Salary Cap Primer: FAQ

Your guide to roster cuts and the business side of the NFL.

The following are some frequently asked questions regarding the salary cap, roster cuts and how it affects the financial side of things. If you have a GENERAL question that’s not answered here, please post a comment under this page and we will add your question and an answer accordingly. 

 

Q: How much cap space do the Giants have?

A: That figure is technically fluid for a couple of reasons. First, the NFL Management Council and NFLPA are still performing auditing/accounting functions regarding players who earned incentives such as playoff berths, Pro Bowls, percentage of snaps played, number of interceptions, etc. Depending on how a player’s contract is written, these incentives will either increase the current year’s cap figure or affect next year’s figure.

Second, and most important: We do not know what the 2017 cap figure is.  Over the Cap is estimating the 2017 NFL cap to be $168 million.  Once all the accounting is done, many teams will then have a surplus of left over cap space form 2016 that they can carry over into 2017.

 

Q: What happens when a player is cut or retires?

A: Depending on when a player is cut, the team saves on the player’s base salary, workout bonus, roster bonus and any incentives. The team does, however, get charged for the prorated signing bonus left on the contract.

Let’s use Victor Cruz as an example. Cruz has two years remaining on his contract. If he were to be cut before the start of the league year, the Giants, according to figures obtained from Spotrac,  would save his base salary ($6.4 million), his roster bonus ($1 million) and a $100,000 workout bonus. That’s a $7.41 million savings.

Now here’s where it can get a little confusing. Cruz’s signing bonus prorated to $1.9 million per year. For accounting purposes, the final installment is due to hit the Giants’ books in 2017. So, the Giants would save $5.51 million if they were to cut Cruz ($7.41 million less the $1.9 million.)

 

Q: What is a post-June 1 cap cut and how does that affect the salary cap space?

Teams can designate two players per offseason to be post-June 1 cap cuts.  In the last CBA, this rule was tweaked to allow teams to cut players before June 1 (so that the players could look for work elsewhere rather than be left twisting in the wind after free agency and the draft).

When a player is designated as a post-June 1 cap cut, this means his entire cap figure must be carried on the team’s books until June 1. After that date, the current year’s prorated signing bonus comes off while the balance accelerates into the following year’s cap.

This is a method used to lessen the cap hit of someone who has a big prorated signing bonus remaining because players who are cut before June 1 have whatever is left of their signing bonus dumped into the current year’s cap as dead money.

Example: Dwayne Harris has three years remaining on his contract and is also is due to count for $2.4 million in dead money if he were to be cut this year and not designated as a post-June 1 transaction.  If the Giants were to designate Harris as a post-June 1 transaction, instead of being charged $2.4 million in dead money, they would be charged $800,000 (the prorated amount of Harris’ signing bonus) with the remaining $1.6 million set to hit the 2018 cap as dead money.  That would make the net 2017 savings $2.2 million.

 

Q: What is the Top 51 rule and what bearing does it have on the cap space?

A: The Top 51 rule makes it possible for NFL teams to grown their rosters to 90 men for training camp without isolating cap rules. Simply put, the Top 51 consists of the 51 highest total cap figures for the current league year. Cap figures include the player’s base salary, prorated signing bonus, workout bonus, roster bonus and any likely to be earned incentives.

 

Q: Can the Giants trade a player who is set to become a free agent?

A: No. Per the league rules, trading cannot commence until the start of the new league year, which for 2017, is March 9, 2017. That date just so happens to be the same date that player contracts expire (that is, those players who are signed through the 2016 season).

 

Q: Let’s say the Giants do trade for another player. How does that affect their salary cap?

A: When a team acquires a player’s contract from another team, the only thing the acquiring team gets charged for is the player’s base salary and any incentives. The acquiring team is not charged for the prorated signing bonus; the team that traded the player must carry what’s left of that player’s signing bonus on their books.

 

Q: What are the elements in a contract and how do they affect a player’s cap figure?

A: The two most familiar elements in a player’s contract include his base salary and his signing bonus. According to Article 27, Section 2(b) of the current CBA, unless otherwise structured during the contract negotiation, all base salaries will increase by at least $80,000 in 2017 and $90,000 starting in 2018. The signing bonus is the amount the player gets when he signs his name to the contract. Because this is cash paid up front, usually the first year’s base salary is “below” market value.

Example: Per Spotrac, defensive end Olivier Vernon’s 2016 base salary was $1.75 million but he received $20 million to sign. Vernon’s 2017 base salary will rise to $11.75 million.)

Another element is a roster bonus, which is usually paid by the fifth day of the new league year (though in some cases, teams might stipulate that a roster bonus be paid if the player makes the 53-man roster coming out of camp).

There is a workout bonus, which is usually one of the smaller parts of the contract. Players can qualify to get these bonuses if they attend a set percentage of the teams offseason workouts. (These workout bonuses are apparently a way to put money in the players’ pockets since they only get game checks during the season.)

There are also incentives broken down into Likely to Be Earned (LTBEs) and Not Likely to Be Earned NLTBEs).

The former category, as the name suggests, are some easy to reach incentive, e.g. umber of snaps played, number of sacks, number of interceptions, weight bonuses, reporting bonuses, etc.  If a LTBE isn’t achieved, the club receives a credit against the following year’s cap figure (hence the accounting process mentioned in the first question!)

A NLTBE doesn’t count against the current year’s salary cap; rather, it hits the following year.

Example: In 2016, cornerback Dominique Rodgers-Cromartie had a NLTBE incentive regarding interceptions. Rodgers-Cromartie met his quota; thus, he triggered an escalator in his 2017 salary which will count against the team’s books in 2017 even though the incentive was reached in 2016.

 

Q: What about guaranteed money? How does that affect the cap?

A: Guaranteed money paid to a player imply means the team is on the hook to pay the player whatever amount was guaranteed unless there is offset language that nullifies the payment. (Offset language means that if Player A gets cut and signs with another team, if there is offsetting language in his previous contract, he will not be able to college two paychecks simultaneously.) Most teams do not release players who are due guaranteed money as doing so is bad business—think of it as paying for a service you’re not getting.

 

Q: What is a Minimum Salary Benefit Contract and how does it affect the cap?

A: This type of contract is a way for teams to sign those older players who carry a high minimum base salary and have them count the same as a second-year player.  To be eligible, the player must sign a one-year deal for the minimum base salary for which he is eligible and not earn more than the maximum amount of Additional Compensation (signing bonus, incentives, etc.).

In other words, if the maximum additional compensation is set at $80,000, a veteran with 10 years of experience who signs a minimum salary benefit contract will only count the same as a second-year player as far as base salary is concerned.