Explaining how the NFL works, Part 6: Contract bonuses

Whether it’s when the NFL is in the full swing of its regular season or if it’s during the downtime of the early summer, there still is constant news and happenings with the league that has made itself relevant 365 days a year. When various things are discussed, sometimes there are terminologies and procedures where fans might have a general understanding of things. Even the most die-hard fans may have certain areas they don’t understand exactly what various things mean and wish to have a better understanding.

Over the next few weeks, I will take some time to do my best in thoroughly explaining some of the various inner workings of things in the NFL. These are not on-field items but more from an administrative standpoint. Whether it be understanding the waiver wire, the Reserve/Injured List, or the breakdown of the practice squad, we’ll take a look at some of the various terms that are thrown around and utilized in descriptions of things in the NFL but may not be fully understood.

Next up is the topic of contract bonuses and how they affect the team’s salary cap.

Signing Bonuses

When a player signs a contract that involves a signing bonus, all of the bonus is paid at the time of signing. This money is now with the player although it does not all count on the team salary cap at that time. The signing bonus will be divided by the number of years of the contract, up to five years, and spread out evenly over to add to the salary cap for each of the seasons. So when a player has a prorated bonus as part of their salary cap hit, it is the portion of the signing bonus that was counted in that year and it’s already been paid to the player.

As an example, If a player signs a four-year contract with a $20 million signing bonus, $5 million counts towards the salary cap each year of the player’s contract

Roster Bonuses

Many players have roster bonuses in their contracts to where if they are still with the team on a certain date, usually within the first several days of the new league year, the player receives a bonus that goes towards their salary for the next season. This money all counts towards the player salary cap hit for the upcoming season.

Likely vs. Not Likely

All other bonuses that are in player’s contract are deemed to be in one of two categories. These bonuses are considered Likely To Be Earned (LTBE) or Not Likely To Be Earned (NLTBE). Any bonus that is considered Likely To Be Earned is charged on the team’s salary cap for that season. Any bonus that is Not Likely To Be Earned is not charged on a salary cap for the upcoming season.

For a contract to be deemed LTBE, it is based on the player’s previous season. For example, if a quarterback has an incentive bonus if they throw for 3,000 yards, it would be considered Likely To Be Earned if the player threw for 3,000 yards or more the previous season. If they did not, the bonus lands in the Not Likely To Be Earned category.

So what happens when a LTBE contract is not reached or an NLTPE contract is reached? The effects of those bonuses kick in the next NFL season. If a player does not reach a milestone that was LTBE, the savings in regard to the salary cap get rolled over into the next season. If a player reaches a milestone that was NLTB, then the cap hit is applied for the next season, usually coming from any amount of remaining salary cap that would be rolled into the next season.

Per Game Bonuses

Another type of incentive bonus is when players get paid extra for each week they are active on game day. The amount the player could make as a bonus per game is multiplied by the number of games to determine how much they could possibly earn for the season.

But do all of these per game bonuses count towards the salary cap? Actually, it is done where a portion (and sometimes all) of the games would count on the salary cap as it is based on the previous season. If a player only appeared in 14 games the previous year, that number times the per-game bonus is how much they would count as LTBE while the rest of the bonus would be considered NLTB.

An example of how this works is the contract Terrell Edmunds signed with the Philadelphia Eagles. Edmunds signed a deal that had $670k in per-game roster bonuses which equates to $39,411.76 per game. Since Edmunds appeared in 15 games last season, that number is multiplied by 15 and therefore counts on this year’s salary cap as $591,176. The additional $78,824, the amount Edmonds will earn if he plays in all 17 games, would be subtracted from any amount the Eagles would rollover into the following year.

Workout Bonuses

One other type of bonuses that occur before a player even reports to training camp are bonuses in the contract for attending offseason workouts. These bonuses are all considered LTBE, but if the player does not appear for all of the workouts then the team gets the money credited back before the start of the season, usually sometime during training camp.

In case you missed other parts of the series, they can be seen here: