Chelsea stepped away from Michael Olise over finances. Is their wage structure a problem?

Disappointment, anger, confusion and concern. These were just some of the emotions among Chelsea supporters after The Athletic broke the news that the club had pulled out of a deal to sign Michael Olise from Crystal Palace last week.

The club felt the transfer was too expensive to pursue and, a short while later, it emerged that the 22-year-old had chosen to join Bayern Munich instead. The move has not been completed yet, but it is only a matter of time.

Bayern were always going to be able to offer Olise something Chelsea could not — that is the possibility of playing in the Champions League next season. It is a significant motivation in itself, and they are a massive club. But Chelsea’s decision to withdraw over the overall financial package — which included wages outside of their structure — is one of the reasons for so much angst among the fanbase.

No club on the planet has spent more on signings over the past two years (in excess of £1billion). A vast amount has been used on youngsters with potential rather than those like Olise who are already beginning to impress at the highest level. Indeed, within 24 hours of Olise being dropped from their wishlist, it emerged that Chelsea had agreed a £19million ($24m) fee with Aston Villa for academy prospect Omari Kellyman.

Chelsea’s decision-making has come under scrutiny again after The Athletic revealed a move for Athletic Bilbao winger Nico Williams, who is starring for Spain at Euro 2024, is now rated as very unlikely because, just like Olise, the combined sum for fee and salary is seen as being too high.

Chelsea are on the cusp of signing Omari Kellyman for a significant fee (Adam Hunger/Getty Images)

Chelsea have sent out quite a strong signal to the market. When it comes to salaries, they do not operate a ‘money is no object’ policy. So what is their strategy and can it work?

Let’s start with some background. When the Todd Boehly-Clearlake consortium bought the club two years ago, part of the business plan was to dramatically reduce the wage bill. The theory is that recruiting up-and-coming players on lower salaries and long contracts means big savings overall because you avoid having to discuss extensions and pay rises with every individual — and the subsequent agent’s commission — every two to three years. Plus, if the day comes where a player asks to leave or the club decides to sell, it should be easier to do so because their wages do not price them out of a move. The saving on wages also potentially means more money to reinvest into the club and it helps their efforts to comply with profit and sustainability regulations (PSR) as well.

This practice was always going to take time. Chelsea’s last financial accounts for the year ending June 30, 2023 showed the club’s expenditure on salaries went up from £340.2million (2022) to £404m. But part of the reason for that is they are still in the process of getting expensive unwanted players from the squad they inherited off the books.

Get the latest transfer news on The Athletic…

Romelu Lukaku, who still has two years left on his contract worth around £340,000 a week, is an example of the kind of mistake made by the previous regime they want to avoid. The transfer fee paid to Inter Milan in 2021 for the then 28-year-old was £97.5m. No matter how well he did at Stamford Bridge, there was always going to be limited sell-on value because of his age. There is a very small market for him too because of the high salary and that has led to Chelsea only being able to loan him to Inter Milan and Roma respectively in the past two seasons. Chelsea are trying to offload the Belgium international again this summer, with a £38m release clause, yet they face the same obstacles.

They will never admit it publicly but the current ownership made errors in their first summer transfer window. Due to completing the takeover in late May, there was a rush to make decisions over signings. Their growing recruitment structure, which includes co-sporting directors Paul Winstanley and Laurence Stewart, plus influential co-director of recruitment and talent Joe Shields, was not in situ.

Then head coach Thomas Tuchel pushed for veterans and Chelsea acquired Raheem Sterling (27), Kalidou Koulibaly (31) and Pierre-Emerick Aubameyang (33). All three were on big wages and did not prove value for money. Koulibaly and Aubameyang were gone within 12 months for less than what Chelsea spent on them. If you do not include Lukaku, Sterling is the highest-paid player in the current squad at over £300,000 a week and even if they wanted to put him up for sale, the England international’s high salary will put many potential suitors off.

