Salary Cap FAQ

We compiled a list of questions people seem to ask a lot on the boards with respect to the Salary Cap.  We hope our users find these questions useful.

1) How much does each team have to spend against the NFL Salary Cap?

The NFL’s Salary Cap for 2003 is $75.007m.

2)How is the NFL Salary Cap determined?

The Cap is determined through a complicated calculation system. The Cap is based on income that the teams earn during a League Year. A percentage of that income, termed Defined Gross Revenues (DGR), is allocated for player expenditures. The DGR is based on ticket sales, merchandise sales, and broadcasts. The DGR is divided equally amongst all 31 (soon to be 32) teams.

For all of you nerds out there, here is the actual Mathematical Calculation:

(Projected DGR x CBA Percentage ) = Players Share of DGR

Players Share minus Projected League wide Benefits = Amount Available for Player Salaries

Amount Available for Player Salaries / Number of Teams = Unadjusted Salary Cap per Team

The CBA Percentages agreed upon in the CBA Extension agreement are as follows:

2003 64.25%

2004 64.75%

2005 65.5%

2006  64.5%

2007 Uncapped Final League Year.

3) What are the minimum salaries that can be payed top players?

The CBA agreement outlines the minimum salaries payable to players.  The amount depends on the number of credited seasons players have in the NFL, and the amounts escalate up to and including 2007 (the uncapped year).

Credited Seasons 2002 2003 2004 2005 2006 2007
0 225K 225K 230K 230K 235K 235K
1 300K 300K 305K 305K 310K 310K
2 375K 375K 380K 380K 385K 385K
3 450K 450K 455K 455K 460K 460K
4-6 525K 530K 535K 540K 545K 545K
7-9 650K 655K 660K 665K 670K 670K
10+ 750K 755K 760K 765K 770K 770K

4) How does a signing bonus effect the cap hit for each year?

The amount of the signing bonus is prorated evenly over the life of the contract.  So if a player signs a 5 year contract that includes a $5m signing bonus, $1m of the signing bonus will be allocated against the teams salary cap each contract year for accounting purposes.

5) What are void able years in a contract and how do these years affect the pro-ration of the signing bonus?

Many contracts these days in the NFL included clauses for "voided years". These are typically incentive laden additions to contracts that will allow the player to file for Free Agency sooner if certain goals are obtained. Void able years can be included when determining the term of years for signing bonus pro-ration. However, if the player meets the goal that voids the year or years of the contract, any amount of the signing bonus that was allocated to the voided year or years will be accelerated and added immediately to team salary. If the accelerated signing bonus puts the team over the Salary Cap, the amount that the team is over the cap will be deducted from the team’s Salary Cap for the next year.  If a player can void a contract based on a "likely to be earned incentive," and the player is on the roster at a later time, there will be no acceleration. If a contract is renegotiated to reduce the number of years of the contract, the portion of the signing bonus that has not been allocated is included in team salary at the time of the renegotiation.

6) What is the basic way to come up with a players' cap figure for any given year?

Basically a players cap figure is made up of base salary, prorated signing bonus, any likely to be earned incentives, any unlikely to be earned incentives from the previous year that were in fact earned, any roster, reporting, workout or option bonuses, and any prorated restructure bonuses.  The only other possible charge is from the "Deion Sanders Rule".

7) What is "Dead Cap Money?">

Dead cap money is the part of a players salary, prorated signing bonus, other bonuses and incentives earned that count towards a teams Salary Cap even though the player is no longer on the team.

8) Do all players on a teams roster count against the Salary Cap?

Between March 1 and opening day only the 51 highest paid players count against the Salary Cap, even though the team could have up to 80 players on the roster at times.  This is called the "Rule of 51".  From opening day until the end of the season all players on the roster count against the cap.

9) How does a restructuring work, in general?

The most common form of restructuring is to reduce the base salary in the year of the restructure and use the difference (or some other agreed amount) as a new signing (or restructure) bonus.  If a player restructures his contract and gets a new signing bonus, the new signing bonus is prorated over the remaining years of the original contract and also over the extension. The allocation of the original signing bonus remains unchanged.  For example, Player X is currently in the third year of a four-year deal (1997-2000) that paid him a $1 million signing bonus.  In 1999, Player X renegotiates his deal extending his contract to the 2002 season while getting a $2 million signing bonus.  The original $1 million signing bonus is allocated at $250,000 per year over 1999 and 2000 just as it would be if there were no renegotiations.  However, the new $2 million signing bonus is allocated at $500,000 per year over the remaining two years of the original contract (1999-2000) and the extended two years (2001-2002).

10) How are the cap hits applied when a player is cut before June 1, or after June 1?

