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How to Build a Team Part I: The Salary Cap

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Updated 3-15-2014

There are two parts to building a team. The salary cap, and acquiring / retaining players. We'll look at each. This is part I, the salary cap. You can talk all you want about getting lots of free agents, but if you can't fit them into your salary cap it's just talk. If you can't balance your checkbook, you're certainly not going to understand this, and you really shouldn't be screaming about how the Packers should acquire more free agents or pay their existing players more money.

The salary cap this year (2014) is $133 million. You can't spend more than $133 million; you have to spend at least $118 million. This is by contract with the NFL Players Association (NFLPA); if you don't obey you'll get sued in that famous Minnesota court where the players can do no wrong.

A player's pay is divided up into salary and bonuses. There will likely be a signing bonus. If the contract is for 5 years, and the signing bonus is $5M, then that $5M is paid to the player immediately, but it counts as $1M per year against the team salary cap for the five years of the contract. What if the player gets cut? He keeps the signing bonus, and the remaining bonus that has not been charged against the cap comes due to the team. If you cut him before June 1st, the remaining bonus counts on this year's cap. If you cut him after June 1st, then the remaining bonus counts against next year's cap. This is why lots of players get cut the first week of June: to spread the cap hit over two years. The cap money which counts towards players that are not on your team is called "dead cap space."

Another type of payment is a "workout bonus." This money is paid to the player if he shows up a certain number of days in the off-season and participates in the off-season training.

Another type of bonus is a "roster bonus." This money is typically due sometime in March or April, and the team must either pay it or cut the player. If the money is paid, it counts against the cap in that year. However, the team may "guarantee" the signing bonus just before paying it. If the bonus is guaranteed, then it counts as if it were paid in equal installments for each of the remaining years in the contract. For example, if a player has three years left in his contract and is due a $300k guaranteed roster bonus, then that money counts against the cap $100k per year for the remaining three years.

Finally there are game roster bonuses; you earn these by being active on each game day.

Contracts can have incentive bonuses. These come in two important types: "Likely to be earned," and "Not likely to be earned." If you give Aaron Rodgers a $1M bonus for being selected to the Pro Bowl, then this money will be considered "likely to be earned," as Aaron is always selected to go to the pro bowl. Such bonus money counts against this year's cap starting right at the start of the year, even though the pro bowl voting isn't until well into the season. On the other hand, if you had a clause in Aaron's contract that gave him a $1M bonus for personally rushing for 20 or more TDs, this would be considered "Not likely to be earned," as Aaron doesn't score that many rushing TDs in a season. If you wind up paying this money, it counts against next year's cap. Whether a bonus is likely to be earned or not is decided by league lawyers, not by your team. However, there are rules and guidelines so that it's pretty easy to structure a payment such that it is or is not likely, depending on your need. It's popular to revise a couple player's contracts near the end of the year with "likely to be earned" bonuses which you secretly know won't be earned. For example you can add a bonus to a linebacker's contract for special teams tackles; this will count against your cap immediately, using up any remaining cap space you might have. If the linebacker does not play on special teams he will not earn this bonus. When the bonus turns out not to be paid that cap space gets moved into next year. Under the newest CBA contract you can simply notify the NFL office in writing and move unused cap space into next year, so these "likely to be earned" tricks are getting rather rare.

A contract may include incentives that are based on team performance, such as total number of games won, total number of points scored, total number of points allowed by the defense. Generally team incentives will be considered not likely to be earned. This is another way to grab cap room from the future. Recently Washington found themselves in a tight cap spot (a situation that's about as rare as the sun coming up), so they converted $1M of Mark Brunell's contract from salary to team based incentives. However, the contract named eight different team goals, and Mark gets his money if any single one of the goals is met. Thus Mark and his agent consider it nearly certain that he will be paid the $1M, while the NFL classifies the $1M as not likely to be earned and therefore not counting against this year's cap.

So we see bonuses are used to move money from future caps into this year, or from this year's cap into next year.

Your salary cap is calculated using the top 53 salaries on your team, so during training camp when you have 90+ players many of them don't count. The cap is $133M, so clearly the "average" player gets $133M / 53 = $2.5 million per year. If you're paying a decent player less than this you're getting a real bargain - Kaepernick played 2012 for $608k, so the 49ers got a real steal on this.

