Explaining how the NFL works, Part 10: Performance-based pay

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 looking at when players receive extra pay from the NFL based on playing time.

What is performance-based pay?

Beginning with the 2002 Collective Bargaining Agreement (CBA), the NFL and the NFLPA instituted a program which created a fund to supplement the salaries of players earning a smaller contract who earned significant playing time on the field. The pay is divided evenly across all 32 teams and is classified as a benefit and therefore does not count towards the salary cap.

How much is the pay?

For the 2022 season, the NFL announced the players received $336 million in performance-based pay. Based on this amount and the fact it is divided among all the teams, each squad should have received $10.5 million in performance-based pay.

Who is eligible?

Every player who plays in NFL snap during the season is eligible for performance based pay. The two factors involved being a player’s salary and the number of snaps they play determine how much each player receives. The higher the snaps and the lower the salary, the more likely a player receives a higher portion of performance-based pay.

How is the pay determined?

This is ultimately the kicker when it comes to calculating how much pay a player receives. The following is the explanation as to how the system works as released from NFL communications:

Under the Performance-Based Pay program, a fund is created and used as a supplemental form of player compensation based on a comparison of playing time to salary. Players become eligible to receive a bonus distribution in any regular season in which they play at least one official down. In general, players with higher playtime percentages and lower salaries benefit most from the pool.

Performance-Based Pay is computed by using a player index (“Index”). To produce the Index, a player’s “PBP Playtime” (defined as the player’s regular season total plays played on offense, defense and special teams, divided by the number of plays of the player with the most total combined plays on that team) is divided by his “PBP Compensation” (defined as regular season full salary, prorated portion of signing bonus, earned incentives). Each player’s Index is then compared to those of the other players on his team to determine the amount of his Performance-Based Pay. If a player’s base salary is less than the Minimum Salary of a player with seven or more Credited Seasons, then player’s base salary will be imputed to be equal to the Minimum Salary of a player with seven or more Credited Seasons (i.e., $1.120M for the 2022 season). By imputing a minimum salary of $1.120 million, a slightly higher percentage of the pool is directed to high-performing veteran players whose salaries exceed $1.120 million, but are not among the highest in the league, as contemplated by the formula. This imputation of salary is solely for the purpose of calculating distributions from the pool and does not affect the actual salary paid to the player under his contract.

For the 2022 season, the Steelers had two players land in the top 25 performance-based pay distribution released by the NFL. Kevin Dotson was seventh on the list and earned $746,013 while Dan Moore was ninth on the list earning $739,072. With both players on the field for every offensive snap as well as being on rookie contracts, it gave them the opportunity to earn the most performance-based pay.

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