If a player is released before June 1 all current and future prorated signing bonuses, and any other guaranteed monies that might have been part of his contract, count against the teams Salary Cap in that year.

If the player is released after June 1 then the unallocated signing bonus portion of the contract is split over two years.  In the current year, that years proration counts against the Salary Cap while all future years prorated signing bonus figures count against the Salary Cap the following year.

11) What is the rookie pool and how does it work?

A teams Salary Cap includes the Rookie Minimum Active Salary Pool as of the day of the draft for all drafted rookies. The salary for drafted rookies will stay at this amount until the player is signed, the team’s rights are relinquished through waivers, or until the Tuesday following the tenth week of the regular season if the player is unsigned.

12) How does the veteran minimum salary system work?

The system was implemented to make it less costly to retain older veterans at the minimum salary. Under this new system, the Salary Cap count for a player with four or more Credited Seasons who signs a contract will be the same as the count for a player with three Credited Seasons.

The difference between the Salary Cap count for a qualifying contract and the stated minimum for the qualifying player's years of service will be counted as a Player Benefit and as such is not charged against the teams Salary Cap.

For example, in 2003, a veteran player with 5 Credited Seasons will receive a Minimum Salary of $530,000; however, only $450,000 will count against his club's Team Salary. The difference of $80,000 will be counted as a Player Benefit and be paid out of the NFL-wide benefit pool. Similarly, a qualifying player with 12 Credited Seasons will receive a Minimum Salary of $755,000; however, only $450,000 will count against his club's Team Salary. The difference of $305,000 will be counted as a Player Benefit and be paid out of the League-wide benefit pool. As a result, the 10-year veteran making $755,000 will cost the club the same as the three-year veteran making $450,000.

What veterans contracts qualify for this system?

(a) A new, one-year contract at the minimum signed after previous contract had either expired or been terminated; or

(b) A continuing, multi-year contract signed before December 1, 2003 that calls for payment of the applicable minimum in 2004.

Additional compensation in either contract described in (a) or (b) above is limited to a maximum per year total of $25,000, including allocated signing bonus, roster bonus, reporting bonus, and incentive bonuses (whether or not likely to be earned

Salary guarantee and/or salary advance, if any, is limited to the minimum salary for a player with three credited seasons (for example, $450,000 in 2003).

The Player Benefit Pool also allows for up to $200,000 in additional incentives to be paid as benefits to qualifying veterans.

13) What affect do players who are restricted free agents have on the Salary Cap?

For Restricted Free Agents (RFA), a Qualifying Offer is included in the team salary. This amount remains in team salary until the player is signed, the Qualifying Offer is withdrawn, or a "June 1 tender" is made.  If the player is unsigned and the Team makes a June 1 or June 15 offer, this offer will be included in team salary until the player is signed, the team gives up their rights to the player, or until the Tuesday after the tenth week of the regular season if the player is unsigned.

14) What is the "Deion Sanders Cap Rule?>

Basically, it means that in a contract that extends into an uncapped year (right now, 2007 and beyond), the player's combined salary, roster bonuses and reporting bonuses in all capped years must be equal to or greater than the combined prorated signing bonus allocations in the capped years.

So, using your example – a $7 million signing bonus over seven years -- the combined salary, roster bonuses and reporting bonuses in the first four years must total at least $4 million. If they don't, the difference (up to half of the signing bonus allocations in the uncapped years) is prorated over the first four years of the contract, then credited back in equal portions to the uncapped years. For convenience, let's say that the player in question gets annual base salaries of $900,000 for all seven years. His cap numbers would look like this:

2003 $2 million (incl. $100,000 Deion charge)
2004 $2 million (incl. $100,000 Deion charge)
2005 $2 million (incl. $100,000 Deion charge)
2006 $2 million (incl. $100,000 Deion charge)
2007 $1,766,667 (incl. $133,333 Deion credit)
2008 $1,766,667 (incl. $133,333 Deion credit)
2009 $1,766,666 (incl. $133,334 Deion credit)

Add it all up, and it's $13.3 million, the same as if it had been a straight $1.9 million per season. The only difference is that $400,000 extra was charged in the capped years and credited back in the uncapped years.

15) What is the "Barry Sanders Rule"?

Due to the Salary Cap, owners are now investing a greater amount of money up front for players in the form of guaranteed signing bonuses.  Thus, the owners must try to protect their investments by including language in the contract that calls for a player to return a portion of the signing bonus to the team if the player "fails or refuses" to practice or play with the team. In certain situations, a team will be repaid some of the signing bonus it paid to a player (i.e., a refund), or a team will fail to pay part of a signing bonus that was already allocated toward team salary.  If this happens, the amount previously included in team salary will be added to the team’s Salary Cap in the next year.