In the real world you're going to have a few very highly paid players that use up a lot of cap; to keep to your average you're then going to have to have a lot of low paid players. A good QB is going to cost you $15m to $22m per year. Good defensive ends or OLBs command a similar salary of $10m to $15m.

In the case of the Packers there are currently a significant number of unsigned free agents; it's extremely likely that several of these will be signed shorty to expensive contracts. Here's the Packers currently under contract who have cap number larger than $2.5m - this is where the real money is going.

Aaron Rodgers   $17.9m
Clay Matthews   $10.9m
Tramon Williams  $9.5m
Josh Sitton      $6.4m
Sam Shields      $5.7m
TJ Lang          $5.1m
AJ Hawk          $5.1m
Morgan Burnett   $4.8m
Jordy Nelson     $4.4m
B.J.Raji         $4.0m
Brad Jones       $3.9m
Bryan Bulaga     $3.8m
Mike Neal        $3.8m
Julias Peppers   $3.5m
Mason Crosby     $3.4m
Total 15 players:$92m

After these 14 players, we have $41m to pay 39 players, about $1m per player. At this instant, just before free agency starts, we have about $20m in cap room to sign a few free agents, including our own like Raji, Shields, Jones, Finley, EDS. Clearly some uncomfortable choices will have to be made. We're then going to need a lot of recently drafted players and veterans playing for the veteran minimum. It's easy to say we should sign Lamarr Houston for $7m as a bookend for Clay, but where will the money come from? You're going to have to cut players or salaries, and pay a large signing bonus to rob your future salary cap. Like Washington and Dallas, this means in a couple of years we would be wielding an ax to our roster. Of course signing Lamarr also means you have to have the cash available to pay a large signing bonus, and you have to be willing to part with that cash, cash which may be needed in a year or two to sign more of your rising players.

You can't just pay players whatever you want, there are minimum salaries. These are:

1) Rookie - $420,000
2) 1 year - $495,000
3) 2 year - $570,000
4) 3 year - $645,000
5) 4-6 year - $730,000
6) 7-9 year - $855,000
7) 10+ year - $955,000

If you sign a veteran player to a one year contract and his bonus is $65k or less, then he only counts on your cap as a 2nd year vet  ($540k) plus the bonus. You're still out the cash, but your cap figures don't have to suffer.

part II:

Very cool Mark, well done.  Just one tiny little minor point...during the offseason, only the top 51 salaries are counted against the cap.

Great writeup Mark, really enjoyed it.

I really hope we can get Matthews for $11 million a year.  I know you were just guessing but I have a feeling he's going to want to push for top dollar and considering the Mario Williams deal will be two years old at that point I think it's going to have to at least rival it.

Secondly, on the Dumervil topic he was scheduled to take a paycut to $8 million a year before the mix up, and it sounds like he's not getting offered anywhere near that from Denver now.  I have a feeling that he will be looking at more like $6 a year (just a guess).  That would make him a lot more reasonable.  Now to tie it back into your post instead of just bypassing the whole point of your writeup and suggesting signing a player, I believe that Shields and Heyward were by far our best two CB's last year.  I would personally rather part ways with someone like Tramon and roll with our top two CB's and let House work his way in along with a draft pick and then have Perry and Dumervil to man the OLB spot opposite Matthews.  Obviously this is all just an opinion and that would hinge on the idea that Dumervil would be open to coming to GB, TT has confidence in our CB's outside of Tramon, TW's contract wouldn't cause too many issues if it was parted with, etc.

Thanks again for the post, good stuff

just like when brett favre signed his 100 million dollar contract, when rodgers signs his 160 million dollar contract the packers will be good enough for the playoffs but they will never win the SB. can't win when 1 player is making 20% of the salary cap.


--- Quote from: majikwen on March 21, 2013, 06:03:29 AM ---just like when brett favre signed his 100 million dollar contract, when rodgers signs his 160 million dollar contract the packers will be good enough for the playoffs but they will never win the SB. can't win when 1 player is making 20% of the salary cap.

--- End quote ---
They didn't win the Super Bowl during Bret's contract becuase Mike Sherman was a completely inept GM who completely destroyed the depth of the team by being clueless about managing the cap and throwing away draft picks, not because they were limited by Brett's contract.


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