The NFL Salary Cap

Introduction


What is the salary cap?

The Salary Cap is one element of an agreement between NFL teams and the NFL Players Association that limits how much each team can spend on player compensation in a given year.

 Why have a salary cap?

The idea behind a salary cap is to help maintain competitive balance in a league. Without one, teams with higher revenue could outspend the other teams and collect all the best free agent players. They would also have the freedom to absorb bad contracts, which in essence lets them cover for making bad decisions.

Without turning this into a political discussion or getting too deep into revenue sharing, let’s just say that it’s generally in the best interest of every team, large market or small, to have as much competition as possible. The NFL can’t function the same way a regular economy does. The richer teams can’t make as much money without the presence of the poorer teams, so it’s helpful to keep the playing field level.

When did the salary cap start?

The salary cap was instituted in 1994. It was originally $34.6 million.

What is the current amount of the salary cap?

In 2013, the salary cap will be $123 million per team, representing s small 1.9% increase over the previous year.

How is the salary cap calculated?

The NFL salary cap is calculated using a formula that is defined in the Collective Bargaining Agreement (CBA). Put simply, it’s a percentage of the league’s revenue. It is defined in more detail in the following section.

Revenue


Calculating Revenue

There are eighteen pages in Article 12 of the CBA that define and subdivide revenue. Most of it goes well beyond our level of interest. For the purposes of the Salary Cap, All Revenue (AR) is subdivided into three categories: League Media Revenue; NFL Ventures/Postseason Revenue; and Local Revenue.

Calculating Player Costs

The formula for calculating the total Player Cost Amount is:

55% of League Media AR + 45% NFL Ventures/Postseason AR* + 40% Local AR – 47.5% of the Joint Contribution Amount**

In 2011 the Player Cost Amount was pegged at $4,556,800,000, or $142.2 Million per team. From that, $704,800,000 ($22,025,00 per club) covers benefits, leaving the 2011 Salary Cap at $120,375,000.

Adjustments

In 2011 they pegged the Salary Cap due to the aborted off-season. In future seasons, Revenue will be estimated by accountants and the Salary Cap will be set based on those estimates. At various times throughout the year, new Special Purpose Letters will be issued by the accountants, and if necessary the cap will be adjusted via what is known as a “True Up.”***

After all those calculations are run, there is still some math to be done to be certain that the Total Player Cost falls within a pre-defined “band.” From 2012-14, the Player Cost Amount cannot exceed 48% of AR. If, using the above formula, it does, they adjust it down to 48% of AR. This upper limit goes up to 48.5% in 2015 for the duration of the CBA.  If the Player Cost Amount ends up being below 47% of AR, it gets adjusted up to that lower bound.

If you remember all the fighting about splitting revenues 50/50 during the 2011 Lockout, this sounds like a big win for the owners. And if you’re wondering why they didn’t just use this band out of AR for everything instead of splitting it into the more complicated formula above, you’re not alone. And you’ll also love the next part.

After all of that fun math, there’s still one last thing to do: Apply the Stadium Credit.

The Stadium Credit is just what it sounds like: a credit given for a portion of any private funds used as part of approved stadium construction or renovation projects commenced during the life of the CBA. There are a few modifications to this related to PSLs and investments and other things that get pretty complicated and boring, but for the most part, 50% of private stadium costs (and 75% if it’s in California) get held back from the final cost.

But that’s subject to a band as well. The Stadium Credit cannot reduce the Player Cost Amount below 47% AR in 2012-14, 46.5% AR for 2015-2016, and 46% AR for 2017-2020.

This is the stuff they spent all of Summer 2011 fighting about, folks, and this is the solution. No wonder it took so long.

So:

Do all that math, split it 32 ways, take out the benefits, and there’s your Salary Cap.

In 2012-2013 they also included a floor, above all that Band stuff, that forces the Cap to remain at the 2011 level if revenues drop. Further, even if the Cap rises in either year, there cannot be a negative True Up applied. 2014 is the first year when all the math really gets used. Luckily for everyone, that’s the first year of the new TV contracts, which means everyone’s going to get a huge raise regardless of whether the players get 47% or 48.5% of the pie.

Unluckily for you, the reader, is that that’s still not the end of this.

Guaranteed Player Cost Percentage

To this point we’ve been talking about revenue, calculations, and costs as they apply to single seasons. There are further provisions to ensure that the players get a minimum amount spanning the entire length of the CBA. This minimum amount is 47%, which is the Guaranteed Player Cost.

If you think back to the lower bound of the band we discussed, you’ll see that it descends to 46% for those final four years. If the Player Cost Amount ends up hovering at the lower bound of that band for several years, that would drag down the overall percentage of money spent on Player Costs over the full term of the CBA. So what they do is, in addition to the yearly calculation and tweaking, keep a running count of AR and Player Cost Amount. The percentage split of this running count is the Overall Average, and this MUST be 47%.

If this Overall Average is found to have dipped below 47% at the end of a League Year, there will be an adjustment to the following year’s Salary Cap to add that amount, which puts the Overall Average back to 47%.

