NFL Salary cap 101: Frequently asked questions

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A couple of years ago the NFL clarified what a catch is in the NFL, unfortunately too late for Pittsburgh Steelers fans. Next up they tried to get pass interference under control which ended up being a failed experiment. One thing the NFL does an excellent job of is laying out aspects of the NFL salary cap. The problem is the jargon laid out in the Collective Bargaining Agreement (CBA) is written by lawyers to protect itself from lawyers. The 456 page document is not all about the salary cap, but an enormous chunk of it pertains in one aspect or another regarding the cap.

Below I will take a broad brush approach to some basics and lay that out in an FAQ format.

What is the NFL’s salary cap?

The NFL introduced the first cap in 1994 to split revenue between the owners and the players and to put all teams on the same, even playing field. Teams are allotted the same amount of cap space each season with one caveat, carryover money.

What is carryover money?

All NFL teams go into the regular season with unspent cap space. Competitive teams use this money in case of injuries or to increase the salaries of practice squad players so they are not poached by other teams. Money that is not spent during a particular league year is carried over to the following season and can increase a team’s cap space. Non-competitive teams can build up quite the war chest to go on a spending spree and try to build a team quickly.

How is the revenue calculated and how much do the players make?

All NFL revenue is put into a “pot” and divided evenly among the 32 NFL teams. The revenue includes all stadium ticket sales, local and national broadcasting (TV, radio, and Internet) royalties, concessions, parking, local advertising, stadium leasing and naming rights, and merchandising.

Teams were allotted $198.2 million for the 2020 season to use for salary cap purposes, which equates out to 48% of the revenue.

Can a team go over the salary cap?

The short answer is no once the NFL league year begins in March of each season. As all contracts have to be approved through the NFL league offices, no team can go over the hard cap.

Can the cap be circumvented and, if so, what can happen?

Long-time Steelers fans might remember having to forfeit a third-round draft pick in the 2001 NFL draft and pay a $150,000 fine because of an undisclosed payment to Will Wolford that was not in his contract. It is doubtful teams do this because of the hammer the league would bring down.

What players count against the salary cap?

All players under contract who are on the roster during the regular season, players unable to perform (PUP), on the Reserve/Injured list (IR), and practice squad players. In the offseason, only the top 51 cap hits count against the salary cap. (Rule of 51)

How do the various free agent designations and draft picks count against the cap?

Unrestricted free agents do not count against the cap.

Once a player is designated as a restricted free agent, exclusive rights free agent, or franchise tagged, their corresponding salary designation counts towards the cap.

Players taken in the draft count as the league minimum ($610,000 for 2020) until they sign their contracts.

What goes into figuring the cap number of a player?

Players base salary, also known as P5 salary, signing bonuses, roster bonuses, and workout bonuses all count. While there are other bonus types, I will not go over them here as the Steelers do not implement them into contracts.

The signing bonus is calculated differently from the other bonuses as it can be spread out over the life of a contract up to five years.

What happens if a player is released, traded or retires with prorated signing bonus left on his contract? (This amount is generally referred to as “dead money”)

If the player has only one season remaining on his contract, no matter how he leaves the team, the dead money amount still counts against a team’s salary cap.

This is my biggest pet peeve with the Steelers and some of their contracts. I was very against the signing of Mark Barron and the extension of Anthony Chickillo. Their contract structures were done so they would either be way overpaid in the second year of their contracts or their contracts would be terminated and the team would eat valuable cap space.

What happens if a player has more than one year left on his contract with signing bonus money prorated out in those years?

If a player is traded, any prorated money is accelerated into that year’s salary cap. This is exactly why there are very few high profile trades.

If the player is released with a June 1st designation, or released after June 1st, the prorated bonus can be spread over two years. If the player has three years of bonus money left on his contract, the final two seasons would count against the second year of the cap and not spread into the third year.

Can a team recoup signing bonus money if a player retires?

If a player retires for no legitimate reason (such as Barry Sanders) the team can go after the signing bonus. If a player retires because of declining performance or age, the team cannot recoup the bonus.

Why are NFL contracts not fully guaranteed?

There is nothing in the CBA which prevents contracts from being fully guaranteed. Kirk Cousins and high draft picks are prime examples of having the ability to get a fully guaranteed contract. The only thing holding back players is that general managers will not do them. In the next 11 years of the current CBA, fans might see more and more guaranteed money in contracts but will not see all players getting fully guaranteed deals. Such a move would have enormous financial implications regarding the salary cap.

Are there minimum salaries the NFL has to pay players?

The absolute minimum for an NFL player is $610,000 on the 53-man roster. For every year of experience, this figure increases. For players with seven plus credited seasons, the minimum salary is $1,050,000. Practice squad players earn a minimum of $9,400 per week and are paid during the bye week.

Unfortunately, more fans do not pay close enough attention to their team’s salary cap. The NFL cap is the unequivocal driving force in building and maintaining a team’s roster. Cap management or lack thereof can have devastating effects on a team’s ability to be competitive or a team’s effort to go on an effective championship run. There is also a sizeable difference between being competitive and having a competitive edge. Spending a few million dollars here or keeping a player for a few million there can have enormous effects. Three million here and $1 million there adds up over time as fans can see with the Steelers sitting on $9 million in dead cap money for 2020.

Hopefully, the FAQ above helped you to understand some basics of the NFL’s complicated salary cap. Please feel free post any questions below and I will do my best to answer them.

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