Budget caps for driver salaries?
Honda F1 website
Honda website

JANUARY 21, 2008

Budget caps for driver salaries?

The talk of budget caps for the Formula 1 world has led to an obvious question: if everyone is cutting back on spending, why are the drivers still being paid as much money as they are? There used to be an argument that drivers had short and dangerous careers and that they were highly paid because they needed enough from their careers to allow them to live comfortably all their lives. The reality is that now have so much money available that they do not know what to do with all of it. They spend their cash on expensive toys. Their managers also get substantial sums as they tend to pick up youngsters cheaply and then milk them for as long as they can.

The biggest salaries in F1 - which are believed to go to Kimi Raikkonen and Fernando Alonso - are around $40m a year and most of the men who can command that kind of money will have careers that will last for at least 10 years. This means that they earn far more than they will ever be able to spend. The rise in F1 salaries has been largely due to driver managers pushing up the prices because they know that a special driver can get as much as someone is willing to pay.

The concept of salary caps may not interest the drivers but if the cap is set, for example, in the range of $15m a year there are only going to be a handful of drivers who will be affected. And the best drivers would still be in the driving seat when it came to negotiations because they would be able to make demands of their own, such as holding on to their image rights, or having control of their own time. There is nothing to stop a driver from earning additional money from his own endorsements and personal sponsorships. This might also help the teams cut down on their marketing expenditure as they will not need as many people to organise their drivers if the drivers have decided that they wish to look after themselves. If a team sponsor is not happy with the amount of access he gets to a driver there would not be any reason why they could not do their own side deals with the driver in addition to a team sponsorship.

Thus the actual earning potential of the drivers would not reduce by much but the teams would get a reduction in what they have to pay.

The only real problem with salary capping is that there are some deals that have already been agreed in the longterm, notably Lewis Hamilton's McLaren contract until 2012. To try to force teams and drivers to alter these arrangements would be hard work so any budget cap would probably have to accept existing arrangements.

It will be interesting to see whether rumours of a salary cap will result in a rush of drivers trying to do long-term deals.

The bad news is that they may find that teams feel less rushed in their deliberations.

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