This effectively pegs the Revenue split at 47% for the rest of the CBA, as if in any subsequent year after an adjustment the Overall Average goes back above 47%, the owners get to do a “recapture,” which is basically the opposite of the adjustment, though the dollar amount of the recapture cannot exceed that of the adjustment.

Guaranteed League-Wide Cash Spending

The previous section dealt only with the percentages that go into setting the Cap. This provision deals with actual minimum cash spending. In 2011 and 2012 this is 99% of the Cap, and for the 2013-2016 and 2017-2020 four-year periods it will be 95%. This figure refers to actual cash spending, including all salaries and bonuses, paid or committed to be paid. Within this, there is also a minimum set per team.

Minimum Team Cash Spending

For the four-year periods 2013-2016 and 2017-2020, each TEAM has a Guaranteed Minimum Cash Spending of 89% of the Cap.

All of these provisions and calculations ensure a fair split of revenue between owners and players.

Got it? Good. Let’s move on.

* Within this item, an expense deduction can be taken for investments in other business projects. If those projects are profitable, however, 50% of the net AR from the projects is included in this segment of revenue.

 ** The Joint Contribution Amount will be set at $55 million in the 2012 League Year and increase by 5% each subsequent year. Of this, 40% is for health care benefits for retired players, 40% is dedicated to charities, and 20% is dedicated to medical research as agreed to by the NFL and NFLPA. 

*** A True Up is a retroactive Salary Cap credit given for the upcoming year, if the accountants run the final revenue numbers for the previous year and they’re different from the numbers used to set that year’s Salary Cap. So if in 2012 it turns out that the 2011 Cap should have been $125 million, the 2012 Cap will get bumped up by the difference. This actually happens more than once before the following season actually starts. And any True Up is exempted from other calculations based on that year’s Revenue or Cap (since it is a credit from the previous year). Of course, this True Up can also be negative, except in 2012 and 2013.

Rosters


Preseason

In the 2006 CBA, Preseason roster sizes were decreased to 80, and teams lost the 5 exemptions they had that let them carry up to 85 players for a while.  The 2011 CBA allows for 90 players during the preseason. Typically there is a cut-down date where rosters are trimmed to 75, usually after three preseason games, and then shortly after that the final cuts are made to get down to the 53-man roster.

During the preseason, first-year players are paid weekly in the following amounts: $850 (2011–12), $925 (2013–14), $1,000 (2015–16), $1,075 (2017–18), $1,150 (2019–20). Veterans receive: $1,600 (2011–12), $1,700 (2013–14), $1,800 (2015–16), $1,900 (2017–18), $2,000 (2019–20). These weekly payments apply from the first day of camp until one week before the first regular season game.

Active Roster

Prior to the 2011 CBA, teams had 45 active (dressed) players for each game, plus an emergency third quarterback if desired. If the third QB entered the game before the fourth quarter, the first two QBs would both be ineligible to return.

In the new CBA, this rule was amended to just increase the active roster to 46 with no conditions. The 46th man need not even be a Quarterback now.

The Active list can be as small as 43 players, should a team make the decision to play short-handed.

Inactive Roster

These players are part of the roster and are paid with NFL Player Contracts, but do not dress as part of the 46 man active roster on Sunday. The decision on who is “up” and “down” is made 90 minutes before game time.

Practice Squads

Each team has a Practice Squad that consists of eight players. These players are free to sign with any other team in the league, provided that the new team pays them three weeks of salary at the NFL minimum, which is substantially higher than the Practice Squad weekly salary. That team must also keep him on the 53-man active/inactive list for those three weeks, regardless of whether they actually retain him.

To be eligible for a practice squad, a player must have less than nine weeks of service (on the active/inactive list) for a team in his one Accrued Season and less than two years of experience on a Practice Squad. A player can serve a third season on a Practice Squad if the team keeps 53 players on the Active/Inactive list at all times (which is normal practice).

Practice Squad players receive the following per week, including postseason weeks:

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$5700 $5700 $6000 $6300 $6600 $6900 $7200 $7600 $8000 $8400

Salary


How is Salary defined? What is P5 Salary?

In the NFL, salary refers to any compensation – including anything of value, not just money – that a player is entitled to under the terms of his player contract, with the exception of benefits.

When thinking about the salary cap, though, that definition isn’t especially helpful. NFL players are compensated with all kinds of different types of payments, included but not limited to Paragraph 5 (hereafter P5) Salary, signing bonuses, option bonuses, workout bonuses, roster bonuses, and all sorts of other clever devices and performance-based escalators.

For the most part, when people refer to salary, they mean the P5 salary, with the P5 referring to the fifth paragraph of the standard NFL player contract. When computing how a player fits into the salary cap for a given league year, this is always relevant, though of course there are also many other things that can also add to a player’s total salary cap hit.

What is the Minimum Salary?

Minimum salary is based on the number of credited seasons a player has.

