Barcelona, Atletico cutting costs amid coronavirus crisis. How are they doing it and why?

Marcotti There are storm clouds gathering over Barcelona (1:57)

Gab Marcotti breaks down Lionel Messi's comments towards the Barcelona board following wage cuts for players. (1:57)

There were two big stories on the front of Catalan sports daily El Mundo Deportivo last Friday. One was Barcelona's announcement that they are about to unilaterally cut the salaries of the 1,800 people who work for them, players included. The reason, the club claim, is simple: They have to.

The other story, as usual, was about what they're going to do in the transfer market in the summer.

Inside the paper, a story explains that the plan is for every athlete at the club to have 70% of his salary taken, with the club applying for an ERTE (more on this in a minute) during the current state of emergency in Spain in a bid to survive. That story follows directly on from two others: one, Barcelona's big priority in the summer being to sign Lautaro Martínez. And two, Rivaldo, whose opinions are wheeled out weekly by a betting company, saying Neymar should be their target. "Barcelona," he says, "should make an effort." Estimated cost of each man: €150 million.

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Atletico Madrid and Espanyol joined Barca in their cost-cutting measures before the weekend, and on Monday, Lionel Messi clarified the will of the Barcelona players on social media -- "We want to clarify that our desire has always been for a reduction to be applied to our salaries because we understand that this is an exceptional situation and we are the first that have always helped the club with what they have asked of us" -- as Spain continues to be one of the hardest-hit European countries in the coronavirus outbreak. Barcelona president, Joan Bartomeu, noted that the cuts "had been achieved as I wanted and the players were committed from day one."

For all that the pressures of the coronavirus have created an unforeseen financial crisis, there's a reason Barcelona were the first to cut salaries and are so vulnerable. A reason, too, why Atletico Madrid are involved: Atletico's net debt is €522m; Barcelona's is €217m. But what if they get pulled back from the edge only to be drawn in once more should the suspension of play continue into the summer?

Atlético Madrid's majority shareholder and CEO, Miguel-Angel Gil Marín, said these measures had "a single objective: to guarantee the survival of the club" and that they would be limited to what is "strictly necessary in order for things to work as they did before when the competition returns." Barcelona issued an unremarkable statement, also claiming that the measure was to seek "a reduction in salary relative to the reduction in the number of hours," given that players (and staff) are not playing or training together daily.

The mechanism clubs will be using during the shutdown, an ERTE, poses a lot of questions and a lot of problems; there are a fair few moral conundrums, too.

So what is an ERTE, anyway?

An ERTE, an Expediente de Regulación de Empleo (a case for employment regulation), is a Spanish legal labour mechanism by which any company can apply emergency measures to either (a) suspend/end employment or (b) reduce salaries as a result of extreme circumstances, justified as either (a) force majeure or (b) an objective reality. The criteria for ERTEs have been relaxed and made more flexible by the government in the face of the coronavirus crisis to try to ease the pressure on businesses, and that includes football clubs.

Football clubs will not choose to end employment, of course, at least not for their footballers, because they would lose their "ownership" of the player. So, they will justify a reduction in salary based on the objective fact that they are unable to work as they were before this crisis.

How is it put into place?

The company (in this case, the clubs) presents its case to the ministry of work (via its local agencies), outlining the cuts it wants to make. The authorities then decide whether or not to validate the request. Requesting an ERTE requires no consultation period or a collective agreement, although those affected have the right to appeal. Barcelona chose to talk to their players because they preferred, for obvious reasons, to reach a negotiated agreement. But then the club announced that they would request the ERTE.

There is still some time before that goes through to negotiations -- the same is true for Atletico and Espanyol, who both said that they had spoken to their players to inform them that they would be requesting an ERTE. Espanyol said the players have been advised and they "understand and respect" the measure, conscious of "how delicate the situation is." They are prepared, Espanyol have said, "to reach an amicable agreement with the club without having to take more drastic measures."

Naturally, the ministry of work is currently overrun given the volume of cases, but there is what is known as a "silencio positivo" -- in other words, it's understood that the ERTE is accepted if there is no response. Individually, employees do have the right to challenge it legally. (Don't rule out a raft of legal cases later on.)

On what grounds can it be challenged?

In this case, for example, a player could question whether it can be demonstrated, in terms of "number of hours," that there has been a reduction of their working day. They have all been given training programmes to fulfill at home. And what if the games they are not playing now are rescheduled in the summer when they would have been on holiday? Those challenges could be made individually or collectively.

What does the ERTE mean in terms of the salary cut? How does it actually work?

In these cases, the salary is immediately reduced by up to 70% for a maximum of 90 days, at the end of which time the job remains the worker's to be reoccupied. The exact details won't be known until the ERTEs are lodged with the authorities. In Barcelona's case, the initial proposal is for it to last the duration of the state of emergency, which was declared on March 11 and will run at least until April 11. After that, salaries would return to 100%, even if -- and here's the thing -- competition does not return. This is a reason why many legal and employment experts think football clubs are jumping the gun: They do not yet know the extent of the economic crisis they are facing.

