It’s not difficult to create cap space

USA TODAY Sports

The salary cap officially will drop by $15.7 million, in comparison to last year. By next Wednesday, all teams must be in compliance with the 2021 cap limit of $182.5 million. Several teams will be scrambling to get out of the red. Others that are in the black will be trying to create even more cap space to permit offseason spending.

So how does a team create cap space? Let’s consider the various strategies.

First, a team can cut one or more players. That wipes out all compensation due to be earned this year: salary, roster bonuses, workout bonuses, and/or so-called “likely to be earned” incentives. For many players, the savings from cutting the player becomes balanced by the fact that premature termination will trigger cap charges from signing bonuses, option bonuses, and/or restructuring bonuses that were spread over multiple cap years.

For example, a player with a $10 million salary in the third year of a four-year deal that included a $10 million signing bonus would have $5 million in unallocated signing-bonus dollars. Cutting the player creates $10 million in cash and cap savings; however, it also creates a $5 million charge for the previously-paid signing bonus. (Teams can split that charge between two cap years by cutting the player with a post-June 1 designation, something that each team can do for up to two players per year.)

Second, a team can get one or more players to take pay cuts. This method creates raw cash and cap savings by reducing compensation.

Third, a team can restructure one or more contracts, by taking the compensation for the current year, reducing it to the CBA-mandated minimum salary, and paying the rest as a signing bonus that gets spread over up to five years.

For example, if a player with seven or more years of service is due to make $20 million in base salary, his salary can be reduced to $1.075 million with $18.925 million converted to a signing bonus that can then be spread over the life of the deal, and into voidable years if need be. By spreading it out a full five years, the cap number drops from $20 million to $4.86 million.

Of course, the other $15.14 million eventually will hit the cap. As the cap goes up, however, those dollars have a relatively smaller impact.

Fourth, a team can convert current-year compensation to an easily-reachable “not likely to be earned” incentive. If/when the incentive is earned this year, it counts against next year’s cap.

There may be other ways that people who create cap space for a living know about. (And if any of you want to share those techniques, please do.) These are the most basic ways to do it, and more and more teams will be doing it over the next week. Several already are.

17 responses to “It’s not difficult to create cap space

  1. How come none of these options are in favor of the player?
    Demand a fully guaranteed “no-cut, no -restructure” deal. I’m tired of seeing NFL players go for the okie-doke with these elastic contracts that only favor the teams.

  2. When I hear the word “salary cap” I think of the great Eddie D and Jerry Jones and how they ran the league in the 90’s. Basically assembling Pro bowl teams and buying Lombardi’s. Hence the reason the salary cap exist.

  3. I’ve said it before, but it’s worth asking again; The process of Cap Carryover needs full examination and explanation. Creating Cap Space is one thing, carryover, another critical aspect of the formula.

  4. So basically a lot of accountants manipulating numbers to hide the true numbers or to kick the can down the road.

  5. What’s the point of a cap if the league just allows teams to kick the can down the road a few times to stay under it?

  6. Can you explain the easily attainable not likely to be earned bonus? It seems like easily attainable and not likely to be earned contradict each other

  7. mackcarrington says:
    March 10, 2021 at 10:36 am
    How come none of these options are in favor of the player?
    Demand a fully guaranteed “no-cut, no -restructure” deal. I’m tired of seeing NFL players go for the okie-doke with these elastic contracts that only favor the teams.

    ————

    Lol players can demand it all they want. They are not getting a no-cut clause. And all a no-restructure clause would do is screw the player over when the cap soars

  8. The NFL Players need new union representation… The NFL Owners rank in billions of dollars each year but the contract that the players who put their well being and life on the line each play of each game but their contracts are not even face value. Professional athletes in basketball (NBA) and baseball (MLB) have fully guaranteed contracts, i.e., the entire amount of their contract has to be paid no matter how well (or poorly) they play or even if they don’t play at all due to injury.

