What exactly makes up Signing Bonuses in the NFL? Ever wondered that? If you are a freak like me who enjoys reading or knowing about contracts, you came to the right place! I spent precious quarantine hours interpreting Article 12 ‘Revenue Accounting and Calculation of the Salary Cap’, and Article 13 ‘Salary Cap Accounting Rules’ of the NFL’s Collective Bargaining Agreement (CBA) to come up with the most relevant information for you! Yes, you. You came here to quench your thirst for football knowledge!
Some fans only consider a signing bonus as being the agreed upon amount a player receives for signing their contract, but not question what exactly is included in them. Not only what is a signing bonus, but what is its DNA make-up? I like taking a deeper dive into things. According to Article 13, Section 6(iii), “Amounts Treated as Signing Bonuses”, there are 15 of them! Strap up your helmet. We are going head first into this.
But first, let’s go over some definitions for clarification purposes.
Signing Bonus: money earned by a player for signing his contract; typically paid out the first 12-18 months. It is prorated against the salary cap for the life of the contract (five-season maximum).
Salary Cap: the maximum amount of salary each team is allowed to pay their players. For the 2020 season, the salary cap is set at $198.2 million. This figure is calculated by collecting all revenue (AR) the NFL owns. All Revenue is subdivided into three categories for purposes of calculating the salary cap: (1) League Media AR, (2) NFL Ventures/Postseason AR, and (3) Local AR. That total number is then divided by 32 (32 NFL teams).
Team Salary: the total amount of salary a team is paying to their players. According to the CBA, the following is what determines a team’s salary: player contracts, tenders, practice squad contracts, termination pay, grievances, expansion bonuses, offseason workouts, rookie football development programs, injury protection, and “other amounts”.
Cap Space: the amount remaining (varies for each team) under the salary cap that can be allocated to pay for player’s contracts. For example, the San Francisco 49ers has $15,741,039 of available cap space (as of April 1, 2020). They can only spend that much on player’s contract for the current 2020 league year. Formula: Cap Space = (Salary Cap) + (Cap Rollover) +/- (Cap Adjustment) – (Total Cap Hit) – (Dead Money)
The main event of this article is signing bonuses, which falls under the player contracts umbrella in the determination of Team Salary. So, let’s try this again. The following is how the Team Salary is constructed under the definition of ‘signing bonus’ under the NFL’s CBA.
“For purposes of determining Team Salary…the term “signing bonus” shall include:”
- (1) Any amount specifically described in the contract as a signing bonus;
- (2) Any guaranteed bonus (money);
- (3) Any payment, including guarantees, for option years, contract extensions, contract modifications, or individually negotiated rights of first refusal;
- (4) Any option or bonus, and any option buyout amount, when paid or guaranteed;
- (5) The difference between the salary in the second-year contract and the first-year contract when the salary in the second-year contract is less than half the salary in the first-year contract (uh, what?). Allow me to simplify. In Year 1, your salary is $100. In Year 2, your salary is $45. That $55 difference is used in determining the team salary. Weird, huh?
- (6) Any bonus signed after the start of training camp;
- (7) Any roster bonus signed after the last preseason game;
- (8) Any salary advance paid on a guaranteed basis;
- (9) Any guaranteed bonus tied to workouts;
- (10) Any salary advance which a player is not obligated to repay;
- (11) Any amount of salary advance, offseason workout bonus, offseason roster bonus, or offseason reporting bonus that is guaranteed for skill, injury, and salary cap terminations**.
- (12) Any renegotiation or extension of a contract that is executed in the final year of contract. Including, salary advance (the player is not and cannot be obligated to repay), any offseason workout bonus, any offseason roster bonus, and any offseason reporting bonus;
- (13) Any bonus to be paid to a player for fulfilling his obligations to play under his contract without seeking to renegotiate and/or holding out;
- (14) Any relocation bonus that is agreed upon between player and team;
- (15) Any increase in a player’s salary for the current league year from renegotiating or extending a player’s contract, IF the NFL DOES NOT receive notice of the salary terms of such negotiations prior to 4 p.m. ET, on the Monday of the tenth (10th) week of the regular season.
That was lot to take in. The NFL is one of the highest grossing sports in the United States, and one of the highest-grossing industries in the United States. With so much revenue being brought in by the NFL, players are compensated handsomely. How the NFL executes it’s salary cap, and other financial business, is one of the hardest things to keep track of for teams and fans alike. Thus, it makes sense there is way more that goes into signing bonuses than fans probably thought (including me!) Now you are equipped to answer my main question of “What exactly makes up a Signing Bonus in the NFL?” like a GM!
** Salary cap terminations, AKA, termination pay is an in season salary guarantee that is automatically given to veteran players (4+ credited seasons). First, players must be eligible. Second, termination pay comes in two forms. To be eligible, a player must have been released after the team’s first regular season game, and has made the active/inactive list on or after the date of his team’s first regular season game. The following is the two forms of termination pay: (1) determine the unpaid balance of his Paragraph 5 salary (base salary). For example, a player’s salary is $1.7 million, $100,000 per game, and he gets cut after week 1. The player is entitled to the remaining $1.6 million. (2) For players who were signed during the regular season and then released during that same season, they are entitled to collect 35% of the remaining unpaid balance. For example, a player got signed week 2 for $1.7 million. He would earn $1.6 million if he was on the team for the remaining 16 weeks (players still get paid during bye weeks). The player got cut after week 2, he would be entitled to only $525,000 ($1.5 million x 35%). Both forms will go against the team’s salary cap.