NFL Salary Cap Explained | 21 Questions Answered

Since the off-season is coming, and again the green dollar (fortunately, not a green serpent) seeks to replace the number of sacks and touchdowns in the news reports, we decided to explain to you, as far as possible, the specifics of the salary cap in the NFL. All this "dead money", restricted free agents and trades after June 1 — what the hell is it and how to live with it? We hope this article will help you at least a little better understand the NFL Salary Cap.

NFL Salary Cap Explained

Where does the NFL salary cap come from?

Everything is not easy here, although an ordinary fan does not need to know this either. But for general development, the salary cap (aka Salary Cap, or "cap") is based on a complex calculation in which the league income is measured, and then 48% of that income is allocated to player costs. These costs include the salaries themselves, plus all kinds of benefits — pension, insurance, medical, training — in general, everything that we call the "social package" and that is not included in the salary itself. So, not all 48% go to the salary cap that teams operate, but somewhat less.

And how much is the salary cap today?

Well, usually everything is announced exactly 1-2 weeks before the official start of the new season. So while we wait. However, it is expected that the cap will now be between $180 and $185 million. Initially, it was thought that there would be 175 million, and many veterans began to buy dumplings and look for a job as a sales assistant, because no one would be waiting for them in the NFL then. And so — it may even turn out to get to Uncle Tom again for the pies.

And if a couple of cents fell into a pocket with holes, can you get them in a year?

And then! There is such a thing — Rollover is called on all sorts of smart sites, and so it means how much the team saved in the previous year and how many millions will be added to its current cap. The team must notify the League a couple of weeks before the start of the season in March, how much of this amount it wants to transfer to the coming year. Then it all adds up, adds / decreases the amount of "incentive" payments to players (more on that later) and we get an Adjusted Salary Cap, which the team should fit into by the beginning of the new season (in 2021 it will be March 17) ...

Are all players counted under the cap?

Yes, no one can escape the gaze of Sauron's eye. Whether you are on the 53-man roster, the list of injured (IR), the list of physically unavailable (PUP) or practice squad — your salary will be paid under the team cap. Only those who are on the NFL exclusion lists (lovers of wives and other fans of blue and red pills) are not counted here.

Wait, there are 90 players! How to fit them all under the cap?

But for sure — no way! Therefore, they came up with the "Rule of 51", according to which only the first 51 people in terms of salary, bonuses and all basic contractual conditions are considered a cap. The rule is valid from the first day of the season until the first game. That is, you have a little man who gets 1 million — the least of all in the team is. You hired another one, who will have a salary of 1.1 million, and the cap will eventually rise by 100 thousand in total, since the first of 51 will fall out.

Are free agents counted under the cap?

There are several types of NFL free agents and their count depends on their type.

Unlimited free agent (UFA) : everything is already said in the term itself — a player whose contract with the team has expired, and who has the right to negotiate with any League team at 19:00 on March 15, and can sign a contract from 23: 00 March 17. Under the salary cap, of course, does not count.

Restricted Free Agent (RFA) : A player whose contract ends but has less than three seasons in the League is a Restricted Free Agent. A season is considered one in which a player was on the team's roster for at least 6 regular season games (games when a player did not get into the active roster for a match, or was on the injured list are also counted). The team can impose a tender of a certain price and value on such a player, depending on what compensation it wants to receive if the player is still lured away. The team can repeat the offer of the opponent or receive compensation.

There are four types of tenders, depending on the compensation the team wants to receive: Round One, Round Two, Original Round (the one in which the player was drafted), and First Refusal (no compensation). The amount of the tender that the team will impose on the player goes under the cap.

Exclusive Free Agent (ERFA) : if the player is in League 2 or fewer seasons (with the same “season” condition as above), the team has exclusive rights to him and only the team can negotiate with him, if they want to leave him ... Such a player is almost always given the minimum wage, and it will go up to the salary cap.

