of a player’s contract while Pochettino’s compensation will likely be a lump sum, the manager’s sacking may actually hit the club harder proportionately.
Chelsea have tried every trick in the book to stay afloat in terms of FFP. Most recently, Boehly controversially sanctioned the sale of part of their Cobham training ground to another group in his network to boost club revenue.
They have also sold two hotels at Stamford Bridge for £76m to give them room to continue to spend on transfers, agent fees and wages.
But despite the club briefing that they have room to go again in the transfer market this season, the Blues’ expenditure is now reaching a critical mass.
Pochettino’s £10m dismissal, which takes the total Boehly has forked out in managerial compensation to over £30m, will only increase anxieties among Chelsea supporters that they are hurtling towards an FFP breach.
And what’s more, any compensation fee they pay in their search for a new manager will also come out of the FFP quota.
Could Chelsea be given points deduction for FFP breach?
According to finance expert Dr Rob Wilson, as quoted by The Mirror earlier this year, Chelsea are “the biggest red flag” in the Premier League in terms of Profit and Sustainability Rules.
Some estimates have Chelsea as much as £248m over the limit as defined by the Premier League’s soon-to-be-introduced new FFP model, which combines an 85 per cent squad cost control ratio with a financial anchoring system. That’s crisis levels.
Given that Nottingham Forest and Everton have both been deducted points for what are ostensibly more minor breaches of the current FFP rules this season, a points deduction is a distinct possibility.
The complexity of Chelsea’s situation may mean the process would take longer than those two examples, and the club would also have the right to appeal any decision made by the league’s independent tribunal.
But the Premier League is desperate to prove to the government that it can self-regulate as the final scope of the coming independent regulator for English football is still to be defined – and that may hasten any process involving Chelsea.