  9. mantastic54 says:
    March 10, 2021 at 11:10 am
    Can you explain the easily attainable not likely to be earned bonus? It seems like easily attainable and not likely to be earned contradict each other

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    Just find some category that a player did poorly in the year before. If he played 5 games, set the bonus at “playing 6 games”, etc. If the running back only ran for 3 TDs, give him UTBE-Incentives of 100K each on his 4/5/6/7th td’s, etc.

  10. hellooooooooooobrooklyn says:
    March 10, 2021 at 11:14 am
    mackcarrington says:
    March 10, 2021 at 10:36 am

    How come none of these options are in favor of the player?
    Demand a fully guaranteed “no-cut, no -restructure” deal. I’m tired of seeing NFL players go for the okie-doke with these elastic contracts that only favor the teams.

    ————

    Lol players can demand it all they want. They are not getting a no-cut clause. And all a no-restructure clause would do is screw the player over when the cap soars

    ————————–

    My only point is that I’m pro-player. You & everyone else on here seem to favor the teams screwing these guys over. I know they won’t get no-cut deals. That’s the travesty of it. So every season we sit here and watch our favorite players get cut. Just because it’s the “norm” doesn’t mean its right.

  11. How come none of these options are in favor of the player?
    Demand a fully guaranteed “no-cut, no -restructure” deal.

    ———————————

    Cause every player is going to bet on themselves for longer big money than the 2 year deals worth maybe 25% of what they’re getting now.

    Fully pricing risk into player’s contracts will only drive the salaries WAAAAAAAAY down.

  12. orechia says:
    March 10, 2021 at 9:48 pm
    NFL players are a union. Explains why they get screwed

    ———-

    Lol yes historically unions have screwed workers while benevolent corporations and employers have treated them really well.

  13. joetoronto says:
    March 11, 2021 at 12:12 pm
    orechia says:
    March 10, 2021 at 9:48 pm
    NFL players are a union. Explains why they get screwed

    ———-

    Lol yes historically unions have screwed workers while benevolent corporations and employers have treated them really well.
    —————————

    Unions tend to favor most those who are established in the profession. This union does not. This Union and the CBA they set up make experienced players (beyond a handful of stars) expendable. Positional caps and max-salary contracts (like the NBA has) would be helpful. Perhaps a rule that no player can sign a contract for a greater AAV than twice the mean of all players at his position from the previous year. That would cap QB contracts this year at $32.6mil. Surely we can all see how that would be beneficial…..

  14. you people are not looking at it correctly.. when a salary is turned into a signing bonus over x amount of years they get that money at signing.. the cap hit is pushed out not the payment.. the player gets their EXACT pay UP FRONT.. so many people are clueless.. it doesnt mean Brady is taking less just pushing it out.. but he GOT his money AT SIGNING it benefits the players.. at least the ones that dont blow it on hookers, drugs, and cars

  15. BAMMER says:
    March 12, 2021 at 6:42 pm

    you people are not looking at it correctly.. when a salary is turned into a signing bonus over x amount of years they get that money at signing.. the cap hit is pushed out not the payment.. the player gets their EXACT pay UP FRONT.. so many people are clueless.. it doesnt mean Brady is taking less just pushing it out.. but he GOT his money AT SIGNING it benefits the players.. at least the ones that dont blow it on hookers, drugs, and cars

    ——–

    You are just as clueless. Singing bonuses are guranteed money, but it doesn’t mean it’s paid all at once. Plenty of times part of the payment for the signing bonuses are deferred to other years. The greater effect is to convert non-guaranteed money to guaranteed money. It doesn’t always mean the team cuts a check on the spot.

  16. losalmon says:
    March 15, 2021 at 9:21 pm

    You are just as clueless. Singing bonuses are guranteed money, but it doesn’t mean it’s paid all at once. Plenty of times part of the payment for the signing bonuses are deferred to other years. The greater effect is to convert non-guaranteed money to guaranteed money. It doesn’t always mean the team cuts a check on the spot.

    —————————————————————————-

    Converting non-guaranteed money to guaranteed money most definitely benefits the player.

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