The clear loophole in AFL's free agency compo — and how two ...

The herbs and spices behind the AFL’s controversial free agency compensation system are in the spotlight again, and it seems clear that something ain’t right.

The 2024 crop of free agents aren’t exactly the biggest name-brand stars. They’re quality players; the common footy fan doesn’t really know how to evaluate defenders like Josh Battle, or any Giants player not named Toby Greene, and certainly not the likes of Harry Perryman.

We knew they would draw high-end compensation, with the details of the 26-year-old Battle’s contract at Hawthorn (six years at over $850,000 per season) and the 25-year-old Perryman’s deal at Collingwood (roughly the same deal, maybe closer to $900,000) being widely reported.

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But it was still surprising to see the pair land their old clubs, St Kilda and GWS respectively, top-band compensation. As in, free first-round draft picks.

For the Giants it wasn’t a massive deal whether they landed a first-round pick or an end-of-first-round one - they’re getting pick 16 instead of pick 20-odd. An improvement, though not an enormous one. But the Saints landing pick 8 is a serious win.

Nobody, even their parents, would call Battle or Perryman a superstar. Yet the AFL says they’re worth the absolute top-level of compensation.

This means the system is flawed. But perhaps not in the way you think.

The core problem with the compensation is really that it exists at all. Yes, other sports leagues like the NFL give out free picks for teams who lose free agents, but they award third-round picks on the high-end - and in a 32-team competition, so we’re talking pick 65 at best, not pick 3 (which North Melbourne got last year for Ben McKay).

And the core idea, that teams need to be rewarded for not employing someone any more, is a bit strange. Isn’t the reward the seasons they employed the player for?

As veteran journalist Damian Barrett said on Trade Radio on Friday afternoon: “Remove the compensation entirely, you’ve had the player for eight years and you haven’t been able to convince them to say.

“But you’ve had eight years of service, which is double than the normal career length.”

The first round of most AFL drafts is already heavily impacted by academy and father-son bidding - it lasted 29 picks last year, which is just stupid in an 18-team competition - and perhaps reducing compensation so that a second-round pick is the top level would make more sense.

However that’s not the issue at hand here, because it appears the Battle and Perryman compo calls have been sparked by a perfect storm of a major salary cap rise, and the unique way the AFL decides on compensation.

WHY IS THERE SUDDENLY SO MUCH CASH AROUND?

The new Collective Bargaining Agreement (CBA) ensured players would be better compensated for their work - and fair enough too, since they’re the product. Even if it sounds crazy to the old-timers, they deserve every dollar they earn; we are not being critical of that.

But the specifics of the AFL’s Total Player Payments (TPP, more commonly known as the salary cap) have created a unique circumstance.

From 2023 to 2024, the TPP rose from $15.02 million to $15.79 million, a reasonable jump.

But from 2024 to 2025, the TPP makes a huge leap to $17.76 million, one of the biggest year-on-year rises we’ve ever seen.

There was also a $2 million rise between 2016 and 2017, and the cap accelerated upwards out of the 2020 Covid depths after it was slashed to help keep the game alive, but it’s still a sudden acceleration when most seasons under this CBA have much smaller rises of $800,000 or less.

Ideally when the salary cap rises, the tide carries all boats upwards. And if every AFL contract had a stipulation where the player’s salary rose along with the cap, this would be the case.

But not every contract has that stipulation. Many do, and the lack of clarity around how much players are paid and whether they have that stipulation makes it harder to analyse both the salary cap and the free agency system - but we know some don’t. And even one player not having the stipulation creates inequalities.

By inequalities, we mean teams having a bunch of extra cap room. They can also manoeuvre themselves into having cap space by back-loading or front-loading deals, or just getting rid of players. Whatever the case may be, they need to pay at least 95% of the salary cap (creating a rather high salary cap floor).

So they have to pay somebody, and this is where free agents can cash in.

