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A Guide to the NFL Salary Cap

Posted on February 19, 2013 by Jason Fitzgerald

Since writing this way back in 2013 OTC has grown tremendously in terms of readership and has
really helped people learn more about the contractual side of the NFL and the saary cap accounting
that teams have to follow. This past year I wrote a book that covers everything you would want to
know about the NFL CBA, salary cap, and other contractual items. You can click the link below to
purchase from Amazon as it will give you a much more in depth look at the salary cap. But for a
quick reference you can keep on reading here to learn a little more about the structure of NFL
contracts.

One of the things that people often ask me about is how exactly does the salary cap work. I admit
sometimes I take it for granted with my charts and explanations that people know how it works
when in reality most don’t. I still learn something new when I interact with people as it pertains to
the salary cap and I’ve immersed myself in it for the last 6 years or so and done my best to learn as
much as I can. So I’ll try and explain some of the money that makes up a contract and yearly cap hit

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and what exactly happens when a player is cut or traded. This is probably going to be long, but
hopefully wont be too confusing, though I make no promises.

Paragraph 5 Salary

The P5 salary is what I refer to as a players base salary. This is the money actually earned for playing
during the NFL season. The CBA mandates minimum levels of P5 pay but not maximum levels.
Minimum pay is based on your experience in the NFL. Experienced is based on earning a “credited
season”, which is de�ned as more or less being on the active 53 man roster for at least 3 games in a
given season. In 2013 the minimum pay for a rookie is $405,000 and for a veteran who has been at
least 10 credited seasons its $940,000. The salary itself is earned in 17 weekly installments and does
not require participation in a game to be earned. The cuto� deadline for earning a week’s pay is
actually Tuesday at 4PM EST, which is why Tuesday during the season is a big day for players to be
cut. It avoids an extra weeks �nancial commitment to a player. In general P5 salary would be similar
to what you earn at your job in that if you work you get paid a pre-negotiated amount of money.

When players get injured and the player is put on IR their salaries can reduce to make up for the fact
that they are not playing. This is called a split salary. It is very common for players drafted in the last
4 rounds of the draft during their �rst two or three seasons in the NFL and for veteran players who
have an injury history. For stars like Darrelle Revis it is not a factor. So during the season if you look
at the IR charts I keep on my website and you see a base salary of $288,000 for a rookie in 2013 its
because I am assuming that they have a split in their contract to reduce the �nancial burden, both
cash and cap, to a franchise. A player does not earn a credit towards a season if they are on IR.

Veteran players can also sign what are called “Qualifying Contracts” in which they are paid in cash at
the minimum level but their cap charge is only that of a player with two years of experience. This
type of contract was created to allow veterans who make more money than younger players to have
a chance to remain in the NFL by keeping the cap dollars at the same level. The contract must be no
longer than 1 season, contain the minimum salary, a guarantee not to exceed the minimum salary
of a player with 2 years experience, and additional bonus money not to exceed $65,000, a number
that rises by $15,000 every 3 years with the next raise coming in 2015, in order to qualify. If the
player received more than $65,000 from another team that season in o�season bonus money you
can not sign than player to a qualifying contract.

Roster/Reporting Bonuses

These are lump sum bonuses paid out for ful�lling speci�c criteria such as being on the roster or
reporting on time to training camp. Roster bonuses come in a number of di�erent forms. O�season
roster bonuses are probably the most prevalent and give the players the most job security. These
are the bonuses you hear about on ESPN when they state “Player X has a bonus due on the 2nd day
of the 2013 League Year”. What this means is that if a player remains on the roster beyond 4PM of
the 2nd day of the League Year (which means the 2nd day of free agency) he earns a lump sum

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payment that the team can not get back if they cut the player at any other point in the season. Why
is this good for a player? Because it forces the teams hand to quickly make a decision on the players
future. A players best chance of �nding another job and getting the most money is if he is available
during all of free agency. If a team carries a player through August and then cuts him, the players
chances at getting big money or a new home drastically reduces. Teams at that point are “capped
out” and don’t like to �ll out a roster with new guys who have yet to know the system.

A perfect example of this was a few years ago when the Arizona Cardinals cut Matt Leinart in early
September. The best he could do was obtain a contract for the minimum salary, $630,000, with the
Texans and a chance to earn a few more dollars if he ever played. He never saw any action that year
and earned $630,000. The following year Houston gave Leinart a two year deal worth $5.5 million
dollars and $2 million guaranteed. He never did anything in 2010 to warrant a raise in 2011. It was
simply the timing of the whole issue. If he had an o�season roster bonus in his contract with
Arizona he would have earned the bigger contract in 2010.

