How Current NFL Player Contracts Are Structured..........

Discussion in 'Chicago Bears' started by soulman, Jun 23, 2014.

  1. soulman

    soulman Pro-Bowler SuperFan DBS Writer

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    Agent's Take: How your team structures deals -- and why it matters

    By Joel Corry | Former Sports Agent

    June 20, 2014 3:01 pm ET

    The devil is in the details with NFL contracts since they aren't fully guaranteed like MLB and NBA contracts. Colin Kaepernick's recent six-year contract extension worth a maximum of $126 million is a perfect illustration of this principle.

    On the surface it appeared as if the San Francisco 49ers made a huge financial commitment to their QB because of the overall value of the deal and the $61 million in guarantees. But Kaepernick's contract doesn't provide him the same level of security as comparable quarterback deals. Only $12,973,766 is fully guaranteed at signing. Jay Cutler, Tony Romo and Matt Ryan have $38 million, $40 million and $42 million fully guaranteed at signing in their contracts, which is essentially triple Kaepernick's amount.

    Kaepernick's deal helped shed light on how NFL contracts are generally structured because of the scrutiny it received. Average salary and total compensation are misleading because of the lack of security with NFL contracts. The most important metrics are compensation in the first three years of a multiyear deal and the amount of money fully guaranteed at signing or will become fully guaranteed early in the contract.


    There are four basic NFL contract structures with slight variances within each general structure.

    Signing bonus

    The only guaranteed money with this structure is a signing bonus, which for cap purposes is prorated or spread out evenly over the life of a contract for a maximum of five years. A big signing bonus can keep salary cap numbers low in the early years of the deal while making it difficult for a team to cut a player because signing bonus proration accelerates onto a team's current salary cap upon release. As salaries have escalated, teams have moved away from the pure signing-bonus model. Teams that still use this structure usually give their players less overall guarantees than comparable players on other teams with different structures. Since it is usually cap prohibitive to release a player that gets a significant signing bonus with this model, some teams are willing to include roster bonuses due in the first couple of days of the second contract year (i.e.; third day of the league year).

    Signing bonus and salary guarantees

    Guaranteed money with this structure consists of a signing bonus and salary guarantees. The base salary in the first contract year is usually fully guaranteed (injury, salary cap and skill guarantees) at signing. Roster bonuses in the first contract year due a few days after signing are fairly common. Even though these roster bonuses technically aren't guaranteed, they are considered as a part of the guaranteed money. Salary guarantees in subsequent contract years are mainly base salary. Some teams will fully guarantee the second-year base salary at signing.

    The trend is for base salaries after the first contract year to be conditionally guaranteed. They are guaranteed for injury only initially but fully guaranteed if a player is on the team's roster on a specified date in each specific contract year. This date will vary from team to team but is normally within the first few days of the current league year (i.e.; 2015 base salary becomes guaranteed on third day of the 2015 league year). Early roster bonuses (first day of the league year) in subsequent contract years containing guarantees aren't as common as the base salary guarantees but operate in a similar manner.

    A majority of salary guarantees have offset language. An offset clause reduces the guaranteed money a team owes a player when he is released by the amount of his new deal with another team. Without an offset, the player receives his salary from the team that released him as well as the full salary from his new contract with another club.

    Signing bonus and option bonus

    The player receives a signing bonus and an option bonus with this structure. An option bonus is essentially an additional signing bonus that's usually paid in the second or third year of a contract to exercise later years in the deal. Since an option bonus is given the same treatment on the salary cap as a signing bonus, it is also prorated or evenly spread out over the life of a contract for a maximum of five years.

    Option bonuses aren't quite as secure as signing bonuses. Typically, an option non-exercise fee for the same amount as the option bonus is included in the contract. It's usually payable the day after the option exercise period expires if the player hasn't been released. Fully guaranteed base salaries at signing that void or reduce after an option has been exercised are sometimes a part of the deal to minimize or eliminate the risk of the player getting released before the option exercise period ends.

    Pay as you go

    Pay as you go is a relatively new structure teams are starting to embrace. A player's cash and salary cap numbers are the same in each contract year because he is receiving salary guarantees instead of a signing bonus under this model. The first contract year usually consists of a fully guaranteed base salary and a roster bonus due a few days after signing. The second year in the most lucrative pay-as-you-go contracts has a fully guaranteed base and a conditionally guaranteed early roster bonus similar to the conditional salary guarantees in the signing bonus/salary guarantee structure.