Player with a Franchise or Transition Tag — Any player who has been tagged by a team (other than the Exclusive Franchise Tag) is still considered a free agent, but limited to that tag. Such a player is counted towards the salary cap in the amount of the superimposed tag.

And what are these tags?

There are three types of tags a team uses to discourage a player from entering the free agent market and to give themselves extra time to negotiate a long-term contract. Well, or just wants to keep the player with him for a year to make sure once again that they need him. The tag can only be applied to one player per season.

Non-exclusive franchise tag (as a rule, it is he who is simply spelled out — franchise tag): the most common and constantly used by teams. This is an annual agreement whereby a player receives a salary of at least the average of the top 5 players in his position over the past 5 seasons, or 120% of his previous salary, whichever is greater. Other teams can negotiate with the player, but in the event of a deal with another team, the team that imposed the tag will receive two picks of the first draft round for that player.

Exclusive franchise tag : very rarely used, as it is more expensive. This is an annual agreement whereby a player receives a salary of at least the average of the top 5 players in his position over the last season, or 120% of his previous salary, whichever is greater. In this case, the player has no right to negotiate with other teams.

Transition Tag : This is an annual agreement whereby a player is paid at least the average of the top 10 players in his position over the last season. The player can negotiate with other teams, but the team that applied the tag has the opportunity to repeat the offer he received. If the team does not want to do this and the player leaves, they will not receive any compensation.

Are the players selected for the draft counted before signing the contract?

Yes. Any player being drafted gets a tender the size of a beginner's minimum wage ($660,000). The tender will disappear as soon as the player signs his first contract.

So what is the sum that the player brings to the team under the cap?

This amount (called Cap hit) consists of several parts. The first is the number found in Paragraph 5 of the standard NFL player's contract and what most of us understand as the player's annual base salary. Second — bonuses, different in their specifics, are also counted under the cap. Typical bonuses are subscription bonus, roster bonus and operation bonus. Well, the third component is incentive payments (more on them later).

What is the difference between these bonuses?

At their core, these bonuses can be described as “thank you for being with us now” (Signing bonus), and “thank you for being with us” (Roster-bonus and Option bonus). From the player's point of view, it doesn't really matter what kind of bonus he gets. But for the team, the difference in these bonuses is significant, since with their help it can influence its salary cap. The roster bonus, for example, is taken into account only in the year in which it is paid. The signature bonus is distributed in proportion to the duration of the player's contract (or proportionally to the remaining years of the contract, if an option bonus is applied), but for no more than 5 years.

So, can you clearly show it?

Well, let's say a player signs a five-year contract for $40 million. It has a signature bonus of $10 million, an operation bonus of $4 million begins to be paid from the second season, and the roster bonus for the second year is $1 million. The fifth year of the contract specifies the base salaries of $1,3,5,7 and $9 million for 5 years.

The $10 million signature bonuses will be split over 5 years, $2 million each, which will be counted under the cap every year.

The bonus is effective from the second season and will add $1 million per cap every year.

The second year roster bonus will be paid if the player is on the team's roster (usually counted on the 5th day after the official start of the season).

As a result, the player's cap it for each season will look like this:

NFL Salary Cap by year

It does not include incentive payments for specific achievements. More about them later.

Is NFL contracts guaranteed?

Most NFL contracts include guaranteed money, but unlike MLB and NBA contracts, the entire amount is rarely guaranteed. However, there is an exception to the first-round rookies drafted, and they are guaranteed almost the entire amount of their first four-year contract.

The largest contracts will include guaranteed signing bonuses, roster and / or ops bonuses, and sometimes guaranteed base salaries.

But this "guarantee" is not always as good as it sounds. Often, guaranteed money is only guaranteed in case of injury, which does not allow a player to be fired if he is injured, but allows him to be fired in various other situations.

And if the option bonus is not paid, what happens?