Other forms of the roster bonus come a bit later in free agency. This gives the player ample time to
�nd a new home while also giving the team time to either trade the contract or renegotiate the
salary. More team friendly roster bonuses deal with being on the roster during the season. Like
salary these are paid out in weekly installments, but come with all kinds of conditions. The most
stringent condition is the active gameday 46 man roster. If you don’t dress on gameday you do not
get paid. Teams cant do that with the P5 salary which is why this form of roster bonus is popular.
Others are rolled into simply being on the 53 man roster per game while the best forms for the
player are those that are paid even if the player is on the injured reserve or PUP list. Some of the
crazier ones I have heard are bonuses that are earned if the player is on the roster sometime in
February of the following year! New England and San Francisco are teams that widely use in-season
roster bonuses.

From a cap standpoint there is also a bene�t to the in-season roster bonus. In the NFL these are
considered incentive based payments. What that means is that when the league year begins what
counts towards the salary cap depends on what you did the year before. So if you are set to earn
$31,250 for every game on the active 46 but only made the active 46 the prior year for 5 games your
cap charge in March will only be $156,250 rather than $500,000. Now if the player ends up playing
16 games they will adjust your cap number accordingly, but that comes at seasons end not during
free agency when teams need the cap room. This was one of the reasons why the Jets used that
type of structure with LaRon Landry. It allowed them to avoid $875,000 in cap charges for 2012 and
defer them to a later date. P5s and normal o�season roster bonuses will always have the full
amount count towards the salary cap. Teams like the Jets can use these in-season roster bonuses as
ways to skirt the salary cap for one season if they wanted to with players like Santonio Holmes by
restructuring his deal to include large roster bonuses for being on the active 53 next year.

Workout Bonus

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These are bonuses paid out for completion of a team’s o�season workout program. These
programs now run for, I believe, 9 weeks, starting in late March and running through May. Teams
can not require mandatory participation for o�season workouts so they often pay large bonuses to
entice players to participate. The way these work are as long as you complete a certain percentage
of the program you earn the full compensation. Some like Landry don’t bother and forego their
bonuses. In addition all players will earn $175 a day for each day they participate in 2013. That per
day number changes every other year, with the next increase slated for 2015. The NFL charges each
team at the start of the 2013 league year a cap fee of $504,000 for minimum workouts on top of the
contracted bonuses, so any reported cap space number between now and the start of free agency
needs to be reduced by $504,000. At the end of the workout period teams have their salary cap
credited for money that was not earned.

Other Bonuses

These are incentivized bonuses that are only earned for meeting some type of criteria. They can be
simple things like weight, which are often given to linemen to avoid them getting too heavy, or very
di�cult to achieve bonuses like being elected to the All Pro Team. Like those in-season roster
bonuses most of these other bonuses are based on performance from the year before. So if you
have a $100,000 bonus for making the Pro Bowl in 2013 and you made the Pro Bowl in 2012, the
team takes a $100,000 cap charge in 2013 because the bonus is now considered “likely to be
earned”(LTBE). If the player does not actually meet the performance at the end of the year the team
is credited with the money back on the cap which will then be carried over to the next league year.
So whenever you see this money listed on a players cap its actually money not yet earned and
money that may never be earned.

The CBA spells out all the criteria necessary for the categories in which individual bonuses may be
paid. Again it’s a mechanism teams can use to circumvent the cap if the player was injured the year
before. For example you could pay Mike Vick a $1 million dollar bonus for 2400 passing yards or
Holmes a large bonus for 25 receptions. While in my mind those are pretty likely numbers, the NFL
considers them “not likely to be earned” (NLTBE) in 2013. In general this section of bonuses can get
very complex especially when teams begin to tie in bonuses based on individual criteria (say playing
time) and team success (o�ensive ranking in a category) or playo� wins.

Prorated Bonus

I saved this for last because it is the money that seems to cause the most confusion when people
look at the cap. For the most part prorated money is what is referred to as a signing bonus in the
press. It is essentially a lump sum bonus that is considered paid out when a contract is signed or an
option invoked, though in reality the payout occurs over a period of time. Now there are a number
of less used prorated bonuses such as completion bonuses, fully guaranteed roster bonuses,
bonuses when signed during a season, etc…but for this discussion we just are interested in those
basic signing or option bonuses.

