Explain NFL contract to me like I'm 5

1,901 Views | 4 Replies | Last: 2 yr ago by DannyDuberstein
Legal Custodian
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AG
Dumb question, so I apologize. But could someone explain NFL contracts to me like I'm five and how it affects the salary cap?

If someone signs a 5 year deal worth $100 million split evenly over the five years with 40 million of it guaranteed and a 5 million dollar bonus.

  • How is the salary cap affected?
  • How does the bonus affect the guaranteed money?
  • How does the guarantee work?
  • Does the contract have to dictate which dollars are guaranteed and which aren't?
  • If the player fulfills the first year of his contract, does that mean he has 20 million left of guaranteed money (or 15 million if the 5 million bonus is part of the guarantee) on his contract?

And then when deals are "restructured" how is the salary cap affected? And does Salary Cap hit = money paid to the player for that league year?

And how does converting salary to a bonus affect it?

Everyone on twitter and media talk about things like this but I haven't been able to find someone to explain how it all fits together.

thann07
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AG


https://overthecap.com/salary-cap-space/
The Porkchop Express
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Ryan34
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AG
There are people literally paid to be experts on the salary cap because of the loopholes and complexity. So take this very simplistic breakdown with a grain of salt.

First, the bonus is part of the guaranteed money. For salary cap purposes, the bonus is prorated over the length of the contract. In your example, it would count $1M against the cap each of the 5 years.

I believe the contract specifies the breakdown of the rest of the guaranteed money. If a player is cut, the remaining guaranteed money plus the rest of the prorated bonus is counted against the current year's cap. Aka "dead money."

The salary cap number is the actual salary + prorated bonus. When teams restructure, they are generally converting salary into bonus so it can be prorated over the rest of the contract.

Lastly, no the cap number is not what that player was actually paid (in case that wasn't clear already). Take Deshaun Watson's new contract as an example. He has a base salary of $1M this year and received a $45M signing bonus. His cap number will be $45M / 5 years + $1M salary = $10M. Even though he actually will receive $46M total.

Teams regularly use this gimmick (giving bonuses now to spread the money to future years) to spend more than the salary cap in actual dollars. In theory, it bites them down the road, but the cap goes up continually so that often isn't the case.
DannyDuberstein
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AG
A few things to note:

- a signing bonus is amortized over the life of the contract. So a $40 million signing bonus on a 5 year deal will hit the cap at $8 mill per year

- base salary as a general rule is not guaranteed and the player has to earn it by playing, but a common practice now is that you'll see some of the early years in the deal guaranteed while the rest is not.

- in some cases. base salary that is initially non-guaranteed becomes guaranteed if the player is on the roster as of X date. For example, Zeke Elliott's 2022 base salary was originally not guaranteed, but there was a clause in his deal where if he was on tbe roster in March 2021, his 2022 salary became guaranteed. That's why the Cowboys are keeping him even tho he sucked in 2021, they have to pay him anyway and no one is gonna trade for him given what he's owed

- roster bonuses are sometimes included in deals where a player gets a one-time payment for still being on the team partially thru the contract. Unlike a signing bonus, this all hits in the year they earn it. Example is a player has a $10 mill roster bonus tied to March 2022. If still on the roster, he gets $10 mill and it will all hit the 2022 cap. Feels like teams are moving away from these more and to the base salary that hits guaranteed markers described above. These are sometimes used by agents to drive a team to make a roster decision about their player in March (keep or cut) while free agency is wide open vs being a late August cut when his option to get a good deal elsewhere are more limited.

All of these are used in combination to provide players some level of assurance of what they'll get paid, while leaving teams various options to manage their cap year to year and balance what they can fit in this year's cap vs kicking the can down the road to hit a future year's cap
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