Salary Cap - Salary Cap in North American Leagues - Salary Cap in The NFL

Salary Cap in The NFL

The new collective bargaining agreement formulated in 2011 had an initial salary cap of $120 million. While the previous CBA had a salary floor, the new CBA initially does not have one until 2013; at that time, each team will be required to spend a minimum of 88.8% of the cap in cash on player compensation in each season. The NFL's cap is a hard cap that the teams have to stay under at all times, and the salary floor is also a hard floor. Penalties for violating or circumventing the cap include fines of up to $5 million, cancellation of contracts and/or loss of draft picks.

The cap was first introduced for the 1994 season and was initially $34.6 million. Both the cap and the floor were adjusted annually based on the league's revenues, and they increased each year. In 2009, the final capped year under that agreement, the cap was $128 million per team, while the floor was 87.6% of the cap. Using the formula provided in the league's collective bargaining agreement, the floor in 2009 was $112.1 million. Under the NFL's agreement with the NFLPA, the effect on the salary cap of guaranteed payments (such as signing bonuses) are, with a few rare exceptions, prorated evenly over the term of the contract.

In transitions, if a player retires, is traded, or is cut before June 1, all remaining bonus is applied to the salary cap for the current season. If the payroll change occurs after June 1, the current season's bonus proration is unchanged, and the next year's cap must absorb the entire remaining bonus.

Because of this setup, NFL contracts almost always include the right to cut a player before the beginning of a season. If a player is cut, his salary for the remainder of his contract is neither paid nor counted against the salary cap for that team. A highly sought-after player signing a long term contract will usually receive a signing bonus, thus providing him with financial security even if he is cut before the end of his contract.

Incentive bonuses require a team to pay a player additional money if he achieves a certain goal. For the purposes of the salary cap, bonuses are classified as either "likely to be earned", which requires the amount of the bonus to count against the team's salary cap, or "not likely to be earned", which is not counted. A team's salary cap is adjusted downward for NLTBE bonuses that were earned in the previous year but not counted against that year's cap. It is adjusted upward for LTBE bonuses that were not earned in the previous year but were counted against that year's cap.

One effect of the salary cap was the release of many higher-salaried veteran players to other teams once their production started to decline from the elite level. On the other hand, many teams have made a practice of using free agents to restock with better personnel more suited to the team. The salary cap prevented teams with superior finances from the formerly widespread practice of stocking as much talent on the roster as possible by placing younger players on reserve lists with false injuries while they develop into NFL-capable players. In this respect, the cap functions as a supplement to the 53-man roster limit and practice squad limits.

Generally, the practice of retaining veteran players who had contributed to the team in the past, but whose abilities have declined, became less common in the era of the salary cap. A veteran's minimum salary was required to be higher than a player with lesser experience. This means teams tended to favor cheaper, less experienced prospects with growth potential, with an aim to having a group of players who quickly develop into their prime while still being on cheaper contracts than their peers. To offset this tendency which pushed out veteran players, even those who became fan favorites, the players' association accepted an arrangement where a veteran player who receives no bonuses in his contract may be paid the veteran minimum of up to $810,000, while only accounting for only $425,000 in salary-cap space.

The salary cap also served to limit the rate of increase of the cost of operating a team. This has accrued to the owners' benefit, and while the initial cap of $34.6 million has increased to $123 million (maximum in 2009), this is due to large growths of revenue, including merchandising revenues and web enterprises which ownership is sharing with players as well.

During the uncapped 2010 season, most NFL teams spent as if there was a cap in place anyways, with the league warning against teams front-loading contracts during the season. The Dallas Cowboys, New Orleans Saints, Oakland Raiders, and Washington Redskins ignored the warning, and in 2012 the Cowboys and Redskins (the top two NFL teams by revenue in 2011) were docked $10 million and $36 million, respectively, from their salary caps, to be spread over the next two seasons. The money would subsequently be divided up among the rest of the NFL teams as added cap space, except the Raiders and Saints (the latter of which was also dealing with their ongoing bounty scandal), who didn't get the extra cap money due to themselves being over, though at a lesser extent to the Cowboys and Redskins.

The owners opted out of the CBA in 2008, leading to an uncapped season in 2010.

Year by Year Salary Cap