Understanding the salary cap

So as not to muddle Collins thread. Cut and pasted from other sites. The goal is to help me and others understanding it. I highlighted stuff I didn't know

The cap is determined by taking the NFL’s total revenues and allocating 47 percent to 48 percent of them towards the players’ salaries and less a 1.5 percent stadium credit. So for an industry that made over $9 billion last year, that means anywhere from $4.2 billion to $4.5 billion in salaries towards the players. Taking those numbers into account that means the salary cap could be anywhere from $130 million to $140 million per team this year.

What people don’t know about is anywhere from $10-12 million per team is donated to the legacy fund for the retired players created by the new collective bargaining agreement. This means the cap for 2012 should be anywhere from last year’s $120 million to the $130 million range.
A couple of things that are going to affect the cap in future years are the huge television contracts that will raise the NFL’s total revenue by $1.865 billion a year, or another $20-30 million per team in cap money. The cap will affect a lot of the contracts signed this offseason. Expect to see a lot of contracts with low first two-year cap hits and then higher third and fourth-year cap hits.

Another interesting thing is how cap hits are determined. Contracts consist of many elements: salaries, roster bonuses, signing bonuses, incentive and escalator clauses and workout bonuses. Salaries are what the players are paid for those specific years; roster bonuses are paid if the player is on the roster on a particular day.

Signing bonuses are paid the day they sign the contract, but are pro-rated over the first five years. Incentive clauses are paid if the player is hits certain stats, and escalators raise the value of the whole contract based on an incentive. Workout bonuses are normally small, but will get paid if the player works out at the team facilities that offseason. Cap hits are determined based on these elements.



The Salary Cap was put in to make sure guys like Jerry Jones don't buy championships like the Yankees do

Cap hits will take into account many things; the first is the actual salary for that year. The next will be a signing bonus pro-ration for that year, and then any sort of other bonus or escalator hit will also be there. Incentives also qualify as far as likely to be earned (LTBE) vs. not likely to be earned (NLTBE).

So let’s say it’s in Michael Vick’s contract that if he plays all 16 games in a year, he gets an extra $100,000 bonus. It would be considered NLTBE because he didn’t play in all 16 games last year, and therefore, would not qualify towards the cap.

Let’s take a look at a hypothetical example contract for a veteran player that could be incentive laden. For this example, we’ll use Atlanta’s John Abraham. Let’s say he signs a deal that is three years long and will pay him $20 million over the life of the contract, with potential for him to make up to $23.3 million, structured as such:

Signing Bonus: $6 million

Roster Bonus on Aug. 15, 2013: $3 million

Roster Bonus on Aug. 15, 2014: $3 million

Base Salary 2012: $2 million

Base Salary 2013: $3 million

Base Salary 2014: $3 million

Incentives: $1 million if he gets 10 sacks in any of the three years of the contract.

Workout Bonuses: $100,000 every year if he works out at the team facilities in the offseason any of the three years.

So looking into this contract, the Falcons would have cap hits broken down like this:

2012 cap year: $2 million base salary, $2 million signing bonus pro-ration, $100,000 workout bonus: $4.1 million cap hit

Note: If Abraham gets 10 sacks and gets paid the $1 million, it won’t apply to the cap for 2012 because he didn’t do it in 2011. However, the $1 million would apply to the 2013 cap year because it would be LTBE in 2013



John Abraham could make more money than what is counted towards the cap for the life for his contract?
Streeter Lecka/Getty Images
2013 cap year: $3 million base salary, $2 million signing bonus pro-ration, $3 million roster bonus, $100,000 workout bonus, $7.1 million cap hit

Note: If Abraham gets 10 sacks in 2012, an extra $1 million would be added to his cap hit for 2013.

2014 cap year: $3 million base salary, $2 million signing bonus pro-ration, $3 million roster bonus, $100,000 workout bonus, $7.1 million cap hit

Note: If Abraham gets 10 sacks in 2013, an extra $1 million would be added to his cap hit for 2014.

So as you can see, the contracts will create a cap hit that isn’t just the salary. When taking into account the cap hits of all 53 players on the team, they have to add up to around 120 million dollars. That’s just a shade over $2 million per player towards the cap every year.

So when your team signs a guy to a six-year, 45 million dollar contract this offseason, make sure you understand just exactly what it means for your team, because they can structure the cap hits however they want to over the long term.

 

NFL Salary Cap Primer | Inside Football

Q: What is the amount of 2012 NFL Salary Cap?
A: The number hasn’t been determined yet; however, it’s been projected by some to be around $122M. Last year the figure was $120.375M. This is significant because back in 2009, the last capped year of the old Collective Bargaining Agreement (CBA), the cap was up around $128M, meaning that once the cap came back, teams that were close to that $128M mark had to scramble to get under the new $120M limit set for 2011. As teams continue to transition under the new CBA, more of the same scrambling is expected to take place again in the coming days.

Q: Why is it that some teams have so much space at the end of a year while others are constantly pressed against the cap?
A: There are numerous reasons for this, including player incentives not coming to fruition and this being “Credited” back to the team’s following year cap and expiring contracts. Another reason might be contract restructurings designed to reduce a player’s cap hit, players being cut, split bonuses, etc.

