NFL Salary Cap & Contracts question

[Redlemon]

Well, it's that time of year, when the NFL teams drop their really good players because they can't afford them anymore (as a Pats fan, I'm mourning Ty Law and the probable loss of Troy Brown).

As far as I can tell, it is because their contracts put more of the money in the future, then the teams drop them because these salary increases would be too much to fit under the salary cap. So, what good is a contract if the team can just drop you anyway? Why would anyone agree to a contract containing big future money that they will never get?

[thatoneguy]

Well, they do get their signing bonus, that money is guaranteed. That cost just gets prorated throughout the length of the contract for salary cap purposes, but they get all that money upfront, so, generally that's a good reason to sign a huge contract.

The fact that players CAN be cut like that is kind of what makes the NFL better than some other leagues. In other leagues, a player can just do well in a contract year, then get a huge contract that's guaranteed money, and coast the rest of the way through it, they have no fear of losing out on the money or of getting cut, because they'll get their money regardless. So, I'm a fan of the salary cap, I think it hasn't hurt the NFL at all, and now that teams are getting good at managing it, it doesn't seem to really hurt anyone, except teams who are irresponsible and sign 12 free agents a year.

[heccubusiv]

thats why most teams sign people for longer contracts. When Mark Brennel got sign by the skins it was for 7 years for the cap, it spreads out the payments over the years but he will only play 5 if he is not cut already.

[MiSo]

how come some teams have a higher salary cap than other teams?
who sets these caps?

[djtestudo]

Originally Posted by MiSo

how come some teams have a higher salary cap than other teams?
who sets these caps?

They don't; every NFL team has the same cap, I believe $85.5 million this season.

The reason to sign a big contract is for the signing bonus, plus the player will likely get at least a portion of the base salary as they won't be cut for several years in most cases.

An example from just today is Derrick Mason. He signed a five-year deal with the Ravens today, although they haven't released the monetary terms yet. He is 32, so likely he will only play three, maybe four years of this deal. However, he'll get all of the bonus money, as well as some of the salary.

Don't worry about Troy Brown, Redlemon. He'll be back with the Patriots most likely; just for less then they would have paid to keep him with the option.

[edmos1]

Capology, thatoneguy is correct in saying the cap # gets spread to the life of the contract, however if a person is cut early the cap value is accelerated back. There are specific dates of what portion hits what year

[DDDDave]

Here is a good, but not all encompassing, explanation of the salary cap...


The NFL salary cap is the absolute maximum each club may spend on player salaries in a capped year. For 2003, that amounted to 64.25% of league-wide "Defined Gross Revenues" (divided by 32 teams), made up of preseason, regular-season and postseason gate receipts and radio and television rights. For 2004 it rises slightly, to 64.75% of said revenues. The salary cap remains in effect at all times, although certain exceptions may make it appear as though it's not being applied at times. (See below.)

A team may not exceed this cap with the salaries of players that are under contract and on their roster. If a team does exceed the salary cap at any time, the NFL can waive players from the team, starting with those earning the lowest salaries, until the team's payroll has fallen under the cap. In addition, the NFL may fine a team up to $1 million per day for exceeding the cap.

Teams must spend at least $67.3 million under the cap rules.

Only players under contract count toward the salary cap. Free agents do not count toward the cap until they sign a contract with the team.

Often it may appear that the cap is not in effect. How, for example, can teams have up to 80 players on the roster (in training camp) yet not exceed the cap? Here's the explanation.

From the day free agency begins—this year, that's March 3, 2004—to the day before the season begins, a club's top 51 salaried players count towards the cap, plus pro-rated signing bonuses, incentives, etc., but not base salaries of other players on the roster up to 80. Thereafter, all salaries on a club's roster count towards the cap.

To get around the cap, teams typically structure their player contracts in such a way that much of the money is designated as "signing" or "roster" bonuses, or "incentive clauses." A signing bonus or roster bonus does count toward the cap but is prorated over the length of the contract, even though the entire bonus has been paid in cash 'up front' to the player. When you read about a player and team agreeing to restructure a contract, it virtually always means that the player has agreed to convert at least a good part of his coming season's base salary into a signing bonus.

