This is the main page for the salary cap information. Almost all the information is compiled and computed by our resident cap guru, Chad "Capologist" Walton. You can view Cap's own column at The Red Zone.

Annual Cap Information

2004
Added 1/29/05
2005
Updated 4/28/05
2006
Added 2/8/05
2007
Added 2/8/05
2008
Added 2/8/05

2005 Cap Savings Chart
Updated 2/12
Chart displaying what it will cost for the team to cut certain players on the roster.

Salary Cap Tutorial & FAQ

by Aaron Freeman

I'll try to teach you the basics of the salary cap. For further questions, you can e-mail me or go to a better source in Chad Walton. You can also post questions at the FalcFans Forums.

What is the salary cap?
When do teams have to be under the cap and how do they do so?
How do you determine a player's cap hit?
What happens if a player is cut?
What happens if a player is traded?
How does restructuring work?
How do option bonuses work?
What about incentives?

What is the salary cap?

The salary cap is a restriction that the NFL puts on each of the 32 teams so that they can only spend a certain amount of money. Think of it as a league-imposed budget on how much teams can spend on their players. In Major League Baseball, there is no cap, and in the NBA, it is a "soft" cap, meaning there are instances where you can exceed the cap limit. But the NFL has a "hard" cap, meaning exceeding it will bring punishment usually in the form of revoking draft picks.

When do teams have to be under the cap and how do they do so?

Technically, teams must be under the cap year-round. But the NFL gives some leeway in that. Teams must below the cap at all times during the regular season, and teams must also be under the cap during the off-season. But really a team can be above the cap during the time following their final game (in regular or post season) and the start of free agency period (typically March 1). During the regular season, every player on the roster (53) counts towards the cap. But during the off-season, the NFL cuts teams a break by only counting the Top 51 salaries against the cap. This is because the NFL allows teams to have 80 players on their roster for training camp and it would be impossible for the team to try to fit every player under the cap.

You may here the terms "cap cut" or "cap casualty" which mean a player was cut, released, or waived in order to purge his salary so the team can get under the cap. Cutting players is the easiest way to stay under the cap, but there are limitations with that method as you will read further down. You can also save cap space by trading players or restructuring their contracts. Restructuring means changing the terms of the player's contract in order to lower his salary. But like cutting, trading and restructuring have limitations as well.

How do you determine a player's cap hit?

As you might now, a player's salary and his cap hit are often times not the same. A player receives a salary by the terms of his contract. For example if a player has a salary of $680,000, he will be paid that on a weekly basis during the course of the regular season. I believe he will be paid $40,000 a week (total salary divided by 17 weeks). But a player's cap hit also has other figures inputted in it. The player's salary is commonly known as his base salary. Typically the base salary is the actual money a player will see in a given year. But also included in a player's cap hit are bonuses. Bonuses come in many forms. The most common is the signing bonus. A player receives his signing bonus when he signs his contract, and one can think of it like any other bonus as something that a player can immediately pocket and take home to the bank. Other forms of bonuses are roster, workout, option, and incentives, just to name a few. Roster bonuses are similar to signing bonuses, but come with the stipulation that if a player is still on a team's roster by a certain date, the player will be paid X amount of money. A workout bonus is received by a player if he participates in off-season workouts. The amount and extent of the workouts is designated specifically by the individual terms of the contract, and can vary from player to player and team to team. Option bonuses can be various, but can be a bonus paid to a player to void his contract or to add more years to his contract. Incentives are bonuses that are paid when a player performs specific acts, usually which are statistical achievements.

All this adds into a player's cap hit. But instead of adding the entirety of a signing bonus to a single cap year, the total signing bonus is prorated over the length of a player's contract.

Let's imagine we have a player named Ed Zample and he signed a contract with the Falcons. The terms of the contract are that Ed signed a five year contract with a signing bonus of $5 million and the total worth of the contract if $13 million. Here are the base salaries in Ed's contract:

This is common in the NFL. It is called a backloaded contract. Ed will receive $7.5 million in base salary, but instead of prorating that evenly over the course of the contract ($1.5 million per year), teams typically design it so that the lowest cap hit occurs initially and it increases annually.

Also included in Ed's contract is a $500,000 roster bonus that occurs in Year 5. Because Ed received a signing bonus of $5 million, it will be prorated as $1 million in each year of his contract. To determine his cap hit, simply add Ed's base salary to the prorated portion of his singing bonus each year, and also add any other bonuses that are part of the contract. Because of this Ed's cap hits will be as follows:

What happens if a player is cut?

So you want to know what are the cap ramifications for the Falcons if Ed is cut? Well this is when the cap gets complicated. Depending on the time of year when Ed is cut the ramifications to the Falcons' cap changes. During most of the year, if Ed is cut the remaining portion of his prorated signing bonus is added to the cap and is called "dead money." For example, let's say Ed is cut following the end of his third season during the off-season. Ed still has two years (Year 4 and 5) left on his contract and there is still $2 million of his original $5 million bonus left prorated. Adding in the $500,000 roster bonus still left to be paid in Year 5, calculates that cutting Ed will leave the Falcons with $2.5 million in "dead money." But this saves the Falcons $500,000 in cap space as the $2.5 million is less than the $3 million Ed was originally set to be paid. As long as there was a signing bonus in the original contract, then there will be some dead money left over when a player is cut. Whether it is before the season, during, or after the season, the remaining portion the prorated bonus is accelerated to the current year.