#CS 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
0 $375 $390 $405 $420 $435 $450 $465 $480 $495 $510
1 $450 $465 $480 $495 $510 $525 $540 $555 $570 $585
2 $525 $540 $555 $570 $585 $600 $615 $630 $645 $660
3 $600 $615 $630 $645 $660 $675 $690 $705 $720 $735
4–6 $685 $700 $715 $730 $745 $760 $775 $790 $805 $820
7–9 $810 $825 $840 $855 $870 $885 $900 $915 $930 $945
10+ $910 $925 $940 $955 $970 $985 $1000 $1015 $1030 $1045

(all amounts in thousands of dollars)

(CS = Credited Seasons)

Beginning in the 2011 League Year, the Minimum Salary of any player not on a Club’s Active/Inactive List (excluding Practice Squad) shall be as follows:

#CS 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
0 $258 $273 $288 $303 $318 $333 $348 $363 $378 $393
1 $273 $288 $303 $318 $333 $348 $363 $378 $393 $408
2 $288 $303 $318 $333 $348 $363 $378 $393 $408 $423
3 $328 $343 $358 $373 $388 $403 $418 $433 $448 $463
4–6 $353 $368 $383 $398 $413 $428 $443 $458 $473 $488
7–9 $378 $393 $408 $423 $438 $453 $468 $483 $498 $513
10+ $403 $418 $433 $448 $463 $478 $493 $508 $523 $538

(all amounts in thousands of dollars)

(CS = Credited Seasons)

For the purposes of these calculations, a player earns a Credited Season by being on an active/inactive roster for three games.

Is there a maximum salary?

No.

Well, that’s not entirely true. The maximum salary is the amount of that year’s Salary Cap, minus whatever costs are required to pay a minimum salary to enough players to field a roster. This would not be a good way to structure a roster, of course.

Is there a salary floor?

Yes, there is. This is described in the revenue section. This is also a part of the annual calculation, but it gives a bit of flexibility to teams that have to account for dead money from previous years. In the new CBA, the floor is enforced at the end of two four-year periods (2013-2016 and 2017-2020), with any team failing to meet the floor being forced to pay, retroactively, any unpaid amount spread out amongst anyone that was on their roster for that entire time period. (The busywork involved in figuring that out and distributing it alone should be enough of a deterrent to teams.) The guaranteed Minimum Team Cash Spending is 89% of the Salary Cap for each four-year period.

Are NFL salaries guaranteed?

No. Unless specifically written into the contract, salaries are not guaranteed.

You may be familiar with the media announcing contracts using language like “eighty million dollars, thirty of which is guaranteed,” however, and most large contracts have substantial guaranteed amounts. The guarantees are usually in the form of bonuses though, not the actual P5 salary.

Funding Deferred and Guaranteed Contracts

That said, P5 salary can be guaranteed and often is. This is subject to some conditions, though, and the league often requires that a future guaranteed salary be set aside (or “funded”). This is essentially an escrow account, and the team is required to deposit the present value of the future amount (calculated using the Discount Rate), less $2m, not to exceed 75% of the total value of the contract.

Types of Guarantees

Guarantees for Injury

Some contracts are written in such a way that a salary can be guaranteed for injury, which just means that if the player cannot play due to a football-related injury, he still receives his full salary. This differs slightly in amount from the standard injury coverage.

Guarantees for Skill

Less common are guarantees for skill, which guarantee a salary even if the player is cut for skill-based reasons (ie, skills have declined or he has been beaten out by a superior player for a roster spot).

Guarantees for Cap-related Termination

Sometimes a team, due to poor planning and/or other circumstances, is forced to release players to avoid paying their salary, thus clearing space under the Cap. This guarantees that the player will still receive his salary. It also makes it less likely that he’d be the player cut for Cap relief, though it’s still possible. If a team needs relief under the 2015 cap and cuts him mid-season in 2014, that guaranteed amount is included in the 2014 Cap.

How is the total team salary computed?

We discussed the rules by which the actual Salary Cap and floor are calculated in a previous section. Now we can dig into the many factors that influence how spending counts against the Salary Cap in any year. Remember, Team Salary must be less than or equal to the Salary Cap.

All of the following amounts are included when determining a team’s Team Salary:

Player contracts

All that the team has paid or will pay to current or former players, including option bonuses.

Tenders

We’ll cover these later, but any player who has been tendered will have a pre-determined amount that will count against the cap, even though the player is not currently under contract. This applies to newly drafted rookies, franchise or transitional players, restricted free agents, and any other exclusive rights player. Obviously this portion of the cap is more of a placeholder during the off-season, as if a contract isn’t eventually signed and the player doesn’t play, a team would make another move. There are other similar placeholders used during the offseason as well, such as any amount over a rookie minimum paid to a player whose salary is not among the 51 highest contracts on the team, if such a player exists.

Practice Squad Contracts

These are relatively inexpensive, but the players on the practice squad do count toward the salary cap.

Termination Pay

If any player has a form of termination pay in his contract and is released, that payment counts against that year’s cap.

