NFL Salary Cap Explained

The NFL salary cap restricts teams in how much they can offer players in salary. It is primarily in place to ensure a level of parity is maintained between the teams and it stops all the best players signing for the best teams as you would see, for example, in the English Premier League.

A player’s contract is divided in to base salary and guaranteed money in the form of bonuses. Teams are able to manipulate the impact of the salary over the course of the contract i.e. they can either spread the salary equally over the years, have the biggest hit in the early part of the contract or, as has become the norm, back end the contract so that the higher ‘hits’ are towards the end of the contract.

I’ll go through Roster Bonuses, Workout Bonuses, Dead Money etc etc and I’ll try and make it as straightforward as possible.

The salary cap figure for 2018 is just over $177m. The cap has gone up sharply in recent years in conjunction with the success of the NFL worldwide, the feeling is that the players should be paid more for the level of entertainment they provide and who can argue with that. The actual figure is derived from a calculation of league earnings but I’m not going to go in to that here.

Although the cap figure is $177m, not all teams will have the same as there is something called ‘carryover’ which gives some teams more cap space based on how much cap space they had in the previous season. Each team will then have a set cap figure plus a calculation of their current liabilities which is calculated by totalling the cap hit for the top 51 paid players on the roster and then adding any dead money accrued through the previous release of players who had guaranteed money on the ensuing years of their contracts.

Dead money is basically money that counts on your current cap that is being paid to players that are no longer on the roster. If a team cuts a player who still has guaranteed money left on their contract then this will usually go against the cap in one lump sum. The team can choose to designate the player as a post June 1st cut which would then allow them to spread the dead money over a number of years so they don’t take the hit all in one go. If a player who has no guaranteed money is released then his salary comes off the cap in its entirety.

The guaranteed money on a player’s contract is made up of bonuses. The main one is the signing bonus and this is generally spread evenly over the agreed years on the contract. A team can decide to pay a player the entirety of his bonuses in the first year of a contract, this may be something a team with a lot of cap space could do to limit the impact in future years. Players may also receive a roster bonus or a workout bonus and these are conditional. A roster bonus is paid if a player is on the roster on a specified date, you may hear quite often that a player is likely to be cut before a specific date as his roster bonus will kick in at that point. The workout bonus may appear in a player’s contract as an incentive to take part in the off-season program and is paid if they do so.

In trades, the team that the player is leaving generally takes the hit on the bonuses the player received on his contract. The receiving team then simply takes on the base salary and can release that player, further down the line, without accruing any cap hit/dead money.

For rookies, there is a set wage structure which was put in place after the last CBA. This is a guideline amount that a player should be paid given where they are picked, it does differ for the position they play i.e. a QB may well be paid more than a LB picked in a similar spot but the difference is now minimal.

Team can restructure player’s contracts and then the salary cap implications get complicated. Generally, however, a restructure involves moving the bonuses to be paid in later years and actually is fairly easy to work out. For extensions, the specifics of the extension should be made clear and a player will receive more money spread over a larger number of years.

Before the league year arrives in March, a team can be over the cap. Teams are obligated to be under the cap once the league year arrives and, from that point, they cannot go over again as any transaction that would lead them to do so would be rejected by the league office.

If a player retires whilst they still have years remaining on their contract the, slightly surprisingly, the team still has to pay their bonuses. Remember, the main bonus is a signing bonus and this still needs to be paid.

Once a player reaches free agency, his salary completely comes off the cap for the team he has just left. Restricted free agents can be tendered and the cap hit from the contract does not contain any guaranteed money, this is the same for exclusive rights free agents.

A player’s cap hit is calculated as: Base Salary (year) + Bonuses (year)

A team’s salary cap is calculated as: League Salary Cap + Carryover

Cap Space Remaining is calculated as: Team Salary Cap – Cap Hit for top 51 players – Dead Money (year)

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