Failure to pay the bonus will usually result in the cancellation of one or two years of the player's contract. But in fact, most of the opts are either guaranteed themselves or the contracts have a guaranteed base salary, which essentially acts as a guarantee of the opt.

In the example above, this would mean that if the $4 M opt bonus from Season 2 was not guaranteed, it would most likely be backed by a fully guaranteed $ 3M base salary plus a $1 Million Roster bonus guarantee. 

What happens when a player gets fired or retired?

When a player is fired or retired from football, the team is exempted from paying base salaries and any roster bonuses that followed further under the contract, but will still have to pay any remaining subscription or performance bonuses that have not yet been counted under the cap.

Using the example above — if a player is fired immediately at the beginning of his 4th season, then the team will not be obliged to pay him a base salary of $7 million (or a roster bonus if he was here). But the split subscription and operation bonuses of $2 + $1 million for the 4th and 5th seasons will immediately count towards the year of dismissal. Thus, the team will have to account for the $6 million remaining bonus payments to the player. Since his initial cap hit this year was $10 million, the team will benefit from $4 million plus a cap, and receive $6 million of dead money minus a cap this season. Since the payments of the fifth season will go into the current year, in the next off-season there will be no "traces" of the player in the payment. In the event of a career end, everything is calculated in exactly the same way.

Is it more profitable to exchange a player? What happens in the event of a trade?

For the salary cap of a team that gives away their player for the exchange, this is in many ways akin to firing him — the team gets rid of the payment of the future base annual salary, but must take into account unpaid bonuses. As in the case of dismissal, he will go to "dead money" and will be counted in the minus cap.

The team that trades a player receives his remaining contract, but is not responsible for any bonus payments previously paid to him.

I heard something about some June 1st. What is this date?

This is a collectively agreed date that divides the financial periods of the different seasons. That is, if a player is fired after this date, the team is, as before, exempted from paying him future base salaries, but it can split the unaccounted bonus payments into two seasons — this and the next, which allows it to get additional space under the cap this current season, by reducing those very "dead money". But next year, under the cap, it will already have less by this transferred amount.

If we go back to our example, then by dismissing a player after June 1 for the 4th year, and not in the first days of the season, the team will receive “dead money” not 6, but $3 million, which will ultimately free up space under the ceiling not 4, and $7 million. $3 million "dead" will be transferred to the next season.

Exchanges and retirements after June 1 will be treated the same way.

Can a team fire a player before June 1 and get the benefit as if they did it after that date?

Yes, the collective agreement allows two players to do the same by designating their dismissal / trade / retirement as "after June". But in fact, this does not have a particular advantage for the team, since until June 1 the player will still minus the cap for the entire amount, and only after the 1st day it will change.

Basically, this option is used so that players can find a new team, while they still have some free money that they did not have time to spend. After June 1, finding a new team is much more difficult.

What is restructuring? Does the player lose money with it?

Not. In the vast majority of cases, contract restructuring does not mean that the player will receive less. Only if some player, who is clearly overpaid, goes to the very cut of wages in the restructuring process.

The restructuring itself is simply a redistribution of money from the current season to future years. A pure accounting trick to free up some cap space this season.

Well, how does it work?

Classic restructuring, often referred to as "simple restructuring" — when a player's base salary is reduced to the minimum approved by the League (for a player with certain years of experience in the NFL, it is different), and the balance is immediately paid to the player in the form of a signature bonus, the amount of which is distributed equally over the remaining years of the contract ... So the player doesn't actually get less, just gets most of the money right away and not over 17 weeks of the season.

Using our example, if a team were to restructure a player's contract in the 3rd year of the contract, his base salary of $5 million would be reduced to the minimum veteran amount (depending on years of experience), say $800 K, which would give the player $4.2 million in instant signing bonus.

Thus, this year the team will receive an additional $2.8 million under the cap (it was $8 million, it became 5.2), but in the next two years it will deal with an additional $1.4 million.

Are there any other workout bonuses?

