The Budget Cap

[Mike Harte]

I think that part of the problem is that in the past F1 teams could offer highly remunerative financial packages to attract some of the very best engineers/aerodynamicists.

However, in more recent times, there are many other industries who prize these specialists for their own production, and are now able to tempt them with more attractive packages that the teams can no longer compete against. Especially now with the budget cap.

[Richard C]

Originally Posted by chillibowl

but there is always a but...for me, part of the logic of the budget cap was also to slow down the pace of development but if its being achieved through the hiring of more, but less talented (at least in terms of their inability to secure higher paying jobs elsewhere) engineers, then perhaps there is cause for concern long term?

F1 is supposed to be the pinnacle and while there are many ways to measure that, remuneration is one that suggests that they are hiring the best.

a tough one and a situation i imagine is different for every team...but just looking at his comments on their own, im curious if Newey felt that, because of the cap, the staff under him was just being underpaid or if they were somehow underqualified/underexperienced to be working under him?

I think most businesses have this issue. It's not a budget cap issue. In that everyone has a budget and you have to decide how to spend it.

For the sake of argument say that...

Avg engineer = $100K/yr
Good engineer = $150K/yr
Premium engineer = $200K/yr

You have a $2 M budget for engineers. All of the scenarios below are valid options that fit your budget. What produces the most optimal output or in other words, what is the best usage of your money? I can guess (probably in the area of that 16 to 14 headcount area), but only teams know the actual answer.

Average	Good	Premium	Total Headcount
20	0	0	20
15	2	1	18
10	4	2	16
5	4	2	14
0	8	4	12
0	0	10	10

To my original point, I don't think Newey's comments is about an inability to hire the best, but to just hire more... including the best. Have his cake and eat it too!

Sometimes you are running a business (maybe even an F1 team) that is swimming in money and you can just spend, spend, spend. There are large tech companies that are like that. They are likely quite inefficient as at some point there are diminishing returns.

As to F1 being the "pinnacle". I think these days that is a marketing perspective. We all know the cars are artificially slowed down. The technology exist to make them go faster. They might be the pinnacle of open wheel racing, but that is as much to lack of competition than anything else. Especially as for the most part FIA (in collaboration with FOM) ensure that F1 remains on the top as all the specs are controlled. You could argue that Indycar is a competitive series that is not under the FIA thumb, but Indycar is not competing against F1. Rather it is measured against economic viability (just like F1, but F1 has more easily usable levers to pull than Indycar). Indycar (just like F1) could be faster, but choses to be slower for various reasons such as safety and cost. Cars in both series are fast enough to be entertaining enough.

What Newey could argue is that F1 is not technical enough. And he might actually argue that. That the best and brightest might find more enjoyable and bleeding edge careers elsewhere. Such as aerospace. Think of SpaceX. Elon Musk might be a complete tool in most ways, but he is dumping money into bleeding edge engineering with respect to the Starship program. If I were an engineer and I could pinch my nose at the stink that is Elon, I would want to work at SpaceX over an F1 team any and every day. With that being said, F1 would still be top of my list (next to something like SpaceX).

Richard

[Gerard C]

A good explanation here: https://fluidjobs.com/blog/formula-1...tatistics-2025
I think the AI will change a bit this salary chart. I wonder how they manage to find mechanics with such a crazy calendar.

[Akrapovic]

Originally Posted by Gerard C

A good explanation here: https://fluidjobs.com/blog/formula-1...tatistics-2025
I think the AI will change a bit this salary chart. I wonder how they manage to find mechanics with such a crazy calendar.

McLaren were talking about a double mechanic teams, similar to what NASCAR do. But the cost is too high with the budget cap.

Those salaries are pretty poor, in all honesty.

[morninggents]

Originally Posted by Gerard C

A good explanation here: https://fluidjobs.com/blog/formula-1...tatistics-2025

The range quoted makes the chart meaningless. I think most of us here could have come up with a figure within those ranges.

[Richard C]

Originally Posted by Gerard C

A good explanation here: https://fluidjobs.com/blog/formula-1...tatistics-2025
I think the AI will change a bit this salary chart. I wonder how they manage to find mechanics with such a crazy calendar.

Nice post and thanks for that link. I used to work in the HR space (designing recruiting and other HR related software) and I find it interesting to see a racing specific job posting site.

Originally Posted by Akrapovic

Those salaries are pretty poor, in all honesty.

I felt the same.

I think there is a "lifestyle" component of working in F1. In that you will sacrifice (family and pay as two examples) just to be part of that circus. I think video game development is similar as it has a history of grinding employees into dust and yet they still want to work within that industry. But that drive to be part of something like F1 will only take you so far... and a number of exceptionally qualified candidates will say "no thank you".

