Beginning in this season, F1 teams are subject to a cost cap of $175 million per team. This cap limits expenditures on car performance but doesn't apply to marketing costs or driver salaries. "The aim is to deliver a more competitive championship that features a more level playing field, while ensuring the drive for creating unique and boundary-breaking technology and engineering remains," Formula 1 explains on its website. Formula 1 is poised to introduce salary caps in 2023 as part of the wider cost saving measures being implemented in the coming seasons. The exact number has not yet been finalised, however it is believed that teams will be restricted to salaries of $30m between both of its drivers. Next year, a budget cap of $145m will come into effect, however salaries from the drivers and the top three highest-earning employees within a team are excluded from the restrictions.
The overall budget cap will be reduced to $135m by 2023, a figure far lower than the originally agreed sum before the economic repercussions of the Covid-19 pandemic. Still, the drivers' salaries should continue to make up for the marketing gap. With few Formula 1 driver salaries publicly available, Forbes relied on financial documents, legal filings and press leaks as well as conversations with industry insiders and consultants to compile this list. Drivers typically receive a base salary plus bonuses for points scored or for race or championship wins, with the amount depending on the size of the team and the experience of the driver. A new budget cap has been introduced in the sport for the first time, with teams able to spend up to $145million per season, with that figure set to decrease further in the coming years to try and level the playing field in Formula 1. The introduction of a salary cap would completely re-work the existing model especially for the pay drivers who bring in money to the teams.
Say what you will, but the concept of a pay driver has existed since cars began racing each other and a change in the current pay structure could have ramifications in the way teams earn revenue from sponsorships. Michael Regan/Getty Images This isn't to say that the playing field has been entirely leveled. That may sound like a lot, and it is, but the smaller teams are happy to see any forward progress. Some driver salaries are paid directly by team sponsors anyway, while most have their own personal deals on the side with companies not affiliated with their teams – and logically those extra earnings should not be limited by the new rules. However, the key thing about the cost cap is not what it covers but rather what it still allows.
There are no fewer than 20 different lines on a team's budget excluded from the $145 million figure, including all marketing costs, driver salaries, and the salaries of the three highest-paid employees. There are heritage activities, finance costs, taxes and so on, and so on. Formula 1 teams have 'agreed in principle' to a proposed salary cap for teams to pay drivers which is expected to commence in 2023. It is understood that under the current proposal, teams would be allowed to over spend in terms of the driver salary cap, but the excess amount would then be deducted from the ($145m) race budget. However, should they underspend the remaining money could not be used for other purposes. It proposes a $30 million cap for teams to pay drivers, starting from 2023.
They can spend more but the excess will come out of what will be a $135 million annual budget cap for all teams by 2023. "Expanding the budget cap to include a defined and regulated allocation for driver costs and the three highest salaries will include all the key performance elements and truly bring the sport to a level playing field. "According to rumours," wrote correspondent Luigi Perna, "they have come to defining a figure. Each team, in the coming seasons, can spend a maximum of $30 million for the two drivers plus reserves. Bonuses and personal image rights would be excluded."
Some driver salaries are paid directly by team sponsors anyway, while most have their own personal deals on the side with companies not affiliated with their teams - and logically those extra earnings should not be limited by the new rules. That means F1 driver salaries are not affected by the cost cap, and teams can spend an unlimited amount on their drivers. A driver salary cap from 2023 has been floated to further rein in the spending but the majority of teams would not trouble the proposed upper limit of £22m. Smaller independent teams will now get the opportunity to compete with the elite teams who were far more superior because of the big money involved in the sport. This cost cap will now level the playing field forcing the big spenders to adjust to the life of the mediocres.
The cost cap will reduce by a figure of $5 million every year for the next three years. This is to ensure a smoother transition for the bigger teams to spend less money. A cost cap is a device created to limit the spending of F1 teams in a calendar year. The amount of money a team spends directly translates to the performance of their car. Currently, there is a massive gulf in the spending between teams that this rule aims to bridge. The cost cap also aims to bring down the expenditure of the sport that has been rising exponentially over the years.
The proposed cap on Formula One driver salaries is under discussion and estimates a $30 million cap for teams to pay drivers, starting from 2023. Most of the contracts of Formula 1 drivers include performance-based bonuses wherein they will get an amount based on winning a race and also scoring points over and above the threshold level agreed mutually. Most F1 drivers do not boast about their earnings however they don't stop the press from speculating either. As explained on Motorsport Tickets' Driven blog, performance-based bonuses can amp up an F1 driver's salary.