Chelsea regard that first window as an outlier and have learnt from what transpired back then. The business that has followed — all signings after Aubameyang joined on deadline day in the summer of 2022 have been aged 25 and under until Tosin Adarabioyo (26) joined as a free agent this month — is a more accurate reflection of the methodology they want to put into place. The club expect the wage bill for the financial year ending June 30, 2024, to be significantly lower.

Barring Lukaku, Sterling is the highest paid player in the squad (Dan Mullan/Getty Images)

Another aspect assisting with this is introducing incentivised contracts, the ability to reward or effectively punish what the team does in a season. For example, most acquisitions made after 2022 suffered a pay cut in the 2023-24 campaign because the club did not qualify for Europe. Those who renegotiated new deals during the 2022-23 season, like captain Reece James, had a percentage taken away as well. New arrivals have pay that reflects whether they are regular starters or not. Sterling is the exception in the current group because there were clauses in his agreement.

It is all very well having a philosophy like this but the club also want good results. Chelsea have not won any silverware under this ownership and will not be participating in the financially lucrative Champions League for a second successive season in 2024-25. It is a factor in why Enzo Maresca is their third appointment as permanent head coach in 18 months.

But could their attitude to the market be contributing to what is holding them back? At 23.7, Chelsea’s squad had the youngest average age in the Premier League last season, according to Transfermarkt. Their reward for a strategy that is waiting for potential to come good? Sixth place. Fans will argue the two are connected and Chelsea have got what they paid for.

Olise and Williams are 22 and 21 respectively. They fit into Chelsea’s model. So why were they not pursued more aggressively? Because while youth and talent are on their side, their salary expectations are seen as far beyond what they have actually achieved in the game so far. Olise started just 57 Premier League games for Crystal Palace but had Chelsea matched Bayern’s package, he would be earning a multiple of what current Chelsea player of the year Cole Palmer is on and instantly been elevated to one of the highest-paid at the club. Williams is estimated to be on about €200,000 (£169,000) a week at Bilbao. Again, this is the kind of sum Chelsea do not see as a good return, given he scored just five goals in La Liga last season.

In saying that, there is no strict wage policy in place. Cases will be judged on an individual basis. It is not as if Chelsea have ruled out the possibility of ever offering a player the kind of salary Bayern did to Olise ever again. But the numbers achieved would have to justify it more than what Olise (or Williams) have managed in their careers. Having this strict criteria in place means they will inevitably lose or pull out of more signings in the future for the same reason.

That may lead to more frustration in the stands, but then it does leave Chelsea with more funds to reward a player performing well from within their ranks — like Cole Palmer, Nicolas Jackson or Malo Gusto. No one would complain about that.

One of the justifiable concerns is what happens when their best players ask for greater sums. Just because long contracts were signed on low wages does not mean senior team members will be prepared to accept the situation forever. This is especially the case if other clubs make their interest known and suggest they will offer greater riches if they agitate for a move.

Williams is another player they have decided not to pursue due to the finances involved (Patricia De Melo Moreira / AFP)

Some will ask whether the millions paid out on juniors like Kellyman — even if his fee will be amortised over five years — would have been better off being put to the wage kitty instead to go get ‘an Olise’. Chelsea will see buying younger players as a relatively cheap investment that can pay off more than risking vast sums in salaries and agent fees on one individual who still has much to prove. Only time will tell if they are right on that one.

Chelsea’s successful pursuit of South American teenagers Kendry Paez and Estevao Willian, who will join from Independiente del Valle and Palmeiras respectively next year, demonstrates they are still very competitive when it comes to buying the best young talent. Paris Saint-Germain and a couple of unnamed Premier League clubs were among those they beat to get Estevao. They are both 17 and have no experience playing in one of Europe’s top five leagues like Olise or Williams do. Their salaries will reflect this but, obviously, Chelsea have confidence they will end up being far better value.

Like all decisions a club makes, fans will ultimately judge this facet of the project on whether the team gets good results. There is certainly room for improvement.

(Top photo: Ryan Pierse/Getty Images)