Q: How is a player’s cap value calculated?
A: A contract’s value takes into consideration base salary, prorated signing bonus, and any other bonuses. For example, John Doe signs a five-year, $10M contract that includes a $5M signing bonus. John’s base salary for each of the five years of the contract is $1M. His cap number, though, is bumped up to $3M because his signing bonus must be spread over the life of the contract ($2M per year). John won’t get an additional $2M per year – the singing bonus is paid up front by a team. But for bookkeeping purposes, he will count for $3M against the cap for each year of his contract.

Other lesser-publicized monies paid to players that count against the cap include per diem pay (such as for mini camps, training, camp, etc.) Any money paid by a club to a player inflates his value against the cap. This is why trying to calculate the EXACT cap figure for each team can be tricky.

What DOESN’T count against the cap are benefits (health, dental, etc.) paid to a player.

Q: How does one arrive at a figure reflecting how much a team has spent against the salary cap?
A: In the off-season, only the top 51 PLAYER salaries count against the salary cap. These include any outstanding tenders made to exclusive rights and restricted free agents. During the season, ALL player salaries, including those on reserve lists (with the exception of retired players) count against the cap.

Q: What happens if a player is cut before his contract expires?
Let’s use John Doe as an example. Let’s say his team decides to cut him with two years remaining on his contract. Take the remaining prorated bonus ($2M per year times two, or $4M), and take his base salary, $1M. Subtract the remaining signing bonus from the base. The result is minus $3M, which means that John would cost his team $3M in dead money (money that essentially goes to waste and can’t be used on another contract.)
This is why many teams wait to cut a player in the final year on their contract, as usually the base salary is significantly higher than the remaining prorated portion of the signing bonus.

Q: What else do I need to know about the cap and player contracts?
A: Under the current CBA, a veteran player is free to negotiate his contract at any time. However, once he signs his extension, he cannot request a new negotiation for at least 12 months, unless his present contract expires. Players cannot go back and renegotiate for a year completed, meaning Victor Cruz can’t go back and ask for more money despite the year he had in 2011. Also, rookie contracts cannot be renegotiated for one year after the rookie has signed on the dotted line, or the following August 1, whichever is later.

Q: If a player receives a contract extension before his present deal expires, how does that affect his cap value?
A: The new signing bonus is prorated over the remaining years of the contract PLUS the extension. So for example, if John Doe has two years left on his contract and a cap value of $3M, and he signs a two-year contract extension that carries a $2M signing bonus. That $2M is split into fourths, with $500K additional being tacked on to the remaining two years of his first contract, and the other two $500K installments added to each year of the extension.
Q: Does the June 1 rule still exist?
A: If a team cuts a veteran player after June 1, the remaining signing bonus will be spread over two years rather than accelerate into the current year’s cap. For example, John Doe is cut in year 2 of his contract with $2M left on his signing bonus and a base salary of $1M before June 1. His team is hit with dead money ($1M base salary less $2M signing bonus equals $1M in dead cap space).

If John is cut AFTER June 1, only $1M of his remaining $2M signing bonus hits the current cap year with the remaining million being dumped into the next year’s cap. Thus, if you subtract the $1M signing bonus from the $1M scheduled base, John Doe ends up costing his team ZERO against the current year’s cap; however, in the next year’s cap, he’ll end up costing his team $1M against the cap.
Q: What happens if a player has a voidable year in his contract?
A: If a player reaches all the incentives in a contract that trigger a void (shortening) of a contract year, the signing bonus will count against the team’s salary cap for the following year.

Q: What happens if a player is traded or waived?
A: If a player is traded or waived, any remaining prorated signing bonus money automatically accelerates against the current year’s cap. However, the old team is no longer responsible for any base salaries that will be paid to the player; that responsibility is absorbed by the new team. In essence, a trade can create dead money against a team’s cap.

 

tl;dr

 

I ain't reading all that words and shit yo.

 

thanks. This is all as I've understood it to be.

it's interesting how much guaranteed contracts change things. DW's contract, should it be traded, recoups $2.6 million of the guaranteed salary off this year's books, and since we're into the season, the signing bonus proration is going to all go to next year. So monetarily there's no point. Hurts you next year no matter what, can't use the additional money you'd get this year. So does a draft pick offset all that dead money? Maybe not. Interesting enough, ESPN said that DW's contract is 14th greatest at RB, which seems low honestly because so many RBs are on a rookie deal.

Carolina paid a premium to keep their guys, and I was on board with it. Because it's changing, not rebuilding. But, the ideal of those is under the thought that things are staying the same, and clearly they're going to change again. So being fucked sucks a little more, because you might be forcing a few players on a coach instead of the assumed built-in want.

 

I'm sure that's not correct.

 

Per spotrac.com he is fif in base sal and average salary for 2012

 

"ESPN said that DW's contract is 14th greatest at RB, which seems low honestly".

No idea where their number came from.

 

A mistake, evidently.