Kimi ended up scoring 390 championship points over those two years, netting him bonuses of €19.5 million, or about $22 million. "As 2021 sees the introduction of a cost cap for the first time in Formula 1, various topics around controlling costs and how this overall objective can be achieved over the coming years were tabled during the meeting," read the official statement. "As part of this, a working group will be created – including the drivers themselves – to discuss the topic of driver and senior team management contracts." The budget cap of 147.5 million dollars limits the teams in how much they can develop.
However, the big teams still have an advantage, because the salary of the drivers and the top of the staff does not fall under this cap. So big teams can spend their budget cap entirely on the car, and also pay their drivers a top salary. There are talks of a driver salary cap being implemented in F1 in the future.
This will see a maximum limit for driver salaries, and it cannot cross that threshold at all. Lewis Hamilton, who replaced Michael Schumacher at Mercedes in 2012, has become an icon on the same level as his predecessor. Last year, Hamilton matched Schumacher's record with his seventh F1 drivers' championship, and he has dominated the competition with his earnings the way that Schumacher, the world's highest-paid athlete in 2000 and 2001, once did. The 36-year-old signed a two-year contract extension with Mercedes this summer, following up on a three-year, $140 million deal in 2015 and a two-year, $100 million extension in 2018. He is also the founder of X44, a team in the new off-road electric-SUV racing series Extreme E.
Leading the pack is Mercedes superstar Lewis Hamilton, who is on pace to earn $62 million on the track in 2021. That figure includes a $55 million base salary—more than double what his closest competitor is guaranteed—as well as a projected $7 million in bonuses for race wins. The cap limits the amount of money a Formula 1 team can spend during a calendar year, relating specifically to costs that impact of a race car's performance and is set at $145m for this year. Now, F1 is circulating the idea of a salary cap for drivers in the sport.
A proposed budget of $30 million has been proposed for the two car operations. One driver could earn $25 million while the second could earn $5 million. It would just have to take that extra money out of its car development fund. So, a team could spend more to sign a top driver, but the thinking is that a compromise on development is a fair trade. There have been multiple discussions about drivers' salaries getting included in the budget cap, which will be now a defining moment in Formula 1.
The 2021 regulation limits the spending of every team maximum to $145 million. F1 teams have to operate within a budget cap for the first time this year, and though it does yet not cover payments to drivers, that may change in the future. Now, the regulator Federation Internationale de l'Automobile is contemplating capping Formula 1 driver salaries as well. One idea is to limit teams to spending $30 million on salaries for two drivers instead of just one, as the Financial Times reported this May.
Last year, F1 teams agreed in principle to a $30million driver salary cap that would come into effect for 2023 for drivers and the top three employees in each team, which typically includes the team principal and technical director. McLaren CEO Zak Brown has revealed he would have made driver salaries a part of the new Formula 1 budget cap after the idea of a separate salary cap was floated. Another point worth noting is the fact that unlike several sports in the United States, where a loose translation of a salary cap is maintained, Formula 1 drivers don't control any of their image rights.
With teams agreeing to a budget cap of $145 million, $140m, and $135m for the following three years respectively, RacingNews365.com takes a look if driver salaries should be counted as part of the proposed budget. Hamilton, who has four wins through ten races, still has time to overtake Verstappen, with the gap in the standings a mere eight points and 12 races remaining on the schedule . It means that the big teams will have to spend less money, but rest assured, Mercedes, Ferrari and Red Bull fans. Your team will still have more money to spend than the rest of the F1 grid.
The budget cap is not that important to the rest of the field, since only a few of the teams even have budgets that will be impacted by the new financial rules. Currently, driver salaries and those of the three highest-paid employees in a team are not covered by the cost cap, with Charles Leclerc voicing his opposition to the proposed move. A salary cap for drivers has reportedly been discussed within the sport, with a figure of $30million mooted for teams to be able to spend on driver wages in a season. The teams in Formula 1 have reached an agreement in principle on a salary cap for the drivers, Motorsport.com reports Wednesday.
There will probably also be cuts in the wages of the highest paid employees. A wretched final season at Ferrari has the four-time champion under pressure to deliver for Aston Martin in 2021. Vettel's expected salary with his new team represents a huge drop from his £37m-per-year earnings with the Prancing Horse.
He has not won a race since the Singapore Grand Prix in 2019 but, with a quick car at his disposal, hopes are high for a return towards the front rows of the grid. Like many sporting leagues across the world, a salary cap could provide a control variable of efficiency. Some suggest that F1 teams have agreed to a driver salary cap framework, in principle. Early in the season it became clear Hamilton was on course to score a record-equalling seventh Formula 1 championship success, which would further raise his already sky-high market value.