Grievances

This is an interesting one. If a player files a salary grievance against the team, 40% of the amount claimed will be counted against Team Salary until the grievance is resolved or until the end of the league year (whichever comes first). If and when the grievance is settled, if it is past the end of the league year, the team can potentially be given a credit against the next year’s cap if they win the grievance. Likewise, if they lose and pay more than the 40%, that could count against the following year’s cap as well.

Offseason workouts

Every team’s Team Salary will be charged for the wages they pay players for completing offseason workouts. Yes, these are PAID workouts. For 2011, these are paid at $155 per day. When you multiply that by 80 players, 4 days a week, and 9 weeks, that ends up being almost half a million extra dollars of leeway that needs to be left per team.

Bonuses

There are so many different types of bonuses that they’re going to get their own section. Some fit into Team Salary for that season, while others do not.

Bonuses, Proration, and Acceleration


Signing Bonuses

Due to the non-guaranteed nature of most NFL contracts, it has become common practice in contract negotiation to include signing bonuses, which are paid up front to offset the risk that a player will be cut in a future season and earn no money. If a team has millions of dollars invested in a signing bonus, they’ll be more likely to want to get a return on that investment in future years, and the player is protected even if he loses the salary in that future year.

Option Bonuses

An option bonus is similar to a signing bonus, but is paid in a future year. A contract may be written in 2011 that includes an option bonus for 2013. What this means is that the team has the option to extend the contract beyond that point, and by exercising that option, they are effectively paying a new signing bonus. You can view any years and bonuses on the contract after the Option as a new contract if you want; it is effectively the same thing.

Roster Bonuses

Also written into the contracts at the time of signing, these future payments are bonuses for being on the roster at a certain point, most frequently at the start of a season. These are not guaranteed, but assuming the player is still effective on the field, they’re relatively easy to earn.

Reporting Bonuses

These are similar to roster bonuses. They’re not guaranteed, but they’re paid if the player shows up to camp.

Workout Bonuses

Teams will often pay workout bonuses to players in addition to the workout program per diem. This is primarily used as a motivational tool.

How Are These Bonuses Handled for Cap Accounting Purposes?

Bonuses are the first of many things that make the NFL Salary Cap so tricky and interesting. They are accounted for in different ways depending on the timing, the amount, whether they are guaranteed, and based on many other factors as well.

In the simplest terms, non-guaranteed bonuses are lumped in with P5 Salary for accounting purposes and count against that year’s Cap, while guaranteed bonuses are lumped in with Signing Bonuses and are spread out over several years, which is known as Proration.

What is Proration?

Proration is simple, but often forgotten by writers: Any signing bonus paid to a player upon the execution of his contract is prorated over the term of that contract (up to a maximum of five years). A $5m signing bonus for a 5-year contract is prorated at $1m per year.

If a contract is extended, or another future-season bonus is paid, those bonuses also prorate, but not until the point at which the bonus is paid.

What is Acceleration?

Acceleration is what happens if a team decides to cut a player to whom it paid a bonus before the end of the proration. Using that same $5m bonus example, if the team cuts the player after 3 seasons, $2m of proration remain. That money is accelerated onto the salary cap for that league year. This is what is known as “dead money,” and this is one of many things that can get a team into serious trouble when managing the salary cap. The reason this acceleration must happen is that the money was paid. Every dollar spent must count against the Salary Cap, and a team may not extend that money beyond the point at which the player was actually on the team.

Exceptions

There are exceptions to both of those rules. If a player has the right to terminate his contract due to events in his sole control, that season is NOT counted as a contract year for the purposes of proration. Much like proration is a small but common hurdle in cap management, this loophole can be useful in planning and manipulating cap totals in future years.

With regards to acceleration of dead money, there is a June 1 exception. If a player is cut before June 1, all the money accelerates into that league Year. If the cut is after June 1, that year’s proration remains, but the rest of the dead money accelerates into the following year. This is how a player can theoretically count against a team’s cap in 2013 even if he is cut long before the 2012 season, and is just one technique used by teams to delay cap hits when beneficial.

In any league year preceding the final league year of a CBA, teams also have the freedom to designate two player contracts that they can terminate before June 1 and still treat as post-June 1 cuts.

Besides the Signing Bonus, What gets prorated?

The following items are lumped in with Signing Bonus for purposes of proration:

  • Anything specifically described as a signing bonus
  • Any guaranteed Reporting Bonus
  • Any option bonus or guaranteed option buyout amount
  • Any difference between Salary in the first and second contract years when the second year salary is less than half the salary in the first.
  • Any reporting bonus in the season of signing if the signing occurs after the start of camp (ie, player immediately reports)
  • Any roster bonus in the season of signing if the signing occurs after the final preseason game (ie, the player is already on the roster)
  • Any guaranteed salary advance
  • Any guaranteed workout bonus
  • Any salary advance that does not require repayment
  • Any completion bonus paid solely for playing out a contract without holding out and guaranteed otherwise for skill and injury
  • Any relocation bonus
  • Any salary increase for that year if the contract is not complete by the 10th week of the year
  • Any offseason roster/reporting bonus, any workout bonus requiring less than 50% participation, or any salary advance not requiring repayment, if these take place in the year after the final league year of the current CBA.
  • Any amount of a salary advance or offseason workout/roster/reporting bonus that is guaranteed on a non-contingent basis

Incentives

In addition to paying signing bonuses and salaries, it is quite common to load contracts with incentives as well. This has the benefit of rewarding players for jobs well done, motivating them to play harder, and yes, as you may be able to guess, creative use of incentives can lead to ways to manipulate the Cap.