Incentive clauses are often made easy to reach as an indirect means of playing a player more while keeping his "base salary" low. Too easy to reach, however, and they're likely to be considered salary by the NFL, which must approve all contracts. For instance, if Drew Bledsoe, who's big and known for being immobile, had an incentive clause paying him $1 million for each game he started, the NFL would almost certainly rule that such payments are salary rather than genuine incentives, since Bledsoe has been a starter for many years. But a clause paying Bledsoe a bonus if he rushes for 500 yards would be legitimate, since he's known for his lack of mobility.

There are many additional rules, some of them highly technical. An example is the so-called "Deion Sanders rule" that was enacted after Dallas owner Jerry Jones gave Sanders a (then-)astronomical $13 million signing bonus, combined with base salaries of the then-minimum salary of $178,000 for the first three years. The new rule states that the first three years of any player's salary must equal the prorated amount of the signing bonus. The intent is to restrict circumvention of the salary cap.

Here's another little-known technicality. Those "likely to be earned" incentives mentioned above? Well, when they're not reached, they become cap credits the following year, which can mean a hidden bonanza for an underachieving franchise. A team that plays poorly, and which writes incentives into many of its player contracts, may actually reap a reward the year after. Case in point: the 2004 Vikings, who are an astounding $33 million under the cap. In actuality, the Vikings' cap is almost $95 million, because Minnesota gets more than $14 million in cap credits this year for "likely to be earned" incentives that weren't earned by their players in 2003.

Player benefits currently are $12,156,000 per club above the salary cap number.

Finally, there is a rule promulgated by the league, designated "Cap Relief For Veterans," which allows teams to sign players with more than four years of experience to one-year contracts and have those contracts count for only $450,000 under the cap. Suppose that a 10-year veteran signs a one-year deal. He will make $760,000 (the minimum salary), but the team that signs him only has to count $450,000 against its cap. Any player receiving this benefit can receive a maximum signing bonus of $25,000.

[Redlemon]

Thanks everyone, and especially DDDDave; that was an amazing writeup. Did you snatch that from somewhere, or do you actually have all of that information in your head?

[jobu]

does anyone know what happens when a player retires during a contract? for instance, a player signs a 6 year contract. he only plays 3 years of that contract. if the siging bonus was prorated over the 6 years, does the team take a hit in year 4 for the rest of the bonus?

[betula]

That was great, DDDDave. I was going to mention the 'likely to be earned' loophole to those that asked if everyone had the same cap. NFL teams are getting much better at managing salaries under the cap, and fewer quality free agents and 'cap casualities' are out on the open market each year. The draft is still the best way to build a team.

[uncle_el]

Originally Posted by jobu

does anyone know what happens when a player retires during a contract? for instance, a player signs a 6 year contract. he only plays 3 years of that contract. if the siging bonus was prorated over the 6 years, does the team take a hit in year 4 for the rest of the bonus?

depends on the language of the contract, but likely the player would have to give the signing bonus back. trev alberts played de and lb for the colts. he signed a contract with a very large signing bonus even though he was having back problems... two years into the contract, he retired, though the contract was not up. he was obligated to give back the balance of the signing bonus, and i believe the colts did not have to take the hit. now, trev alberts is an analyst of the nfl on espn.

ricky williams originally signed his contract, and received his signing bouns from the saints. when he was traded to miami, miami worked in a clause for getting the signing bonus back, even though they didn't pay it, and wouldn't take the hit for any portion of it. when he decided to retire, the courts decided he was due to pay it back to the dolphins, and the saints never saw any of the money!


both agents and teams know what they're doing when they sign players to long-term deals with huge signing bonuses up front. donovan mcnabb and mike vick are two recent players who received giganormous contracts with huge signing bonuses up front (i believe vick's was 37 million)... players get guaranteed money up front, teams get to spread it out over a long period... and both the agent and team know the contract will likely be reworked after 3-4 years. whether the player's actually know this, and how much they understand is another topic!







as thatoneguy said, the salary cap is a great thing. it keeps the league fresh, as teams can't just load up talent without worries. also, since contracts are not guaranteed, players can't really rest on their laurels. if you don't show up in games, you can easily be cut. you have to make it halfway through the season, before the rest of your contract for that season is guaranteed (unless you get put on ir).