Incidentally, there is another doubt here: Most Spanish football players earn a monthly salary, referred to as the sueldo (effectively a monthly living allowance) plus two much, much larger annual payments six months apart, known as the ficha. It's not yet clear whether the reduction would apply to only the sueldo or to the ficha as well. Four monthly payments remain to be paid out this season.

Is that percentage applied across the board? Is it a single solution for the entire staff?

In Barcelona's case, that was reportedly the proposal, certainly within the sporting departments. There is no legal requirement for everyone to have their salary cut by the same percentage, and individual ERTEs can be requested, employee by employee. But Barcelona suggested that every athlete take a 70% cut -- whether that's a basketball player, handball player or roller-hockey player, whether the footballer is male, female, first team, second team or under-19. This is of course hard to justify: A young player on €2m can afford to lose 70% for a month (or more) far less than an older player on, say, €12m.

As for athletes in other sports who earn a fraction of that, the differences are huge. A basketball player at Barcelona will not make in a year what many of the footballers make in a month. (And don't rule out more drastic measures occurring later, either.)

What about non-sporting staff?

This would, in all probability, be even worse and it will depend on each case.

None of the three clubs that has announced ERTEs (Barcelona, Atlético, Espanyol) has given the details yet. (Reports have suggested Atletico's players would take a 9% cut if play resumes but 18% if it doesn't, while staff would be cut 30% for as long as this situation continues.) Espanyol seemed to imply that cuts would affect only the sporting staff, while Atlético and Barcelona explicitly said it would affect sporting and non-sporting staff, although Atlético noted that it would apply to only those (who objectively can be shown to be) unable to work and whose hours have been clearly reduced. For these staff, of course, the impact can be devastating.

Football clubs employ a lot of people. At Atlético, there are almost 900 employees, according to El País. Only 38% are on fixed contracts. There are 100 across the shops alone, shops where activity has ground to a halt. Those staff might well feel that a small reduction from the highest earners could protect them easily and/or that reducing their far smaller wages would make little difference anyway. This was a point made by non-footballing staff at Barcelona, who pointed out that that their wages together account for less than 4% of the club's annual budget, while first-team wages alone account for 61%.

What role does the state play in this?

This is another reason why the ERTEs sit uneasily for some when applied by football clubs. These are private bodies, and in some cases private bodies that spend heavily, often well beyond their means. They rely on an assumption of inflation and continued sporting success, which is precarious. In some cases, they make a lot of money or at least generate a lot of money; they actually lose too much, which is why they're in trouble. In many cases, there are people who make a lot of money out of them, too.

If a company requests an ERTE, the state takes on some of the unemployment benefits and social security commitments that come with it. Employment lawyers with expertise in football calculate that each first-division player at a club granted an ERTE could cost the state around €1,800 a month. Perhaps more important, 45-48% (depending on location) of the 70% of the salary that they are not getting, which would have been paid in income tax. During a global health crisis.

What if play does not restart? What are the alternatives?

Marín might feel Atletico's actions are "strictly necessary in order for things to work as they did before when the competition returns." But what if that doesn't turn out to be true? Then the impact would be even greater, and these measures might feel largely irrelevant and certainly insufficient.

This is an eventuality that the football authorities are trying to avoid at all costs, because a loss of TV money -- although how the TV companies will react is far from clear-cut, and a whole new issue -- could be devastating. Barcelona say they're being especially hard hit right now because they are a club that depends particularly on revenue from the shops, museum, marketing and so on, all of which are closed. Matchday revenue is huge, too, so the impact has been felt sooner. But it is TV money that is likely to be the greatest loss, and they don't yet know how big an impact that will have.

Which leads us the next question: Will the ERTEs really make a difference?

At heart this is the key, not least because there is a moral dimension to all this -- as well as a practical one -- in terms of the impact it has on the reputation of the clubs and the league (which rely on attracting players).

For the smaller clubs below the first division, the impact is gigantic and the risk is very, very serious. For clubs and for players at the top, it is different. A one- or two-month temporary pay cut, even at 70%, is a short-term fix; it's also a small one. Perhaps easily swallowed up by a single summer signing. (And that's 70% on a top-level player's wage; 70% of one month's wages from the person behind the till in the club shop barely resolves anything at all in a billion-euro business.)

"We want to get back to how we were before," Marín said. But if the sacrifice of an entire staff -- many of whom are not making comfortable livings -- and the contributions of the state simply allow clubs to get back to spending money they haven't really got on players they don't really need, then it's tempting to wonder: What's the point?

How can this news, complete with talk of survival and necessity, share the same page with speculation about the next multimillion-euro superstar?