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Salary
Cap FAQ
1. How much does each team have to spend against
the NFL salary cap?
The NFL’s Salary Cap for 2007 is
$109.000m. However, every teams salary cap figure is adjusted for LTBE incentives not
earned in the previous year, or UTBE incentives earned in the previous
year. Currently the Redskins cap number
in 2007 is $109.000m.
2. How is the NFL salary cap determined?
The percentages of
the league's expanded revenue pool that the players are to receive as
compensation are set at 57 percent in the 2006 and 2007 seasons, 57.5 percent
in 2008 and 2009 and 58 percent in 2010 and 2011. The 2012 season would be
played without a salary cap
The deal assumes
that the teams collectively will outspend the cap by 2 percent per season
That sets the
"trigger points" at 59 percent of revenues in 2006 and 2007, 59.5
percent in 2008 and 2009 and 60 percent in 2010 and 2011. The cap then will
automatically adjust from year to year based on whether the teams' collective
spending on player compensation reaches the trigger points. If the collective
spending on players surpasses the trigger point in a season, the cap
automatically will adjust downward the following season. If spending fails to
reach the trigger point in a season, the cap automatically will adjust upward
the following season
Thus, the deal
assumes that the players will receive an average of 59.5 percent of revenues
over the duration of the deal
3. How does the owner’s revenue sharing
agreement work?
The highest-revenue
teams to pay about $7 million apiece annually into a fund that will be distributed
to low-revenue franchises. The revenue
sharing plan agreed to in 2006 will transfer $850 million to $900 million from
high-revenue teams to low-revenue clubs over the six-year span of the
agreement. The top 15 revenue-generating clubs will pay into a fund that will
be redistributed among low-revenue franchises. The top five teams will pay at
the highest rate. The rate will decrease for Nos. 6 through 10, then decrease
again for Nos. 11 through 15.
The total amount of
money redistributed under the plan includes both payments by the top
revenue-producing teams and future funds that will be redirected by the league,
the person familiar with the plan said. That explains the difference between
the $7 million figure and the approximately $10 million per team that would be
required among the top 15 clubs for the plan to redistribute $900 million over
six seasons
4. What are the minimum salaries that can be
paid to players under the CBA?
In 2007 the minimum
salary for rookie or first-year players is $285,000; second year is $360,000;
third year is $435,000; fourth year is $510,000; fifth-year through seventh
year is $595,000; eighth year through 10th year is $720,000; and 11th year and
longer is $820,000.
5. How does a signing bonus affect the cap hit
for each year of a contract?
The amount of the signing bonus is prorated evenly over the life
of the contract or to the CBA limit (in 2007 that is 6 years). So if a player signs a 6 year contract that
includes a $6m signing bonus, $1m of the signing bonus will be allocated
against the teams salary cap each contract year for
accounting purposes.
6. What are voidable years and how do they
affect the proration of a signing bonus?
Many contracts these days in the NFL included clauses for
"voided years". These are typically incentive laden additions to
contracts that will allow the player to file for Free Agency sooner if certain
goals are obtained. Voidable years can be included when determining the term of
years for signing bonus pro-ration. However, if the player meets the goal that
voids the year or years of the contract, any amount of the signing bonus that
was allocated to the voided year or years will be accelerated and added
immediately to team salary. If the accelerated signing bonus puts the team over
the Salary Cap, the amount that the team is over the cap will be deducted from
the team’s Salary Cap for the next year. If a player can void a contract based
on a “likely to be earned incentive,” and the player is on the roster at a
later time, there will be no acceleration. If a contract is renegotiated to
reduce the number of years of the contract, the portion of the signing bonus
that has not been allocated is included in team salary at the time of the
renegotiation.
7. What is the basic way to come up
with a players' cap figure for any given year?
Basically a players cap figure is made up of base salary,
prorated signing bonus, any likely to be earned incentives, any unlikely to be
earned incentives from the previous year that were in fact earned, any roster,
reporting, workout or prorated option bonuses, and any prorated restructure
bonuses. The only other possible charge is from the “Deion Sanders Rule”.
8. What is “Dead Cap Money”?
Dead cap money is the part of a players salary, prorated signing
bonus, other bonuses and incentives earned that count towards a teams Salary
Cap even though the player is no longer on the team.
9. Do all players on a teams
roster count against the salary cap?
Between the start of a league year (around March 1) and opening
day only the 51 highest paid players count against the Salary Cap, even though
the team could have up to 80 players on the roster at times. Prorated bonus
amounts from players not on the top 51 salaries and any dead cap money also
counts during this period. This is called the “Rule of 51”. From opening day
until the end of the season all players on the roster (including injured
reserve) and practice squad count against the cap.