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For those of us who have ever taken an accounting course think of this money as a depreciation
schedule on an asset. If you have no accounting knowledge maybe think of it like buying a car in that
your personal expense comes over the 5 years you are paying o� the car loan. The league looks at
each player as an asset with a maximum working life of 5 years for every prorated bonus paid.
Prorated money is split over the course of the contract or 5 years, whichever is less, in equal
installments. So if you have a player with a 6 year contract that begins in 2013 and you pay him a
signing bonus of $20 million he will carry an expense of $4 million in each year from 2013-2017 from
the bonus. There will be no expense in 2018 because that is beyond 5 years. If it’s a 3 year deal with
a $9 million bonus the expense is $3 million per year because now the limit is 3 seasons rather than
5.

When you hear of an option bonus normally it means a bonus paid out in the second year of the
contract, though sometimes it can be as late as the third or fourth year. That starts the clock over on
the working life. So in the case of the 6 year deal an option bonus paid in 2014 will extend all the
way out to 2018. So if its a $5 million bonus that’s an extra $1 million per year. The prorated bonus
portion of the players salary now includes the $4 million from the �rst bonus and $1 million from
the second bonus, giving him a full charge of $5 million per year from 2014-2017 and $1 million in
2018.

In general what we are talking about here is the ability to “buy now but pay later” from a salary cap
perspective. What happens is the team and player agree on a contract value. Lets assume the sides
decide he has to earn $21 million in the �rst 3 years of a 5 year deal worth $33 million total. Now the
team could simply pay him $7 million a year in P5 salary, which would leave the team with cap
charges of $7 million per year, but what if team is really strapped for cap space. Their other option is
to pay him $15 million in a signing bonus, prorated at $3 million per year, and then pay the rest of
the $21 million as base salary. Pretend its $1 million in 2013, $2 million in 2014, and $3 million in
2015. Our new cap charges are $4 million, $5 million, and $6 million a huge savings on our team
salary cap. This is why you hear of teams, and the Jets will likely be one of them in 2013, converting
base salary into a guaranteed bonus. All is well in the world when we do this until we come across
what we call “dead money”.

Dead Money

This is the “pay later” portion of the equation. Dead money is your unused prorated money. Going
back to the car example- unfortunately you �nd out that your car is a lemon just three years into
owning it. The transmission died. The car leaks every �uid under the sun. Every other week it breaks
down on your way to work. You have no option but to junk it. Does the bank just forgive the
remaining two years of your auto loan? Nope. If you still owe $7,000 on the car you have to pay the
bank $7,000 when you give that car up. That’s exactly what happens in the NFL. In essence you owe
the salary cap money like you would the bank.

In the example where we had a 6 year contract with a signing and an option bonus that money you

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owe the cap is huge if you need to “junk” the player. If you want to cut the player in 2015 it’s a
charge of $5 million per year from 2015 thru 2017 and an additional $1 million in 2018. In the NFL
you get that money all charged at once so it’s a lump sum payment of $16 million in cap dollars for a
player not even on the team. In 2016 its $11 million, 2017 its $6 million and in 2018 it would be $1
million.

That’s why signing bonus money gives the player far more �nancial security than just the lump sum
payment. It o�ers an extra layer of protection from being cut due to the cap costs being so high to
the team. Better to pay the player a few million to stick around and eat up $8 million in cap space
than not be here and cost me $16 million. That’s why when we talk about restructuring contracts for
the sake of salary cap room in this year we always have to have an eye on the future. Its why for
players like David Harris and Nick Mangold who have had two down years in a row you don’t want to
push too far in the future. You also need to see what it means for future cap. In Mangold’s case he
has a gigantic salary cap number already in 2015. Push too much money from 2013 into the future
and you are stuck with no more room to renegotiate in 2015 unless you just want to remain tied to
someone that may be trending down. Just getting under the cap is easy, managing the future is not
and GMs and cap managers spend tons of time going over those possibilities when they have to use
prorated money for salary cap purposes

The only other issue in regards to dead money from the prorated bonus is the timing of the release
or trade of the player. It if occurs after June 1 the league will only allow you to take a dead cap hit of
the prorated money from that particular season, meaning $5 million in the example above. The
balance is then charged to the following year, in the example $11 million in 2016. You can also
designate a player a June 1 cut prior to June 1. In this case you will maintain the full cap charge for
the player, even though he has been released, until June 1 at which point just the prorated money
for the year remains with the balance being charged to the following league year. This is done to
allow you to avoid guarantees or roster and workout bonus money that you might be obligated to
pay if the player actually remains on the roster until June 1. But in terms of helping with free agency
it really does not give you any bene�t due to the bene�t coming long after players are signed.