Richard

[chillibowl]

Originally Posted by Gerard C

A good explanation here: https://fluidjobs.com/blog/formula-1...tatistics-2025
I think the AI will change a bit this salary chart. I wonder how they manage to find mechanics with such a crazy calendar.

indeed thank you for the link!

Originally Posted by Akrapovic

Those salaries are pretty poor, in all honesty.

that was my first thought as well. im sure the bonus structure works for some teams/employees, but as base salary relative to the time commitments, travel, and educational training required, the amount of profit the sport generates etc...remuneration here does feel quite low.

but reading further, i got also the impression that the reason for the lower salaries has more to do with lack of transparency in regards to wages and wage negotiations? while the cap may have made such practices more important, F1 has long held this practice of salary confidentiality.

so while Newey might have raised a relevant issue, it was nevertheless an issue that existed before the cap era?


on a side tangent...as this is dealing with base salaries, im curious how year end/performance bonuses factor into the cap?

lets say teams with realistic chances of winning the constructors are presumably operating at the max budget level...and if they do win we can further assume that every employee receives some part of the win bonus.

but if that team is already running at the max budget, wouldn't those bonuses push them over the cap? or if they are pushed to the following season, now further serve to reduce how much the team can spend in that following season?

[chillibowl]

Originally Posted by Richard C

I think there is a "lifestyle" component of working in F1. In that you will sacrifice (family and pay as two examples) just to be part of that circus. I think video game development is similar as it has a history of grinding employees into dust and yet they still want to work within that industry. But that drive to be part of something like F1 will only take you so far... and a number of exceptionally qualified candidates will say "no thank you".

cults be like that!

[Gerard C]

Richard and chilli you're welcome And to salaries you must add taxes they differ from country to country. For instance in France, depending on the level of qualification and salary, taxes for the employer can go from 45 to 55 per cent. Same thing with bonuses and advantages like appartment/house or company car. Impossible to police imo.

[chillibowl]

So there is talk of some sort of mechanism to account for the higher cost of living in Switzerland for Audi/Sauber…not sure if that is part of the large cap increase for 2026 tho?

Also a story that Audi will set up a UK satellite facility to offset the issues with tax rates/cost of living between countries so may not be as necessary?

But indeed, with each allowance made to account for these things, concerns about policing also increase.

[Gerard C]

Drawing up a rule you can't police is a wide open door to cheating. The increase for 2026 makes sense its a good move imo. F1 is all about excellence not average and when a team has a good person, engineer or mechanic, stability is a must. Plus the keep your secrets secret thing.

[greentrumpet]

Originally Posted by chillibowl

So there is talk of some sort of mechanism to account for the higher cost of living in Switzerland for Audi/Sauber…not sure if that is part of the large cap increase for 2026 tho?

Also a story that Audi will set up a UK satellite facility to offset the issues with tax rates/cost of living between countries so may not be as necessary?

But indeed, with each allowance made to account for these things, concerns about policing also increase.

Crikey, the lower standard of living in the UK. Is that a Brexit bonus?

[Richard C]

Originally Posted by chillibowl

on a side tangent...as this is dealing with base salaries, im curious how year end/performance bonuses factor into the cap?

I took a very quick look at the financial regulations around how bonus are allowed. I didn't spend much time, but it looks like there is exclusions to a point. Assuming I read it correctly the teams get to exclude the lower value of...

1. 20% of fixed employee compensation
2. $10 million (or $12 million if a team wins championship or improves their championship position over their best position over the past three years)

If anyone wants to look, then at the exclusion section (Article 3, specifically 3.1 (k)) in

https://www.fia.com/sites/default/fi...2024-12-11.pdf

Richard

[chillibowl]

Nice one! Thank you.

Like that there is an exclusion, not just for the team that wins but also one that has improved!

[TrapezeArtist]

I think allowing Audi a bigger budget cap because they are based in Switzerland is opening up a crazy can of worms. What proportion of the budget is spent with sub-contractors and component suppliers in so-called lower-cost countries? How will that be accounted for? What allowance will the budget cap make for different taxation rates (income, corporation, business rates, etc) in different countries.

I haven't noticed any great rush of teams relocating to Rwanda (other third-world countries are available) to increase their head-count. This smells of favouritism to me.

[Richard C]

Originally Posted by TrapezeArtist

I think allowing Audi a bigger budget cap because they are based in Switzerland is opening up a crazy can of worms. What proportion of the budget is spent with sub-contractors and component suppliers in so-called lower-cost countries? How will that be accounted for? What allowance will the budget cap make for different taxation rates (income, corporation, business rates, etc) in different countries.

I haven't noticed any great rush of teams relocating to Rwanda (other third-world countries are available) to increase their head-count. This smells of favouritism to me.

