Introduction to the NFL Salary Cap

1. What is the NFL salary cap and why was it created?

The NFL and NFL Player’s Association (NFLPA) have agreed to a system in which, every season, there is a “salary cap” that represents the maximum amount of salary teams are allowed to pay to NFL players for a given season (or League Year). The salary cap system was by proposed by the NFL (and agreed to by the NFLPA during negotiations) after players won several legal battles granting them measures of free agency. Every year, the salary cap is determined based on an agreed-upon-formula.

Salary is paid to a player for a particular League Year and is charged to a club’s team salary. The sum of the salaries for a club’s individual players is the club’s team salary.

2. Is the salary cap a hard cap or soft cap?

The NFL salary cap is a hard cap. Teams must be under the cap every day and may not exceed the cap through exceptions. This is unlike the NBA salary cap, which is a “soft cap,” meaning teams may exceed the cap through one of the many salary cap exceptions available.

3. Does every team have the same salary cap?

No. While the “base” salary cap will be the same for every team, there are team-specific adjustments that result in teams having individualized effective salary caps.

4. What causes team-specific adjustments to the salary cap?

There are two team-specific adjustments, each of which occur annually:

  1. Teams are allowed to roll over unused cap room from one season to the next (this is a new rule that was agreed to in the current collective bargaining agreement [CBA], which is in effect for the 2011-20 seasons). One team may have $5 million to rollover to the following season, for example, while another team may have $10 million.
  2. At year-end, the league adds up the incentives paid out by a team and compares that sum to the estimated amount that was charged to a team’s cap. This reconciliation may result in the addition or subtraction of salary cap space to a team’s salary cap for the following season.

Other scenarios that could trigger a credit or deduction to a team’s salary cap for the a subsequent season include: (1) a player filing a grievance and the settlement amount differing from the estimated amount that was charged to the cap, (2) a team receiving insurance proceeds related to an injured player’s contract (which was previously paid by the team), and (3) a change in circumstances regarding assumed player bonuses, such as a completion bonus.

5. Do benefits provided to players figure into a team’s salary cap room?

Player benefits such as health insurance, pension, and other post-retirement benefits are not charged to a team’s salary cap. Those expenses are already incorporated into the calculation used to establish the league-wide salary cap.

6. Is a player’s salary cap charge equivalent to the cash paid to a player for a League Year?

A player’s cap charge may reflect the amount of cash he is being paid during a particular League Year, however the two amounts often differ. The primary reason for the discrepancy between the “cash” amount and “cap” amount is the fact that signing bonuses and other amounts treated as a signing bonus (OATSB) can be allocated over several seasons for salary cap purposes even though the cash bonus may have been paid in full during the first year of the contract.