Guaranteed Money

In the NFL you can primarily be cut for three reasons: skill, injury, and salary cap. A skill cut states
that you are no longer as good as your peers competing for the same position. Injury means that
you are not in the necessary condition to play football. Salary cap terminations mean that a team
needs cap room to sign a player or retain players who, in the view of the club, are better than you. In
the NFL almost anything can be guaranteed (P5 salary, roster bonuses, workout bonuses, etc…), but
it’s the level of guarantee that is important.

Fully guaranteed money is the real deal. That means your money is protected from skill, injury, and
cap terminations. For you to not earn that money you have to do something egregious to be cut and
not paid. The most complete form is that with “no o�set” meaning not only do you get paid from the

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team that cut you but any additional money you earn from another team that year is yours to keep.
Most contain o�set language meaning if the player has a $7 million dollar guarantee and signs with
a new team for $2 million you are only on the hook for $5 million in cap and cash dollars.

Often times reported guarantees are not fully guaranteed. Normally they just contain protection for
1 of the 3 termination reasons. So if you are protected from injury but don’t get hurt that injury
guarantee was worth nothing. You have a skill guarantee but the teams cap is awful you are out of
luck. You will never see a roster or workout bonus guaranteed for all 3 terminations upon signing,
due to rules in the CBA treating them as a prorated bonus. In my mind the skill guarantee is the best
of the three to have because it’s the most subjective but that’s just my opinion on it.

Guarantees can also be earned over the life of a contract. Usually its based on being on the roster
beyond a certain date- normally either right after the Super Bowl in February or the 2nd day of the
new League Year in March. I believe Tom Bradys deal fully guarantees itself every year where he is
on the roster at the start of the League Year. Roster and workout bonuses can also become fully
guaranteed and not treated as a prorated bonus using similar mechanisms where the full guarantee
is contingent on an event. Veteran players who have never received what is called “Termination Pay”
automatically have their base salaries guaranteed at the start of a season if they make the active
roster for week 1. If they do not make it for week one about ¼ of their salary is guaranteed. One you
receive “Termination Pay” this automatic guarantee is no longer available to the player.

The bene�t to guaranteed salary for the team is that is lessens the dead money from bonuses in the
later years of a contract making it cost e�ective to cut a player in the 3rd year and beyond of most
contracts. It is also a useful tool in negotiations to work out more favorable terms with a player since
you are guaranteeing money rather than just protecting it with dead money. Also, unlike signing
bonuses, there is no dead money that remains on your team if you trade a player. In a trade in the
NFL all signing bonus money accelerates onto the cap of the team trading the player, just like as if
the player was cut. The guaranteed salary simply transfers to the new team.

On my site when you see “dead money” listed it includes all prorated money for a player plus money
that I know is guaranteed for skill that season. It is the number based on the player being a pre-June
1 cut. If you want to know the amount if cut after June 1 for most players you simply �nd the players
dead money charge for the following season and subtract it from the amount in the current season
from the tables. Or you can just email me and Ill follow up with you on it.

Closing Thoughts

Well hopefully you made it to the bottom of this and if you did hopefully it at least explains a little bit
of what is in an NFL player contract, how they are valued, and how it e�ects the possibilities of
cutting the player and general workings of the salary cap. Feel free to ask any questions below or via
email and Ill try to answer those questions either in a future article or in a followup discussion post
as best I can.

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Ddub • 4 years ago

What is the impact on a team's cap if a player voluntarily retires in the middle of a
contract? Example: Kyle Orton is considering retirement, but he has (I think) 2 years left
on his contract.
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Guest > Ddub • 4 years ago

Bonus accelerates into that year

So , if the bonus would've been spread over a 5 year contract for cap reasons ,
and there would be for example , 2 years left on a deal when a player retires , the
remaining cap hit is accelerated into 1 year rather than over the 2 years if the
player still played or was cut.

There's usually language in the contract that claws back some of the up front
bonus for that player , if they decide to retire

CBA allows the team to attempt to recoup some of that Signing Bonus. This has
become known as the “Barry Sanders Rule”.
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JamesWS > Ddub • 4 years ago

I'd like to know this with regards to Chris Snee and his 6.6 million cap hit for
2014...
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Jason Fitzgerald Mod > JamesWS • 4 years ago

I would not expect the Giants to go after any signing bonus money in his
deal so I would expect Snee's dead cap money to be his prorated bonus
plus the workout bonus money Id imagine he earned. I think thats $4.3
million or so.
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ConservativeChas • 2 years ago

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