Incentives are classified in two ways.

Likely to be Earned (LTBE)

All incentive amounts and performance bonuses are included in Team Salary if they are considered “likely to be earned” during that league year based on his or his team’s performance in the previous year. In the simplest terms, if a player has a $1m salary and $250,000 in LTBE incentives, his Cap hit is $1.25m.

If an incentive is NOT Likely to be earned (nLTBE), the player’s Cap hit is just his $1m salary.

Defining whether an incentive is LTBE is where all the rules and fun come in.

Any incentive in the first year of a rookie contract is deemed LTBE.

Any incentive in the sole control of the player, such as reporting bonuses, weight or workout bonuses, etc is deemed LTBE.

Any team performance is automatically LTBE if  the team met or exceeded the specified performance during the previous year.

If a contract is renegotiated and conditions for an incentive bonus have already been met, that bonus will be deemed LTBE.

If a contract is renegotiated after the start of a season, any new or altered incentive bonus for that season that may be earned is automatically deemed LTBE.

Any incentive stated in per-play or per-game terms is LTBE to the extent that it was achieved by the team or player in the previous year.

Any incentive based on the team’s ranking in the division will automatically be deemed LTBE.

Any incentive based on team performance will be LTBE if it sets a minimum level of statistical performance equal or lower than that achieved by the team finishing in the bottom 5 in the league in that category in the prioer year. As an example, an incentive based on the team winning X games will be deemed LTBE if in the previous year X wins was within the bottom 5. The opposite (X was in the top 5 in the prior season) will be automatically nLTBE.

Similarly, an incentive can be written to be relative to other teams (ie “top 5 in the league”). If this is the case, any incentive requiring the team to be bottom 5 of the League or bottom 3 of the conference will be LTBE and Top 5 / Top 3 finishes are automatically nLTBE.

If a player has more than eight different team performance categories included, all but the eight lowest amounts will be deemed LTBE. To determine the number of categories for this purpose, consider these examples:

If A and B and C, player will receive $X

This is purely conjunctive and counts as one category.

If A and (B or C or D), the player will receive $X

This can be satisfied in three ways and thus counts as three categories.

If A and playing time is in excess of B, player receives $X

If A and playing time is in excess of C, player receives $Y

If A and playing time is in excess of D, player receives $Z

Though B,C, and D are the same category, this counts as three categories as well due to the three different outcomes.

Final League Year

As with many other things, there are Final League Year conditions placed on incentives to limit the extent to which payment can be shoved into an uncapped season.

For non-rookie contracts, if more than three Team performance categories are included as incentives, all but the three lowest dollar value incentives will be deemed LTBE. This differs from the eight that are allowed in other years.

Any Team performance incentive bonus for a non-rookie in the final league year or after will be automatically deemed LTBE unless it is also coupled with a playtime requirement greater than or equal to the player’s actual playtime during the year prior to the execution of the contract.

Any incentive bonus earned in the Final League Year that is nLTBE will be automatically counted against the Salary Cap immediately upon attainment, and any LTBE incentive will receive a credit immediately upon that point at which it becomes impossible to earn. Put another way, there needs to be room under the cap in the Final League Year for the nLTBE incentives.

Incentive Payment and Accounting

At the end of a season, if incentives actually paid resulted in a club paying salary in excess of the Salary Cap, the amount of the overage will be deducted from the team’s allowable Team Salary in the following year. Likewise, if incentives are included in Team Salary but not paid, that amount will be added to the following year’s Team Salary. Remember, only LTBE incentives are accounted for ahead of time. So unattained LTBE incentives and attained nLTBE incentives can potentially impact not just the current year’s Cap, but the next as well.

Allowable Incentives

Incentives must be of the types listed below. All other incentive terms are prohibited. No offensive player can have incentives for team performance on defense or vice versa, unless that player played 15% or more snaps in the previous season on that opposite side. Special Teams playtime bonuses are allowed only if the player participated in at least 50% of the special teams snaps in the prior season.