Although Hamilton played down the importance of his salary in discussions over his new deal, reports claimed F1's highest-earning driver was seeking a further pay rise. Apr.8 - Formula 1 is closing in on a $30 million per team annual budget cap to specifically limit spending on drivers. The discussion over a potential Formula 1 driver salary cap continues, while it has not gone ahead and been implemented. The current cost cap does not include driver wages and other expenses such as travel and stay.
This implies that F1 driver salaries are not impacted by this move as teams are open to spending unlimited amounts on their drivers. Starting from the 2021 season, Formula 1 has introduced a cap on the overall cost so that there is a level playing field across the teams' finances. There is a cap of $145 million that each team can spend throughout the season. Formula 1 teams are currently discussing the potential introduction of a driver salary cap for the 2023 season.
"I think all the team bosses supported putting in a driver salary cap," he said. "I think you have that in the majority of other sports around the world. Getting the teams to accept a budget cap was one thing, but the idea of limiting what they can pay their drivers and top staff quite another, and, understandably, a number of the drivers are not happy. Teams can also spend more than $30m on drivers should they wish, but it's been agreed that any excess will simply be lopped off the team's operational budget cap. The basic idea is that teams will have a maximum budget of $30m to split between two drivers.
Most will spend substantially less than that, and in theory if they take two paying drivers who bring sponsorship and don't take a salary from the team, the bill could be zero. Earlier this year, with the start of the 2020 season postponed and with limited income being generated by the F1 organisation with which to pay the teams, the sport's stakeholders made a wise decision to reduce future spending. In 2021 there will be a budget cap for the first time in Formula 1, which teams will have to take into account.
The salary of the drivers is not part of this cap, but that is what F1 wants. After two years away from the F1 track, Fernando Alonso is back with Alpine. The 39-year-old, once at the center of the series' Spygate and Crashgate scandals, has rebuilt himself into a tremendously popular driver, in part by broadening his auto-racing horizons. In recent years, he has competed in the Indianapolis 500, entered the Dakar Rally and won the endurance races 24 Hours of Le Mans and 24 Hours of Daytona. The Spaniard won the drivers' championship in 2005 and 2006 with Renault—an earlier incarnation of his current team.
The budget cap has been a complicated goal to achieve, and the document outlining the policing of the new rules, which were first published in October 2019, runs to 41 pages. The original cap was to be set at $175 million for a season of 21 races. This was later brought down to $145 million after the pandemic struck. Under the terms of these rules, the limit increases by $1 million per race if there are more than 21 races. Fueling the smaller teams' enthusiasm is the expectation that they might actually start to make money in a sport that traditionally has mostly been a good way to lose it.
On the revenue side, F1 used a formula that funneled much more of the revenue collected from things like media rights and race-hosting fees to winning teams than to outfits at the bottom of the standings. And sponsors had relatively little interest in partnering with teams that couldn't consistently put their drivers on the podium. Without a war chest to upgrade their cars, the smaller teams sank further in the standings. It was a feedback loop from which teams like Manor and Force India, which both crashed into bankruptcy, and Lotus, which was forced to sell for pennies on the dollar, couldn't escape.
Formula 1 is closing in on a $30 million per team annual budget cap to specifically limit spending on drivers. Each team will be able to spend a maximum of $145million throughout the season. That means the cost of building the cars, mechanic and engineering salaries, testing or wind tunnels and anything related to the car itself.
From the beginning of the 2021 season, Formula 1 introduced a cost cap, designed to level the playing field across the teams' finances. Lewis Hamilton, seven times world champion (and he hasn't finished yet) is going to have his future earnings limited through legislation that the sport's governing body and the F1 team owners have approved and embraced. It's like the salary caps in football; the teams loved that, and they suggested it was for the good of the sport. Current seven-time Formula 1 world champion Lewis Hamilton is, with no surprise, the highest-earning driver on the grid.
In 2021, the British driver will make close to $30 million, which is over $1 million per race. However, Hamilton took a pay cut from his previous salary, which was closer to $40 million per annum. The plan for a driver salary cap is in addition to the overall budget cap that will be introduced next year. The two-time world champion is back in Formula 1 after a two-year absence.
Fernando Alonso is estimated to be earning £15m for his comeback season with Alpine, who have rebranded from Renault. The 39-year-old will be expected to help his new team win the midfield battle after a fifth-place finish in the 2020 constructors' championship. One of the hottest prospects in the field, the Ferrari star earned a respectable eighth-place finish in 2020 despite driving a sub-par Ferrari car. It's likely to be another slog for the Italian team so Leclerc will have to be at the top of his game to improve on his two podium finishes last season.