10. How does a basic contract restructuring work?
The most common form of restructuring is to reduce the base
salary in the year of the restructure and use the difference (or some other
agreed amount) as a new signing (or restructure) bonus. If a player
restructures his contract and gets a new signing bonus, the new signing bonus
is prorated over the remaining years of the original contract and also over the
extension. The allocation of the original signing bonus remains unchanged.
11. How are
the cap hits applied when a player is cut or traded before June 1, or after
June 1?
If a player is released or traded before June 1 all current and
future prorated signing bonuses, and any other guaranteed monies that might
have been part of his contract, count against the teams Salary Cap in that
year.
If the player is released or traded after June 1 then the
unallocated signing bonus portion of the contract is split over two
years. In the current year, that years proration counts against the
Salary Cap while all future years prorated signing bonus figures count against
the Salary Cap the following year.
Each year a team can designate two players who will be destined
for post June 1 releases to spread out remaining signing bonus acceleration
into the next year. To do this, teams must carry those players' cap numbers
until June 1, but release them before June 1 so they can hit free agency. After
June 1, the team gets to remove the salary and take the remaining cap hit in
the following year. For example, if a player has $4 million of remaining
signing bonus and four years left on his contract, he can be released before June
1 and be a free agent. After June 1, the team would have only the $1 million of
proration on its cap that year and let $3 million be applied to the following
year's cap.
12. What is the rookie pool and how does it work?
A team’s Salary Cap includes the Rookie Minimum Active Salary
Pool as of the day of the draft for all drafted rookies. The salary for drafted
rookies will stay at this amount until the player is signed,
the team’s rights are relinquished through waivers, or until the Tuesday
following the tenth week of the regular season if the player is unsigned.
13. How does the veteran minimum salary system
work?
The system was implemented to make it less costly to retain older
veterans at the minimum salary. Under this new system, the Salary Cap count for
a player with four or more Credited Seasons who signs a contract will be the
same as the count for a player with two Credited Seasons.
The difference
between the Salary Cap count for a qualifying contract and the stated minimum
for the qualifying player's years of service will be counted as a Player
Benefit and as such is not charged against the teams Salary Cap.
What veteran
contracts qualify for this system? A
new, one year contract at the minimum signed after previous contract has
expired or has been terminated.
Additional compensation is limited to a maximum per year total of
$40,000, including allocated signing bonus, roster bonus, reporting bonus and
any incentives clauses. In 2009 this
amount rises to $50,000.
14. What affect do players who are
restricted free agents have on the Salary Cap?
For Restricted Free Agents (RFA), a Qualifying Offer is included
in the team salary. This amount remains in team salary until the player is signed,
the Qualifying Offer is withdrawn, or a “June 1 tender” is made. If the player
is unsigned and the Team makes a June 1 or June 15 offer, this offer will be
included in team salary until the player is signed, the team gives up their
rights to the player, or until the Tuesday after the
tenth week of the regular season if the player is unsigned.
15. What is the “Deion Sanders
Rule”?
Basically, it means that in a contract that extends into an
uncapped year, the player's combined salary, roster bonuses and reporting
bonuses in all capped years must be equal to or greater than the combined
prorated signing bonus allocations in the capped years.
If the latter is greater a cap debit is applied to the players salary cap number pertaining to the difference
prorated over the capped years, then credited back to the players cap number in
the uncapped year(s).
16. What is the “Barry Sanders
Rule”?
Due to the Salary Cap, owners are now investing a greater amount
of money up front for players in the form of guaranteed signing bonuses.
Thus, the owners must try to protect their investments by including language in
the contract that calls for a player to return a portion of the signing bonus
to the team if the player “fails or refuses” to practice or play with the team.
In certain situations, a team will be repaid some of the signing bonus it paid
to a player (i.e., a refund), or a team will fail to pay part of a signing
bonus that was already allocated toward team salary. If this happens, the
amount previously included in team salary will be added to the team’s Salary
Cap in the next year.
17. What is the difference between a
“credited” and an “accrued” season?
A Credited Season is any season in which a player is on one of
the following lists for at least three (3) regular season or post-season games:
Active List, Inactive List, Injured Reserve List, or Physically Unable to
Perform List (PUP). A player will also earn a Credited Season if he is released
injured and paid the equivalent of at least three (3) game checks. Weeks on the
Practice Squad will not count toward a Credited Season.
An Accrued Season is a season during which a player has been on
full pay status (Active, Inactive or Injured Reserve List) for six (6) or more
regular season games. However, a player who is on the Exempt Commissioner
Permission List, the Reserve Physically Unable to Perform/Non Football Injury List, or the Practice Squad for any of the six (6)
qualifying games will not earn an Accrued Season regardless of his pay
status. Earning an Accrued Season
entitles a player to advance through the free agency system which governs a
player’s negotiating rights once his contract has expired