Team Incentives

OFFENSE:

  • Points scored
  • Touchdowns scored
  • Total offense (yards)
  • Average net yards per rush
  • Average net yards per pass
  • Sacks allowed
  • Completion Percentage

DEFENSE:

  • Points allowed
  • Touchdowns allowed
  • Total defense (yards)
  • Average net yards per rush allowed
  • Average net yards per pass allowed
  • Interceptions

SPECIAL TEAMS:

  • Own punt return average
  • Own kickoff return average
  • Opposing punt return average
  • Opposing kickoff return average

TEAM:

  • Wins
  • Playoffs
  • Conference Championship
  • Super Bowl
  • Return/Recovery touchdowns
  • Turnover margin

Individual Incentives

RUSHING

  • Total yards
  • Average yards (100 attempts)
  • Touchdowns

PASSING

  • Passer rating (224 attempts)
  • Completion percentage (224 attempts)
  • Interception percent (224 attempts)
  • Total yards
  • Yards per pass (224 attempts)
  • Touchdown passes

RECEIVING

  • Total receptions
  • Total yards
  • Average yards (32 receptions)
  • Touchdowns

DEFENSE

  • Interceptions
  • Interception return yards
  • Touchdowns on interception returns
  • Opponent fumble recoveries
  • Opponent fumble return yards
  • Touchdowns on opponent
  • fumble returns
  • Sacks

PUNT RETURNS

  • Total yards
  • Average (20 returns)
  • Touchdowns

KICKOFF RETURNS

  • Total yards
  • Average (20 returns)
  • Touchdowns

PUNTING

  • Gross average (40 punts)
  • Net average (40 punts)
  • Inside 20-yard line

KICKING

  • Total points
  • Field goals
  • Field goal percentage (16 attempts)
  • 0-19 yards (4 attempts)
  • 20-29 yards (4 attempts)
  • 30-39 yards (4 attempts)
  • 40-49 yards (4 attempts)
  • 50 yards or longer (3 attempts)

OTHERS

  • Roster bonuses
  • Reporting bonuses
  • Playtime bonuses (excluding special teams)
  • Special teams playtime

Honors and Awards

  • Pro Bowl
  • All NFL (1st & 2nd team)
  • All Conference (1st & 2nd team)
  • Super Bowl MVP
  • NFL MVP
  • Offensive Player of the Year – NFL or conference
  • Defensive Player of the Year – NFL or conference
  • Player of the Year – NFL or conference

VETERAN MEDIA

  • Associated Press
  • Pro Football Weekly
  • Pro Football Writers
  • Sporting News
  • Sports Illustrated

Summary of Salary Calculations

Distilling all that down, to calculate what counts against a given season’s Salary Cap, you simply add up the actual cash spent as part of the Team Salary calculation, including incentives earned, plus whatever portion of Bonus Proration and/or acceleration applies to that season.

Provisions for Final League Year and Uncapped seasons

As you may recall, 2010 was an uncapped year. The previous CBA provided for an uncapped season that came into play when the owners opted out of the agreement. While an uncapped year sounds like it could be a huge boon to the players, it also had several troubling new rules that limited player movement and owner spending. In addition to the well-publicized changes in eligibility for free agency, there are rules such as the 30% rule, the Deion Rule, and others that apply to contracts that would extend beyond the Final League Year (in this case, 2020) into what could potentially be another uncapped season.

30% Rule

No contract extending into any season beyond the Final League Year can provide for an increase in annual Salary of more than 30% of the Salary in the Final League Year, per year, in any of those years.

This does not include prorated amounts attributable to signing bonuses or any amount paid to buy out a player’s right to terminate one or more contract year. It DOES include any Option Bonus that prorates into the years in question. So an Option Bonus is treated as a Signing Bonus for purposes of proration, but that proration is also included in the 30% rule. Yes, this is tricky and a bit inconsistent at first. But if you’re creative, you can come up with ways to use Option Bonuses, which go into effect in future years, to your advantage in an uncapped season. This is one of several rules that helps to limit the risk of a team loading huge contracts into one uncapped year while also saving money in capped seasons. It also made things difficult for players to sign lucrative extensions that included any kind of large raise, although some players, such as San Francisco’s Patrick Willis, still found ways to make it work.

Deion Rule

The Deion Rule exists for contracts that extend past the term of the current CBA, into what would be an uncapped year (such as 2010). It is named for Deion Sanders, who got a huge bonus and low salaries in his $35m 1995 contract with Dallas, and is in place to prevent teams from loading too much money into the uncapped season, effectively removing it from the cap total of the years covered in the CBA.

The rule states that the non-prorated amounts (salary, roster/reporting bonuses, escalators, etc) in the capped seasons – or first three years if there are fewer than three capped seasons – must be as much as the amounts of any prorations (from spreading out signing bonuses, etc) in those years. If they aren’t, that means the bonus being prorated was probably pretty substantial, and the difference in amount will be subtracted from future uncapped years and applied equally to the years under the cap. If the difference is more than 50% of the combined prorations in the uncapped years, the 50% amount is used instead. Future option bonuses in the contract are also considered, but not until the bonus is paid.

So if, for example, a contract written before the 2008 season called for a player to receive $1m in salary for each of the next five seasons, but included a $25m signing bonus, the contract, with the $4m difference, would be subject to the Deion rule. There would be a $12m total difference in the first three years, with $10m of signing bonus prorated into the final two uncapped seasons. So $5m of that (50% of $10m being less than the $10m difference) is deducted from those seasons and redistributed into the first three years of the deal.