Remember, contracts aren’t purely about talent. What’s almost more important is leverage. After all the theoretical world’s best player, on a team that simply doesn’t have the money to pay him what he’s worth, either has to move clubs or accept a below-market deal.

But free agents have huge leverage because they’re the AFL trade period’s most valuable asset - players who don’t cost you a draft pick.

Trading for a player like Clayton Oliver is very difficult because you have to fit in both his contract and satisfy Melbourne in a deal. Signing Oliver, if he was a free agent, would be much easier.

That’s why the likes of Ben McKay, Josh Battle and Harry Perryman are getting these near-million dollar salaries. On a completely open market with every player gettable, they would almost certainly be paid less, but their prices are driven up by clubs desperate to add talent without sacrificing draft currency.

So their salaries are driven up, their perceived value in the AFL free agency system is driven up, and the compensation assigned to them is driven up. But that’s not the only problem.

THE HERBS AND SPICES ARE A BIT TOO SPICY

The AFL has done its best in recent years to explain without explaining how the compensation system works.

We say ‘without explaining', because we’ll never know everything. We can only assess contracts in a vacuum, based on what is reported through journalistic methods, because AFL player contracts aren’t made public. So it’s impossible to know exactly what salary level equates to what level of compensation.

And even the clubs don’t know exactly what they’re gonna get, because if they did, they could directly manipulate salaries to be just enough to get into the compo tier they want. (Though it’s still pretty clear teams have a vague idea of the numbers.)

This is what we know about the compensation system:

- Each season the current year contracts of all players aged 25 and over, based on the contract info from the start of the season, are ranked;

- Points are allocated based on their average guaranteed contract value, their age (with 25-year-old players getting maximum points), and new for 2024 the length of the contract (with 5+ year deals getting the maximum points);

- Players are then assigned into bands, with deals which fall in the top 5% overall being worth a first-round pick, the next 10% being worth an end-of-first-round pick, and it continues from there;

- The bottom 30% of deals are not worth any draft compensation;

- Teams can lose their compensation picks if they sign free agents who effectively counteract the players they’ve lost.

So Battle and Perryman must sit in the top five per cent of all comparable contracts, with their values being boosted by their relative youth, and the fact they’re on six-year deals.

There are some 800 players in the AFL, so the top five per cent of that is the top 40 players in the league - nobody would put them in that category, but keep in mind that Battle and Perryman are only being measured against fellow players aged 25 or older, not the entire pool.

It still seems a bit strange though, doesn’t it? Well, there’s a clear flaw when you have a year like this one with a $2 million jump in the salary cap.

Battle and Perryman are signing contracts based on the 2025 cap, which went up by 12.6% compared to the 2024 cap, but they’re being measured against deals under the 2024 cap.

The best method to actually compare contracts would be by measuring them as a percentage of the salary cap - this allows for cross-season comparisons.

Let’s round up and say Perryman is on $900,000, just for simplicity’s sake. That would take up 5.69% of his team’s salary cap in 2024 - but in 2025, it’ll take up 5.07% of his team’s salary cap.

That may not sound like a lot but it’s a critical difference, especially when you’ve got players on the borderline of first-round compensation like him and Battle.

Look at it this way - 5.07% of the 2024 salary cap is about $800,000. That’s the actual value of Perryman’s deal if you’re comparing him to the current season’s contracts.

But he’s on $900,000, because he’s playing under a different salary cap to everyone he’s being compared to. The comparison between his deal, in a world where there’s an extra $2 million for every team to spend, and 2024 deals is just incorrect.

We will never know for certain, but it sure seems like if Battle and Perryman signed deals with an average salary of $800,000 (what their contracts would be worth in 2024 on a percentage-of-the-cap basis), they wouldn’t have been worth first-round compensation.

We know there are a lot of numbers here, and it’s not completely black-and-white - feel free to correct us and explain the system, AFL! - but it appears this is an avoidable loophole.

A loophole big enough for the Saints and Giants to squeeze through before scurrying off, saying “thanks for the free first-round pick!”