It is a can of worms, but I can understand the issue. Any large corporation experiences this on a regular basis when it comes to understanding what is appropriate compensation when you factor in regional differences. You can't make a "one size fits all" model work if you have a geographically diverse workforce. Take IT jobs here in the US. You will have locations such as the San Francisco bay area (Silicon Valley) that is both extremely high cost of living but also a high concentration of talent. You will have other areas of technical excellence such as Austin, TX, Northern Virginia (NoVa), or in the Research Triangle (RTP) in NC where I live/work that will have lower costs of living and commensurate lower competitive salaries. I would love to be paid California salary (higher) and those in California would love to have my cost of living (much lower). Typically business will use geographic adjustments to determine "what is competitive" in specific regions. It sounds like F1 is trying to use OECD data to do the same. In the US, I have found the accuracy of those adjustments to be all over the place from one company to the next.

What is weird to me however is that this is NOT driven by a need to source qualified employees in a competitive market (Switzerland is not a focus for F1 technology) and more about trying to prop up a business (Sauber/Audi F1) that is located in the wrong place from an economic perspective. If Cadillac F1 decides to locate in California for example, can Cadillac get an adjustment as well? It's a slippery slope and has potential to be gamed somehow somewhere. On a related note, is there a similar issue when comparing the F1 breadbasket of UK vs. Ferrari in Italy?

Richard

[TrapezeArtist]

Originally Posted by Richard C

It is a can of worms, but I can understand the issue. Any large corporation experiences this on a regular basis when it comes to understanding what is appropriate compensation when you factor in regional differences. You can't make a "one size fits all" model work if you have a geographically diverse workforce. Take IT jobs here in the US. You will have locations such as the San Francisco bay area (Silicon Valley) that is both extremely high cost of living but also a high concentration of talent. You will have other areas of technical excellence such as Austin, TX, Northern Virginia (NoVa), or in the Research Triangle (RTP) in NC where I live/work that will have lower costs of living and commensurate lower competitive salaries. I would love to be paid California salary (higher) and those in California would love to have my cost of living (much lower). Typically business will use geographic adjustments to determine "what is competitive" in specific regions. It sounds like F1 is trying to use OECD data to do the same. In the US, I have found the accuracy of those adjustments to be all over the place from one company to the next.

What is weird to me however is that this is NOT driven by a need to source qualified employees in a competitive market (Switzerland is not a focus for F1 technology) and more about trying to prop up a business (Sauber/Audi F1) that is located in the wrong place from an economic perspective. If Cadillac F1 decides to locate in California for example, can Cadillac get an adjustment as well? It's a slippery slope and has potential to be gamed somehow somewhere. On a related note, is there a similar issue when comparing the F1 breadbasket of UK vs. Ferrari in Italy?

Richard

I was thinking exactly what you said in your second para while still reading the first. Taking your IT comparison, you contrast high salary, high cost California with low salary, low cost Redneck County, but companies can justify the high salaries of California (which are a cost to them) by the better access to the pool of talent. Read that across to F1 and Switzerland is not California but Carbon Fibre Valley in England is.

[chillibowl]

as a counter point tho and with the caveat that im not necessarily a fan of nor advocating for the expansion of the grid, but as more potential teams look to enter then surely aiming for a plurality of teams from different locations/nations should also be a priority no?

rather, shouldn't there also be teams able to operate fully and wholly out of the US, or Germany, or Japan? why not aim to include a team based in China or given their access to investment a team fully based out of the Middle East...after all this is a global sports league.

no doubt this would be complicated to sort out, but with respect to employee remuneration across nations, some sort of equivalency formula can be implemented and would of course evolve over time as lessons are learned. methods to do this already exist across industries and companies operating out of or looking to expand into different countries so its not like F1 would be trying to reinvent the wheel be implementing some of that methodology. certainly every international auto manu is already well acquainted with these issues.

and of course the notion that it would be too difficult, complicated, and/or prone to exploitation, while true, were also similar concerns put forward as to why a budget cap would never work in F1...but here we are today with a cap system that works.

of course Audi made their choice so for sure accept the argument that they chose to operate out of Switzerland so its up them to make it work under a cap they agreed to participate in, but if a team in the UK can afford to pay 500 employees and stay under the cap while a team based in another country can only afford 250 employees while staying under that same cap limit (making those numbers up) then to me there is a flaw in the system which requires redress.

[S griffin]

Really we should have more teams on the grid, but it’s more logical for teams to be based in Europe. There’s no reason for them to be anywhere else. It wouldn’t work in the Middle East. Really Europe is still F1’s heartland and that’s not going to change. We’ll see what Audi do, but Sauber have always done fine where they are based in Switzerland

[morninggents]

But, in F1, not since the days before the budget cap.