In the near term, this rule will not apply, as the current CBA extends until 2020.

It is unclear how Deion rule charges are handled if and when a new CBA is negotiated that eliminates the uncapped seasons.

Rookie Wage Scale

The 2011 CBA featured the introduction of a Rookie Wage Scale and new rules regarding the first contracts players could sign. The wage scale greatly reduced the size of contracts given to top draft picks, standardized (mostly by shortening) the lengths of rookie deals, and provided for more standard escalators to increase the salary paid to young players that excelled during the early years of their contracts and careers. This frequently-debated change greatly changed the dynamics of the drafts and roster construction, as now less money is guaranteed to unproven players and more is available for players on their second contracts.

It also greatly simplifies the negotiation of rookie contracts. There is still room for variation, but a large part of a Rookie’s salary is set by his draft position.

Total Rookie Compensation Pool

If you recall the revenue section, Team Salaries are established using a formula based on League-wide revenue. Within the League-wide total Team Salary figure is a total Rookie Compensation Pool, also calculated by formula. This is the League-wide limit on the total amount of Rookie Salary that can be contracted with Rookies, both drafted and undrafted. Any money earned by a Rookie in his Rookie Contract counts against this Total Rookie Compensation Pool.

In 2011, the Total Rookie Compensation Pool was set at $874.5m.

Year-One Rookie Compensation Pool

Within the Total Rookie Compensation Pool is a Year-One calculation, which is the limit on the total amount of first-year Rookie Salary that can be contracted.

Total Rookie Allocation

Year-One Rookie Allocation

These refer to each team’s proportional share of the League-wide Rookie Compensation Pools.

Year-One Formula Allotment

Year-One Minimum Allotment

These are fractions calculated based on the player’s draft position.

As you can see, the Rookie salaries are largely pre-determined. It’s a lot like a slotting system now.

There are still opportunities for creativity and challenges with Rookie contracts, though.

25% Increase Rule

No Rookie Contract can contain an annual increase of more than 25% of the Year-One Rookie Salary. For the purposes of the 25% increase rule, Rookie Salary DOES include any proration from a signing bonus, as well as any LTBE incentives.

Undrafted Rookie Reservation

This is the maximum total amount that may be offered, as signing bonus, to any/all Undrafted Rookies a team hopes to sign. In 2011 this was $75,000.

Rookie Contract Lengths

All Rookie Contracts for first round draft picks will be for four years with a Club option for a fifth year.

All Rookie Contracts for other draft picks will be four years.

All Rookie Contracts for undrafted Rookies will be three years.

Proven Performance Escalator

Because drafted Rookies are pretty well locked into their first contracts (they are not able to renegotiate them until after their third year), it was necessary to build in a way to increase the pay of any player that outperforms his contract. This is what led to the creation of the Proven Performance Escalator (PPE). This is mandatory for Rookies drafted in rounds 3-7.

The PPE is a non-negotiable amount by which the player’s Year 4 P5 salary may escalate if he achieves one of the following two escalators:

1) he participated in a minimum of 35% of his team’s offensive or defensive snaps in two of his three regular seasons;

2) he participated in a cumulative average of 35% of snaps in that three year period.

This is not especially difficult to achieve if a player earns a starting role and stays healthy.

The PPE, if achieved, will elevate the player’s year-four salary to the level of the Restricted Free Agent Qualifying Offer in that season. Free Agency Rules are covered elsewhere. It’s a pretty healthy raise for a player drafted in the lower rounds, though.

Money earned via the PPE does not count against the 25% rule or the team’s Total Rookie Allocation.

Fifth-Year Option

Instead of the PPE, first-round draft picks have a fifth-year option. This is a team option, but it can be quite lucrative for the player.

Like the PPE, this option is non-negotiatble and set based on amounts set for Free Agents.

If the player was a top-10 pick in the draft, the amount of his fifth-year option is the amount of the Transition Tender that applies in the previous (fourth) year for that player’s position. This is based on the average of the top ten highest salaries at that position.

All other first-round selections will have an option that uses the same math as the Transition Tender, but using the 3rd through 25th highest salaries as the basis for the average instead of the top 10.

This option allows the player to either receive a substantial raise or become a Free Agent, while giving the team one more year of exclusive control.

FAQ


What gets teams in trouble with the Salary Cap?

In general, what gets a team in trouble is bad decisions and poor planning. Because of the mostly non-guaranteed nature of most NFL contracts, players and their agents often demand signing bonuses, which then end up prorating in to future years. If a team makes bad decisions on players or signs people to bad contracts, it may face the prospect of paying someone well after cutting the player. It may face this many times over in the same year.

Some teams make a habit of robbing from the future to pay for the present. Sometimes this is justified; sometimes it is irresponsible. It can be done if properly planned, but a mistake could cripple a team in future seasons.

How does a team gain Salary Cap relief?

