Would NFL ever tie compensation to cap percentage?

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Starting in 2011, the NFL’s franchise tender became determined through a five-year average ultimately tied to the percentage of the salary cap consumed by the highest-paid players at a given position. Thus, as the salary cap spikes, the franchise tenders increase accordingly.

So why shouldn’t that also apply to players who sign long-term deals? Per an NFL Players Association source, there’s nothing in the Collective Bargaining Agreement that prohibits tying compensation to a percentage of the salary cap. While it can’t be used in rookie deals or offer sheets, it’s fair game for free-agent contracts and veteran renegotiations.

If, for example, a player signs a five-year deal worth $15 million per year with the cap at $155.27 million per year, that’s currently an investment of roughly 10 percent of the cap. But as the cap goes up (currently at $10 million per year), the relative percentage of the contract shrinks. At the current rate, that $15 million contract could soon look not as great as it does now — sort of like J.J. Watt’s contract in relation to Olivier Vernon’s.

But just because it’s permissible doesn’t mean an NFL team would go for it. Teams prefer certainty in player contract amounts, despite the year-to-year uncertainty of the cap. Besides, few players will have the leverage to demand that kind of a term.

Defensive tackle Ndamukong Suh was the last of the pre-wage scale dominant players who was able to force his way to the open market and dictate terms. With rookie deal now slotted at a much lower level and the ensuing franchise tenders affordable, the league’s best players won’t be able to go to launch an auction in which the player’s agent tells teams that one of the terms will be protection against spikes in the cap in the form of a bonus or other adjustment ensuring that the player will continue to get a predetermined percentage of the cap as it passes, for example, $160 million, $180 million, and $200 million.

So it’s no different than fully-guaranteed contracts. They’re available, but teams rarely if ever will give them out.

Still, it’s a fair concern for players whose deals that look great when signed quickly turn less-than-great as the salary cap keeps turning like numbers in a pinball machine.

20 responses to “Would NFL ever tie compensation to cap percentage?

  1. The agents know the cap trends and it’s up to them to arrange the contracts so the player gets what they can get. Plus, it’s not all that often that the salary stays the same between years. It goes up and down through the contract to help manage the cap hit and depending on bonuses.

  2. How about that year where there was no salary cap? Everyone would have played for free?

  3. I don’t know what anyone else thinks, but $20 million a year sounds pretty good to me regardless of what percentage of the cap it is.

  4. A straight up percentage of cap deal precludes the effective upfront payment of bonuses amortized for cap purposes that protects both player earnings from catastrophic injury and a teams ability to move on from untenable contracts

  5. Absolutely terrible idea. The idea behind the ever increasing salary cap is that unsung grinders can get their payday not so mediocre QBs can get $50m a year.

  6. That is a dumb idea. The cap going up brings in ‘extra’ money that can be used to go get big name free agents. Tying the contract to a percentage of the cap means that extra money is gone because it goes to players already on the roster. The result would be those guys get cut or restructured at an even high rate than now.

    Tying max compensation by position to the cap is a different story. (Ex. QB 15%, Wr 8%, etc) That would lower QB money and spread it around to other players. It would also reduce the creative compensation packages that mean next to nothing. As of now, the QBs seem to grab the extra cap money from cap increases. For teams that already have a decent QB the money goes to whatever FA is at a position of need. That is the only way Olivier Vernon got that ridiculous contract. I’m sure there would be players complaining that it would limit their personal compensation potential but we are talking 25 or so guys. The net result of this would be higher compensation for a much greater percentage of veterans but the downside is that EVERY PLAYER mistakenly believes they are the best and should get the max.

  7. What’s the difference? Every team has a guy that manages their cap and I am sure they consider these contracts as a percentage of the cap regularly. And I am sure players agents do the same thing.

  8. It is the fact that the cap goes up (and a good player’s percentage of the cap goes down) that creates room for the team in later years to go after other needed players to complete the team.

    Why would a team ever want to lock in the percentage of cap? Money for the team aside, it’s what frees up other dollars for other players.

  9. These concerns are already factored into the negotiating process, and cap numbers of contracts generally increase in future years for accounting convenience as the salary cap continues to grow.

    Under the current system every contract has a total Present Value of what that contract is worth today. If the contract was tied to a percentage of the cap, then that would still be the case with the teams and agents both guessing as to what those dollar amounts might be in the future. If a team were to reconfigure an offer to change the payment structure to a cap-percentage, then there’s no reason to think they would create an offer that under their projections would increase in a higher Present Value today, otherwise they could just as easily add more money to the original offer if they are interested in providing greater compensation overall.

    It’s any party’s guess as to how much the cap will rise in the future, and either party has a relatively equal chance of guessing high or low on that guess. They could also agree in 3 years to flip a coin for a guaranteed bonus payment of either 2 million or 4 million as one example, or they could just agree to an amount of 3 million. Either one would have the same Expected Value.
    There is no fundamental advantage as a matter of number logic to have one formula or another that both result in the same Expected Value.

    If there’s a difference of opinion on future cap increases, then each party is bound by their own guesses as a basis for calculating the Present Value in any contract negotiation. Every agent and every team can make their own determination of what any player is worth in terms of Present Value, and either side is naturally going to be more or less inclined to strike a deal on the basis of a given offer being higher or lower than what they believe the player’s value is in conjunction with the calculation of each side’s future cap increase guesses.

    The bottom line is it doesn’t matter which payment system is used since either method would result in both sides calculating what the overall Present Value is, and that’s already happening. If a team or agent doesn’t think an offer makes sense when factoring in what the future numbers are worth, then they won’t do a deal until their negotiation perspective is reconciled to the point that they are happy with the overall Present Value of the contract.

    However, it could be relevant or advantageous for the Union and the League to consider modifying the compensation model in conjunction with the next CBA deal if they can creatively design a different type of compensation system that results in a perceived win-win in contrast to the current system model. They would be wise to explore any alternative ideas that may be able to accomplish that.

  10. Owners would never do it. What if the player gets hurt, or….like many Free Agents who get their payday become busts (but still get more money to do so). It would be more fair to provide more escalators into rookie contracts for instances when a player overperforms….

  11. Along these lines, teams spending all their cap money on free agents will have a bunch of existing players unhappy. Those that don’t spend on a few free agents can instead use the money to redo existing contracts giving the players more money and making the deal better for the team too. Perhaps extending the term etc.

    Spending all new money on new players is short sighted (says the guy whose teams aren’t spending money).

  12. “How about that year where there was no salary cap? Everyone would have played for free”

    Which we all know was not really a “no cap” year because of Goodell’s fabrications in taking cap dollars from Dallas and Washington for the two years following it because they didn’t follow the cap rules even though it was an “uncapped year” officially.

  13. And also what happens when inevitably the cap goes down. The NFL can’t continue to make record profits every year. I’m not saying its next year, or even in the next five years, but eventually the league will make less money one year than it did the previous, and the salary cap will actually decrease.

  14. The NFL is going to implode in 5-6 years. Family wages are stagnant but owners and players think they should see 10-15% profit increases yearly.

    Wake up the fans are losing money our economy is in turmoil and we are worrying if JJ feels good about 100 million.

    Put it perspective a person making 50,000/yr has to work 200 years to make his 5 year deal. REALLY are we that stupid

  15. Sorry meant to say it would take 2,000 years at $50,000 a year to make the
    100 million dollars deals they get in 5 yrs!

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