Cap Clarity: A Simplified Look At The Salary Cap In 2022

July 7, 2022
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The salary cap is a highly complex and confusing contract written and agreed upon by the NFLPA and the NFL. And I will do my best to take this mess (putting it politely) and make it understandable for those without master’s degrees in accounting. But, after reading this, you’ll understand why some teams are always in cap trouble.

The Basics

Surpassing the agreed cap is prohibited. The salary cap is adjusted annually based on league revenue. The current agreement gives the players 47 percent of league revenue, divided equally among teams. At the beginning of every league year, all teams must be at or below the salary cap for that league year. 

And due to agreements, no team can spend less than 89 percent of that year’s cap. Additionally, The NFL agreed only to be allowed to save five percent of the cap, and if they fail, the players will be awarded unspent money. 

Here’s The First Way The Cap Is Manipulated

Contacts do not have to be divided equally among years of employment. This allows teams to sign players to enormous contracts, only to cut them after a few seasons because they backloaded a contract. The downside is doing this to key players such as the quarterback. People teams don’t want to cut.

The player’s counter to this is the guaranteed salary, customarily paid out throughout the contract. However, guaranteed money does not run into extensions as those are considered new contracts. Signing bonuses are still an obligation of the team that signs the contract, meaning they can ship off the player and still owe him. This is called the dead cap.

Dead Cap

Again, the Dead cap should be paid by the team that agreed to the initial contract. However, I have read contradictions on whether the dead cap counts towards the salary cap, confusing things.

Adam Hulse wrote, “This is where dead money comes into play. Any player that is not on the team roster but is still owed guaranteed money will count against their salary cap for the next two seasons. The remaining portion of the guaranteed money will be spread evenly across two years and paid to the player.”

https://www.sportskeeda.com/nfl/what-dead-cap-nfl-explaining-business-football

Hereab Kurdi wrote the following using DeVante Adams as an example, “Adams’ cap hit in 2022 will be $8,170,576. But didn’t we just say he would earn $22.75 million in 2022? Indeed, and this is where the fun starts. Teams are all about saving money, even if they act like they’re just lighting it on fire sometimes. This is considered the dead cap hit, because only the base salary along with the signing bonus and other bonuses count toward the salary cap.”

https://wegotthiscovered.com/sports/nfl-dead-money-explained/

I get this is where most of the confusion comes from, and I don’t blame you. I have researched a lot, and a dead cap is the guaranteed money owed to a player from the contract at the time of termination. So say if a player has been guaranteed 30 million over four years. The player is cut after two years and has been paid 18 million. That player would still be owed 12 million dollars in “dead cap” Because of that, the NFL and players said it creates a dead cap. I’ll touch more on this subject later.

Signing Bonuses  

This podcast features a former NFL Executive explaining how the NFL wiggles around the cap.

Although it is typically paid out over the duration, a team can decide how they will pay out the bonus. And this supposedly does not count towards the cap. So a team can choose to pay a guy all the bonuses from years one, two, and year three. This may sound unclear, so I’ll let someone else explain.

Andrew Brandt of sports illustrated wrote, “Here is an example: Let’s say a player signs a four-year contract with a $20 million signing bonus. Signing bonuses, for cap purposes, are prorated. Thus, that player’s bonus is treated as $5 million in cap each year. The “cash over cap” for that one player, on one bonus of one contract, is $15 million: He received $20 million cash with only $5 million against the cap. This illustrates how teams are able to spend over the cap in terms of cash spending without being over the cap in terms of cap accounting.”

https://www.si.com/nfl/2021/03/02/business-of-football-understanding-the-salary-cap-dead-money

Then There Are Incentives & Restructures.

The contract is occasionally loaded with realistic and unrealistic expectations, also known as incentives. Based on the previous season, the team must count it in the salary cap if it’s considered realistic. It doesn’t hit the books if deemed unrealistic until the guy achieves the milestone.

Players can be asked to get paid less for a season. This can be because a player failed to perform or the team needs money. It’s all on whether or not the player agrees to take a pay cut. This is a risk and can create disgruntled players.

The Cap Can Be Manipulated

Based on everything I read, teams can manipulate the salary cap, but it’s a risk. And with how confusing it is written, it’s easy to mess up; teams have done so in the past. Especially with the dead cap because the guys writing the contracts do not always understand. It’s a headache. So here’s another thought from Brandt on how teams should work the salary cap.

When it comes to the cap Brandt says, “It is simple: Pay as you go. The goal for every team’s cap management, in my opinion, is to match, as much as possible, cash spending and cap accounting. It is to resist the temptation for short-term gain—which always leads to long-term pain—and pay as you go.”

https://www.si.com/nfl/2021/03/02/business-of-football-understanding-the-salary-cap-dead-money

And this is probably why Bill Belichick refused to mortgage the future this offseason to win now. There’s too much risk, especially since key players can refuse to have their contract messed with once terms are set. Like Hightower in 2019, seen here as reported by Doug Kyed in this tweet.

Summary

All you need to know is the salary cap is real and it’s complicated. And even though normal people cannot explain it simply, the league and the players union understand it because even though they wrote it so basic accountants struggle to understand it, but their experts do. And that’s all that matters unless your team is one of those messing up their cap but that’s an article for another subject.

And if you want to know how much money the Patriots have in the cap, I recommend Miguel Benzan, also known as @Patscap on Twitter. He’s pretty accurate with his numbers and understanding of the CBA. He keeps the salary cap up to date on his Twitter profile.

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