[Richard C]

Originally Posted by S griffin

There’s no reason for them to be anywhere else.

I can't agree with this at all. Especially as an "absolute" position.

Keeping teams in one location (such as UK) may mean...

1. Easier to recruit talent
2. Easier to utilize potentially co-located (geographically) suppliers/partners
3. Easier for Eurocentric race schedule.
4. Easier from budget cap perspective (removes the variability of cost of living topic)

But all of those are in the "easier to do" category. Which is valid, but that does not invalidate other reasons for teams to NOT be located in Europe (or more specifically a small part of the UK).

What if a team (or a sponsoring manufacture) have historic geographic roots or cultural identity? So for example... Ferrari is in Italy. Is that OK? If that is OK, why not have a team in Spain, or Japan or the US? It is harder, buy let teams operate where they want. Granted, locating in the middle east, or North Korea might be a challenge.

Richard

[crmalcolm]

Originally Posted by Richard C

I can't agree with this at all. Especially as an "absolute" position.

Keeping teams in one location (such as UK) may mean...

1. Easier to recruit talent
2. Easier to utilize potentially co-located (geographically) suppliers/partners
3. Easier for Eurocentric race schedule.
4. Easier from budget cap perspective (removes the variability of cost of living topic)

But all of those are in the "easier to do" category. Which is valid, but that does not invalidate other reasons for teams to NOT be located in Europe (or more specifically a small part of the UK).

What if a team (or a sponsoring manufacture) have historic geographic roots or cultural identity? So for example... Ferrari is in Italy. Is that OK? If that is OK, why not have a team in Spain, or Japan or the US? It is harder, buy let teams operate where they want. Granted, locating in the middle east, or North Korea might be a challenge.

Richard

Personally, I think it is time to break out of the mould of just sticking to European bases and outdated tracks in Europe just because they've been used for a while.

With 6 American races on the calendar in 2025, plus another 8 Asian races - the need to be located in Europe for proximity to circuits is fast diminishing.

Lots of industry is moving from the Europe to parts of the Middle East, and I could see a team realistically being based there in the not too distant future.

[bjohnsonsmith]

Originally Posted by crmalcolm

Personally, I think it is time to break out of the mould of just sticking to European bases and outdated tracks in Europe just because they've been used for a while.

With 6 American races on the calendar in 2025, plus another 8 Asian races - the need to be located in Europe for proximity to circuits is fast diminishing.

Lots of industry is moving from the Europe to parts of the Middle East, and I could see a team realistically being based there in the not too distant future.

I think breaking out of the mould is going to be a little tricky, as both F2 and F3 are very much Eurocentric.

[chillibowl]

Originally Posted by crmalcolm

Lots of industry is moving from the Europe to parts of the Middle East, and I could see a team realistically being based there in the not too distant future.

right! many companies moving there and and not just finance and tech firms...manufacturing concerns who service both Europe and Asia are realizing the benefits of its central location. from a logistics point of view it makes sense.

very much agreed that its just a matter of time before someone goes for it.

Originally Posted by bjohnsonsmith

I think breaking out of the mould is going to be a little tricky, as both F2 and F3 are very much Eurocentric.

in fairness no one is saying all the teams should move there...just that it should be made more feasible under the cap system to encourage those outside of the traditional F1 centres to participate. if it works great, if it doesn't then the team folds as many teams have in the past...no moulds need be broken.

regardless tho, if ones preference is to keep F1 Eurocentric (and fair enough if it is) then that is even more reason to support budget cap offsets to factor in for things like wage disparities and the very different costs and standards of living within Europe.

why cant a team wholly operate out of Germany or France anymore? if they could then maybe there would still be races there?

[V8 Fireworks]

Originally Posted by chillibowl

in fairness no one is saying all the teams should move there...just that it should be made more feasible under the cap system to encourage those outside of the traditional F1 centres to participate. if it works great, if it doesn't then the team folds as many teams have in the past...no moulds need be broken.

why cant a team wholly operate out of Germany or France anymore? if they could then maybe there would still be races there?

They can, nothing stopping them. Mercedes made a choice to buy an English garagista (even for their engines!), Alpine likewise (although they had the traditional Viry engine factory in Paris from the 1970's). Nothing stopped them from setting up chassis operations in Germany and France.

It is feasible to do as you say, the Honda and Yamaha MotoGP bikes are (or were until recently) entirely made in Japan -- but it seems (if anything) this is now a disadvantage to competitiveness.

MotoGP has moved towards more rapid development and closer integration of race team and development team, more like F1. Where new aero and chassis parts are brought literally by the week. Whereas only the slower changing F1 parts, like the engines, can seemingly be made in Japan and be competitive.