    There may also be conditional guarantees in the third year. Deals with this structure have higher cap numbers, particularly in the early years, because of the absence of a signing bonus. Since there isn't any signing bonus proration, teams have more cap flexibility. A team won't have any dead money (a cap charge for a player no longer on the roster) if a player is released during the latter years of the deal once the guarantees have expired, provided that his contract hasn't been restructured.

    What it all means

    Teams are requiring per-game active roster bonuses in contracts with more frequency under each of the basic contract structures. The primary benefit of the roster bonuses is they provide teams some financial and cap relief with injuries. The per-game amount is only payable if a player is on the 46-man active roster for that particular game. For example, Kaepernick has $2 million roster bonuses ($125,000 per game) in most years of his deal. If Kaepernick suffered a season-ending injury in San Francisco's eighth game during the 2015 season, he would only earn $1 million of his $2 million 2015 roster bonus.

    It's important for an agent to know a team's structural conventions during a contract negotiation. Insisting that a team deviate from their structural preferences is usually an exercise in futility. Teams are extremely reluctant to establish new contractual precedents but are more likely to make an exception with highly sought after free agents, superstars and quarterbacks.


    Here's a look at the preferred structure of the most lucrative contracts on each NFL team.

    (I only included the Bears. Here's the link to the article for those who want to check out the others)

    http://www.cbssports.com/nfl/eye-on...r-team-structures-deals----and-why-it-matters


    Chicago Bears: The Bears have shown a lot of flexibility when structuring contracts. Jay Cutler's seven-year, $126.7 million contract has a pay-as-you-go structure. The Bears converted $5 million of his $22.5 million 2014 base salary into signing bonus during March in order to sign Jared Allen to a pay-as-you-go deal. Cutler has $2.5 million in per-game roster bonuses in the later years of his deal because of his injury history. Julius Peppers had a modest signing bonus, first-year roster bonus due shortly after signing and conditional guarantees in subsequent years. Matt Forte's contract is structured in a similar manner as Peppers' deal. Jermon Bushrod, Lamarr Houston and Brandon Marshall got signing bonuses with fully guaranteed first-year base salaries and conditionally guaranteed second-year base salaries.
    • Informative Informative x 1
  2. soulman

    soulman Pro-Bowler SuperFan DBS Writer

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    As the overall value of contracts rise teams are getting away from their previous style of giving large signing bonuses to lower the initial cap cost of deals for their UFA signings and moving more toward other types of contract structures that are less punishing on the back end of these deals.

    To me this is another sign that as players become and remain better conditioned as they age the inflated dollars at the end of some of these deals will be earned more frequently than was thought at the time many were signed. When that happens a players cap cost soars and the team has a problem keeping an aging player who consumes such a large percentage of the teams caps space. This was the situation the Bears faced with Julius Peppers.

    Many teams, the Bears included, have moved to structuring larger contracts, like the one Cutler received, on a pay-as-you-go basis, or with more modest signing bonuses and option bonuses and/or per game bonuses that must be earned each year in the early years of the deal. I just thought this was an interesting piece of info on how the league is changing as the dollar value of contracts mount.
  3. BSBEARS

    BSBEARS Pro-Bowler

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    Good read, pay as you go seems to be more popular. Also interesting on Forte, Houston, Bushrod, and Marshall. Seems like the more likely to get injured Forte still under older contract, might just be an older contract and that is all.

    Houston , Bushrod , and Marshall with a conditional second year base still sounds a bit like prove it or protection against age.
  4. soulman

    soulman Pro-Bowler SuperFan DBS Writer

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    I think too many teams have gotten burned like Philly did trying to buy All Pro vets with huge signing bonuses and then never getting the player they paid for as far as his productivity. On top of their SBs their salaries were huge as well so it was either keep overpaying for them or take your lumps, eat the dead money on the cap, and move on.

    These per game bonus dollars are smart as well and a teams answer to regaining cap space for replacements if key vets are lost to injury. If a guy is getting $100k per game as a bonus for being on the active roster that game and he's lost in the 6th game of the season that should mean that $1 mil in cap space becomes free to pay for a replacement.

    That kind of structure becomes pretty important as far as keeping a team competitive and able to shrug off certain injuries as the season progresses. The alternative is what we saw with the Bears last year when we lost players and didn't have adequate cap space to replace them with anywhere near equal talent.

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