Yes, workout bonuses (aka workout bonuses) are money paid to players for attending off-season workouts. Collectively, the minimum daily training rate in 2021 is $275. Starting from the first official day of the new season, teams must take into account in their payment a minimum wager multiplied by 80 players and multiplied by 36 days. In 2021, this will be $792 thousand. After the start of the season, this amount is replaced by the actual amount of workout bonuses paid to the players (since not everyone is given exactly the minimum).

In addition, many players have additional bonuses for attending training sessions included in their contracts. They are immediately credited to the cap and if the actual earned amount is less, they are adjusted during training camp to knock out the remainder.

So what about the incentive payments? How do they affect the NFL Salary Cap?

Oh, this is a paragraph with an asterisk. Do not break your brains, as the author has them in this matter.

Incentive payments are spelled out in some contracts as a reward to a player for achieving certain criteria in a season. Incentive payments are of two types — which are likely to be received (LTBE — Likely To Be Earned, translate as you wish) and which are likely not to be received (NLTBE — Not Likely To Be Earned). Each of them has a different effect on the salary cap.

LTBE is a payout based on the completion of last season's achievements and is considered under the cap in the season in which it is scheduled.

For example, if a running back scored 1200 yards on the run last year, and his contract for the current year has an incentive payment of $100,000 for overcoming the 1,000 yard bar, then this is an LTBE incentive and the team will receive $100,000 less this year.

If a player scored 1000 yards last year, and he has a payout of $100 thousand this season for 1200 yards, then this is an NLTBE incentive and this $100 thousand will not be taken into account by the team under the cap this year.

That is, if a player does not receive an LTBE payment, its amount will be credited to the team under the cap in the next season. With NLTBE payments, the opposite is true — if the conditions are met, the team will receive a minus for the cap in the amount of the payment next year.

Are you still alive?

And what prevents a player who has signed a big contract with a signing bonus from retirement next year?

If a player is in his prime and leaves football unexpectedly during a long-term signing bonus contract, the collective agreement allows the team to return a portion of the signing bonus. This rule is known as the "Barry Sanders Rule".

If the team — having passed the arbitration on this issue — has the right to return a part of the signature bonus, it is credited to it as a plus to the cap for the next year.

However, this does not mean that every withdrawal from football leads to arbitration (which still needs to be won) and to the return of a part of the signing bonus. As a rule, the teams themselves, concluding contracts with veterans, initially understand that they are unlikely to play it completely for them. Refunds only happen in certain, strange and unreasonable situations without a serious reason (i.e. no injury, etc.)

What stops teams from exceeding the salary cap?

To put it simply, they are forbidden by the League and the NFL can simply block the signing of any contract if it exceeds the team's cap. If the team exceeds the cap due to unaccounted bonuses after being fired / exchanged, the NFL gives it 7 days to return to the desired value in any legal way (dismiss someone else, or restructure someone's contract).

What are the minimum wages in the NFL now?

The collective agreement established a calendar of changes in the minimum wages of players from year to year, depending on the number of years played in the League. It looks like this:
NFL minimum wages

What about the newcomers in the draft? For them, after all, a place is specially left, it seems?

Back in the collective agreement of 2011, there was a major change that affected the League. The so-called "General Compensation Pool for Newbies" was created, which almost completely changed the order of payment of the players selected in the draft and removed the old "salary cap for newbies". The new system not only limits rookie salaries in the first year, but also the total compensation for a player's first NFL contract.

In the new system, the payment of newcomers is largely structured, which allows you to quickly negotiate an agreement with them. This also allows the League to define a rookie pool for the salary cap, which is determined by the sum of all specific picks in the draft where this particular team picks. All these figures are also proportionally increasing every year and the increase in the salary cap.

Well, that seems to have ended the basic questions. In the economic wilds of the NFL as in life — you can study for many, many years, but you still don't know everything. If, after this educational program, something is not completely clear to you, ask questions in the comments and I will try to answer them.

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