There is an instance during the calendar year where the Falcons could receive a break on the amount of dead money taken in the current year. This occurs after the month of June. If a player is cut after June 1, then the team can receive a break in the dead money. Instead of the entirety of the remaining prorated bonus accelerating to the current year, if a player is cut on June 2 or after then only the first of the accelerated portion accelerates to the current year. And the remaining portion will be delayed as dead money for the following year. For example, if Ed was cut in June after his second season with the Falcons then he would have three years left on his contract (so only $3 million left in prorated bonus + $500,000 roster bonus). But because of the break the Falcons get, cutting Ed would only leave $1 million of dead money for Year 3. But in Year 4, there would be the remaining $2.5 million ($3.5 million - $1 million) counting against the Falcons cap as dead money. This applies if Ed is cut during training camp or during the regular season.

What happens if a player is traded?

Trading a player is basically the same as cutting a player in the off-season. When you trade a player, the remaining portion of his prorated signing bonus is accelerated to the trading team. So if the Falcons traded Ed, they would take on dead money. While the team that receives Ed would only assume his normal cap hit. For example, if Ed was traded during Year 2 to the Panthers, the Falcons would assume an extra $2.5 million (accelerated bonus of $4.5 million - $2 million regular cap hit) on their cap, while the Panthers would only have to assume the $2 million on Ed's contract against their own cap. For this reason, trades in the NFL are not as common as they are in baseball and basketball. Typically, NFL teams will only trade players that have small or no signing bonuses at all. That is why restricted and exclusive rights free agents are typically the most common types of players traded, because their tender offers do not include signing bonuses.

How does restructuring work?

Restructuring is probably the most complicated and intricate part of the salary cap process. I don't understand it all myself, but I will try to present you with an example of the most common and simplest form of a restructured contract.

In our example, let's say the Falcons need to save some extra space so they need to restructure some contracts. Say it is the offseason prior to Year 3 of Ed's contract, so it would not be a good idea to cut him (would add an extra $1 million to the Falcons cap). So they decide to restructure Ed's contract. A common form of restructuring is lowering the player's base salary. In this case, the Falcons can lower Ed's base salary of $1.5 million to $500,000. Now the Falcons have cleared $1 million off Ed's contract. But now what happens to that $1 million? Usually teams treat it as a signing bonus. In that way, it becomes prorated over the remaining years of his contract just like a normal signing bonus. That means that there will be a $333,333 cap hit ($1 million / 3 years) in Years 3, 4, and 5. Although this frees up $666,667 in cap space in Year 3, it adds an additional $333,333 to the Falcons cap in Years 4 and 5.

So although restructuring is a quick way to gain cap space without losing a player, but it also can hurt a team down the road. When you begin to restructure contracts with large bonuses, it can be very detrimental to the salary cap in future years.

How do option bonuses work?

I will address Mike Vick's contract for this one, which term's can be seen here. I know the details are pretty confusing, but I will address the option bonus specifically. In the original contract Vick signed the length of the contract was six years. But included in the contract was the option for the Falcons to extend the deal by paying an $8 million bonus following Year 1 of his contract. This $8 million acted just like a signing bonus and was prorated over the course of the remaining years of the contract. Also the fact of paying this option added two more years to the length of Vick's contract. Meaning the $8 million would be paid over the course of the final 7 years of the contract giving him an extra hit of $1,142,857. Option bonuses can have many functions. In the case of Vick's contract, it also lowered the base salaries in Years 2 through 6. Option bonuses can be used to void contracts as well, meaning teams can cut off years to a player's contract and make him a free agent.

What about incentives?

Incentives are interesting. Incentives are categorized as either "Likely to be Earned" (LTBE) or "Not Likely to be Earned" (NLTBE). Their names are pretty self explanatory. LTBE incentives count towards the cap while NLTBE incentives do not. But the way it goes is that if the player achieves those NLTBE incentives then they count toward the following year's cap. Let's say that in Ed Zample's contract there were incentives included. They include:

But prior to Ed's signing with the Falcons he had never started 16 games for his previous team. Also the Falcons did not win the Super Bowl in the year prior. That would make those two incentive clauses NLTBE. But the Falcons did go to the playoffs the previous year, so that incentive clause is deemed LTBE. That means that along with Ed's normal cap hit, there will be an additional $500,000 added to it. If Ed does start 16 games in Year 1 of his contract, the $250,000 will then become LTBE for Year 2. But if the Falcons do not go to the playoffs in Year 1 of Ed's contract (and obviously do not win the Super Bowl), then both those become NLTBE for Year 2.

I think this pretty summarizes the basics of the salary cap. Remember you can submit further questions to either me, Capologist, or post questions at the FalcFans Forums.

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