On the surface, the NFL salary cap is pretty simple. Every year there’s a salary cap number, and you’re not allowed to spend more than that on players. But there are a couple hairs in the soup that makes this a bit more complicated. The big one is the signing bonus.
A signing bonus is exactly what it sounds like, it’s a big pile of money the player gets when they sign the contract. The problem is that this makes calculating their yearly cap hit a bit weird. Consider a player who signed a 5-year deal worth $100 million with a $60 million signing bonus. If you calculated the cap hit based on when they actually got the money, it would be heavily skewed towards the first year.
|Year||Cap Hit (millions)|
This is obviously unreasonable. No team would ever be willing to give out significant signing bonuses. So the NFL allows teams to prorate the cap hit over the length of the contract.
|Year||Cap Hit w/o Proration (million)||Cap Hit w/ Proration (million)|
The other main way a player gets paid is through salary, which is exactly what it sounds like. That money hits the cap in the year it’s get paid, and it can either be guaranteed or non-guaranteed.
This is all very easy if you sign a player and keep them for the entire length of their contract. But anybody who’s followed the NFL knows that that’s often not the case. Teams trade and cut players all the time before their contract ends. So how does cutting and trading effect the cap?
The salary portion is pretty intuitive. That gets sent to the team who traded for the player. Same if they’re cut, the team only pays the guaranteed part of their salary, which remains on the cap. But the signing bonus yet again comes in and complicates what would otherwise be a very simple operation.
If you cut a player halfway through their deal, you’ve already paid them the full signing bonus. But you’re prorating the cap hit over the full contract. So how does the cap hit work? The NFL decided that in this case the remaining cap hit of the signing bonus is accelerated onto the current year.
As an example, take our 5 year contract from above. Since we prorated that $60 million signing bonus over 5 years, the cap hit from that bonus is $12 million per year. But if you cut them in year 3, the $12 million from year 4 and 5 go onto the year 3 cap.
Cap Hit Before Cut (million)
|Cap Hit After Cut (million)||Cap Savings (million)|
This is why it’s often very difficult to move on from a player early in their contract. As you get further into it, the cap hit of that signing bonus that gets accelerated gets less and less.
There is a lot more to NFL contracts, but these basics represent the biggest part of what’s considered when teams think about whether or not they want to cut a player.