Explaining how the NFL works, Part 19: The salary cap

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 an overview of the NFL salary cap.

Rationale and history

With the beginning of modern free agency in 1993, the 1994 NFL season was the first one in which there was a universal amount in which teams could not go over in their spending on players. This first salary cap for the 1994 season was set at $34,608,000. To put this number into perspective, two players are currently more than this amount themselves with their cap number for 2023 in Patrick Mahomes ($39,693,381) and Ryan Tannehill ($36,600,000).

The reasoning behind the salary cap in the NFL and other professional sports is to “level the playing field” when it comes to the sizes of the market for each team. Simply because a team makes more money than others should not give them the opportunity to outspend the competition and keep a tight grip on landing the most expensive players. With every team having to operate around the salary cap, even the teams in the smallest of markets can contend for championships.

The salary cap is determined by taking the percentage of revenue negotiated in the Collective Bargaining Agreement (CBA) and dividing it equally among the 32 NFL teams.

When does it start?

Teams must be under the salary cap for a given year at 4 PM EST on the first day of the new league year in March. This is the first time a player’s salary cap number for each season becomes official and all futures contracts come on the books. At any point during the league year a team must be under the salary cap at all times.

The uncapped year

In 2010 the NFL experienced an uncapped year in the midst of the salary cap era. The uncapped year was put in the CBA for the final year in which the agreement was in place. The reason for this was to entice both the NFL and the NFLPA to have an agreement done ahead of time rather than run the risk of suspending operations. But in 2010, the two sides wanted a new agreement an uncapped year occurred followed by a lockout at the beginning of the 2011 league year.

During the uncapped year, the rules that govern the salary cap were not in place but there was an understanding across the league where teams that did not comply with the regular salary cap rules would suffer consequences. In fact, two franchises, Dallas and Washington, we’e both penalized future salary cap space due to signing players with large, front-loaded contracts for 2010 in order to save more money against the salary cap in future years.

Salary floor

The 2011 CBA implemented a salary floor which began in 2013. For a given season, a team must spend 89% of that year’s salary cap.

Trends

Following the 2010 uncapped year, it was the first of two times when the salary cap decreased. After having a cap of $123 million in 2009, the 2011 salary cap was set at $120,375,000. The reason for this decrease was adjusting the percentages of revenue given to the players. The only other time the NFL saw a decrease in the salary cap came in the 2021 season with the salary cap fell $15.7 million due to lost revenue in 2020 from the global pandemic.

After a decrease in salary cap in the 2021 season, the 2022 season saw the largest increase in the salary cap since it was implemented in 1994. With an increase of $25.7 million, the salary cap increased exactly $10 million above where it was in 2020 before taking the dip in 2021. For 2023, the salary cap increase was $16.6 million and is set at $224,800,000.

Can teams go over the salary cap?

The short answer in regards to a team going over the salary cap is no. If a team makes a deal by signing a player or making a trade which puts them over the salary cap, it is not accepted by the league and becomes void. Although teams operate above the salary cap before the beginning of a given league year, they are not officially over the cap until the league year begins.

Extra cap

When a team does not use all of their salary cap space in a given year, it is rolled over into the following season and added on to the league-wide cap space designated to each team for that year. For this reason, the exact salary cap for every team is slightly different based on the amount of rollover cap from the previous season.

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