Explaining how the NFL works, Part 8: Contract restructures

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.

After explaining minimum salaries, bonuses, and dead money, it will be much easier to explain how a contract gets restructured.

Restructures

One way an NFL team can free up salary cap space without releasing players is to do a contract restructure. This only works if the player has more than one season left on their contract unless the team is willing to add void years to the end. If the team adds any more seasons that include a base salary, it would be a contract extension, not a restructure.

While some people look at a contract restructure and think the player is taking a pay cut, it is actually quite the opposite. Being a player who gets their contract restructured by a team is much more beneficial because it takes money that may not have otherwise been guaranteed and pays it out right away.

The most simple explanation for a contract restructure is simply taking a portion of a players base salary for a season and converting it into a signing bonus. The player gets their money as the signing bonus at the time of the restructure and reduces how much they are paid throughout the season. In other words, it’s a cash advance which can’t be taken away.

As we covered previously when talking about contract bonuses, a signing bonus is paid to a player at the time of signing the contract but gets spread out to where it counts against the salary cap equally across the remaining years of the deal. A contract can be restructured multiple years throughout a player’s contracts but can obviously only be restructured once per season.

This idea is often referred to as “kicking the can down the road” because it is taking money paid now and spreading it out into multiple years. Every dollar that is paid to the player will eventually count against the salary cap, but by restructuring the contract it just doesn’t count as much on the upcoming season’s salary cap. And the more a player’s contract is restructured, the more it increases their prorated bonus and raises their salary cap hit in future years.

For a general example, let’s say a player signs a five-year deal that had a $20 million signing bonus. That bonus counts against the salary cap as $4 million each season. In the second year of their contract, the player was due to make a $9.2 million base salary. The team then decides to restructure $8 million of their salary and place it as a signing bonus. With four years remaining, this gets spread out to be $2 million for each of the remaining years. Ultimately the Savings comes in at $6 million as that is the amount that is pushed into the future from the restructure, but now the player has $6 million each season counting as a prorated bonus from money they were already paid. In the future seasons, this $6 million plus their base pay for that season will ultimately be their salary cap hit each year.

Full restructure

Many times when a team restructures a contract, they do it for a full restructure giving them the highest amount of savings they can get without adding years. To do a full restructure, the player’s base salary minus the minimum salary for a player with as many credited seasons is converted into the signing bonus. So for a player with six credited seasons, the minimum salary in 2023 is $1.08 million. For a player with this many credited seasons, all of their base salary except for the $1.08 million would be converted into a signing bonus.

This was exactly the case with Minkah Fitzpatrick for 2023 as he was set to have a $14.5 million base salary. Instead, $13.42 million was converted into a signing bonus with Fitzpatrick’s base salary left as $1.08 million. With four years remaining on his contract, $3.355 million was added to each season Fitzpatrick was under contract and saved the Steelers just over $10 million in cap space.

While often a player does a full restructure, sometimes not all of the money that could be pushed into a signing bonus is done so. This is what the Steelers did with T.J. Watt in 2022 as they looked at his contract and figured out how much they would need for the upcoming season and restructured him for that amount. The way it worked out was the Steelers only converted $9 million of Watt‘s $24 million base salary into a signing bonus. This saved the Steelers $6.75 million in 2022. The Steelers could have converted almost $23 million into Watt’s signing bonus and saved more than $17 million for 2022, but the Steelers chose not to kick the can down the road if they did not need to. The Steelers can do the same thing this year with Watt’s $20 million base salary if they need the additional space just ahead of the 2023 season.

Max restructure

While a full restructure is generally kicking the can down the road almost as much as possible, the maximum way to do it is to add void years onto a players contract to where the length of it would be for five more seasons. This gives the maximum savings a team can squeeze out of a player. If a player only had two years left on their contract when it was being restructured, adding three more void ears allows the cap hit to dip for the upcoming season but leaves a dead money hit once the contract voids.

During the 2021 offseason, the Steelers did use void years in a contract extension with Stephon Tuitt. With two years remaining on his deal, the Steelers added three void years in order to save almost an additional $2.4 million in cap space in 2021. But because of the void years the Steelers added, this was why Tuitt waited until June 1 to announce his retirement last year (as outlined in Part 7) so the almost $9.7 million in dead money was spread into two seasons.

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