Most of the ways this is possible have been discussed in various places on this site. The most common tactics are to renegotiate existing contracts and to replace older players with younger, cheaper ones. Of course, if an older player is cut after having been paid a large bonus, the team is likely to face some dead money. This is where planning comes in. Sometimes you have to weaken yourself one year to gain relief in the next.

What is “Cap Purgatory” or “Cap Hell?”

These are just two of many terms that people throw around for the situations that some teams find themselves in, usually after years of poor planning and/or bad decisions. If a team has to start cutting useful players to clear Cap space or is unable to afford to field a competitive team, they are said to be in Cap Hell. It might be more accurate to describe that as something that team’s fans experience, because it means that bad management has weakened the product on the field, and it’s likely that the fans are paying a substantial amount of money to watch that weaker team play.

What are some Cap Loopholes?

There are too many to list, and new ones are being invented all the time.

For the most part, they involve clever and well-timed renegotiations, the use of LTBE incentives that don’t end up being earned (or in other cases, nLTBE incentives that are paid), restructuring option bonuses, guaranteeing future P5 salary, voiding future payments or years, or some combination of all of the above.

Some GMs are notorious for coming up with clever clauses that escalate salaries in future years without breaking rules, or for tying bonuses and guarantees to unusual conditions. Some might argue that some of these “tricks” violate the rules, and sometimes the rules are rewritten in the next CBA (the Deion rule, for instance), but all contracts must meet the League’s approval.

When can contracts be re-negotiated?

Rookie Contracts can be re-negotiated after three seasons for drafted Rookies and two seasons for undrafted Rookies.  Once re-negotiated they are no longer considered Rookie Contracts.

After a veteran contract is written it can be re-negotiated at any time. Once this happens once, though, it may not be re-negotiated again for a year.

What happens when a player is cut?

Salary Cap-wise, the team is forced to account for every dime they paid to that player. If a large signing bonus was paid, any remaining prorations are accelerated. A team can save a bunch of money in Salary by cutting a player, but all that they have already paid must come out of the Cap.

What happens when a player is traded?

Any money already paid to that player remains on the cap for the original team. If there are bonus prorations, those are accelerated just as if the player had been cut. This is one reason that trades aren’t as common in the NFL as in other sports.

Any future salary or bonuses to be paid to a player according to his contract are the responsibility of the new team.

Are contracts insured?

This is up to the teams. But these are multi-million dollar deals. To the extent that it is possible, contracts are insured. But remember, most contracts are not guaranteed.

It is also possible for players to take out policies on their own contracts, which can protect them against any loss of future earnings they may encounter.

What happens if a player is hurt in rookie minicamp (before signing contract)?

This happens more often than you’d think. Teams will still negotiate in good faith and sign and honor a contract with a rookie in this case as if he was not injured.

Can money be traded with a player?

No. Only players and draft picks may be traded.

Are coaches and management included in the Salary Cap?

No.

Are practice squad and inactive players included?

Yes.

Under what circumstances can a team recover money from a player?

A team can go after portions of signing bonuses already paid if a player commits what is known as a forfeitable breach.

A player commits a forfeitable breach if he:

1) Willfully fails to report, practice, or play and damages the team (holdouts)

2) Is unavailable due to incarceration

3) Is unavailable due to non-football injury

4) Retires

A player may not be asked to forfeit P5 salary already earned. A player can only forfeit money that is part of the Forfeitable Salary Allocation for the year(s) in which the breach occurs. That year’s proration of a Signing Bonus fits within that allocation, but not the whole bonus, for instance.

Are there any exceptions to the Salary Cap?

It depends on what you mean by exceptions. As noted throughout this site, there are several ways by which a team may end up with a small amount more or less to spend in a year, and there are also many ways in which they can spend more cash in one League Year than the actual salary cap (for instance with large signing bonuses, which amortize over five years). But when all the accounting for that is done, every team MUST be below the cap and above the floor, and every dollar spent must be documented. It is a hard salary cap and there are stiff penalties for cheating.

What happens if a team and/or player try to cheat or get around the Salary Cap?

Penalties for circumventing the salary cap, as decided by either the Commissioner’s office or a system arbitrator, can be quite steep. Sanctions for players and agents include fines of up to $500,000 and possible voiding of contracts. For teams found to have broken the rules, the Commissioner can whack them with all of the following:

  • $6,500,000 fine upon the team
  • forfeiture of up to two draft choices (without limitation by round)
  • $500,00 fine upon any executive or personnel
  • One year suspension for any executive or personnel

There are similarly steep penalties for inaccurately reporting revenue.

What are some safeties in place to prevent cap manipulation?

Aside from the stiff penalties listed above, all contracts must be approved by the League office in New York, and everything is subject to review by the Commissioner and/or an arbitrator.

What kind Credits / Debits exist?

Obviously any true-ups or adjustment to the league-wide salary pool can make small changes to a team’s salary limit, but a team may also carry over room from one year to the next if it is unused. If a team receives a refund or forfeiture of previously paid money (or unpaid money that was claimed under the cap pending a grievance), that amount is credited to the Team Salary for the following League Year.