I don’t follow the NFL, but I a while back I heard that a player was offered a high salary and he negotiated what worked out to be a lower one so that the team could either get better talent or pay the other players better. For some reason I thought that it was Tony Romo. I just asked someone who said that they thought that Troy Aikman negotiated his pay structure to work better with the salary cap.
Does this ring a bell with anyone?
Good example (and good for Brady for doing it), but I heard this from a die-hard Cowboys fan–my teenage son. Have any Cowboys done this?
Tony Romo has only been a starter one year, and has never had contract big enough to need cutting. It’s possible that Aikman did it.
Be aware that renegotiations often do NOT mean that a player is getting less overall money, just that they are shuffling numbers around and sometimes deferring some of the dough a few years down the road (sometimes even with interest) so that a team can fit under the salary cap.
I think I remember hearing that Curtis Martin of the Jets did this recently too.
Yep, here it is: http://abclocal.go.com/ktrk/story?section=sports&id=5383220
Every team in the league has had multiple players do this. It’s a common work-around for the salary cap, and teams do it all the time.
Capology 101: NFL contracts are roughly 50% salary and 50% signing bonus. Salary is not guaranteed; if the team cuts you, you don’t see a dime of the remaining salary on your contract. Signing bonus is guaranteed, in that it’s paid in full immediately when you sign the contract. There are also “roster bonuses”, which are like a time-release signing bonus triggered at designated dates if the player is still on the roster.
One common technique in restructuring is to offer a long extension with a reasonable salary and a sizable signing bonus. This sizable bonus is money in hand, so the player is happy, and it only tangentally affects the cap, so the team is happy. Obviously you only want to go this route with players you are sure you want to keep, like Tom Brady. It is worth nothing that Peyton Manning restructured his mammoth contract last season.
Most NFL contracts involve escalating salaries. For example:
Signing bonus: $10 million
Year 1: $2 million (cap hit: 4m: 2m salary + 2m bonus)
Year 2: $3 million (cap hit: 5m: 3m salary + 2m bonus)
Year 3: $4 million (cap hit: 6m: 4m salary + 2m bonus)
Year 4: $6 million (cap hit: 8m: 6m salary + 2m bonus)
Year 5: $10 million (cap hit: 12m: 10m salary + 2m bonus)
This contract would be reported as a $35 million contract, which the agent gets to brag about when courting new clients. In reality, neither the player nor the team expect the last two years to be paid out. Instead, at the beginning of the fourth year, the team could offer the same basic contract as an extension, replacing the original contract. (Signing bonuses cannot be restructured; only salary can.) This would then work out as follows:
Signing bonus: $10 million
Year 1: $2 million (cap hit: 4m: 2m salary + 2m bonus)
Year 2: $3 million (cap hit: 5m: 3m salary + 2m bonus)
Year 3: $4 million (cap hit: 6m: 4m salary + 2m bonus)
Signing bonus: $10 million
Year 4: $2 million (cap hit: 6m: 2m salary + 2m original bonus + 2m new bonus)
Year 5: $3 million (cap hit: 7m: 3m salary + 2m original bonus + 2m new bonus)
Year 6: $4 million (cap hit: 8m: 4m salary + 2m original bonus + 2m new bonus)
Year 7: $6 million (cap hit: 10m: 6m salary + 2m original bonus + 2m new bonus)
Year 8: $10 million (cap hit: 14m: 10m salary + 2m original bonus + 2m new bonus)
So after the restructuring – during which the player just pocketed a cool $10 million for signing – the cap relief is significant. Year 4’s cap number dropped down from $8 million to $6 million, and year 5 dropped from the ridiculous $12 million to a more reasonable $7 million.
Another way to restructure is to move some of the salary over to incentives, but you have to bring the hard sell to go this route because it isn’t guaranteed. Incentives are also a bit more complex to figure in regards to the cap, since you enter the realm of Incentives Likely To Be Met (counts against the cap unless they fail) vs Incentives Not Likely To Be Met (doesn’t count against the cap unless they succeed), and the various criteria by which those categories are defined for any given incentive. Restructuring with incentives is usually a matter of “take this new deal or we’ll cut you.”
Pretty much every trade involves restructuring as well, which is why you see much more movement of high profile stars between NFL teams than you do in the NBA, where every penny of every contract is guaranteed. That means that in the NBA, you can only trade players of equal pay grades, where in the NFL you can pretty much ignore contract issues when crafting your trade proposals. (Thus the story about Kobe Bryant and the precious few possible trades that could get him off the Lakers.)
The biggest recent restructuring was Randy Moss, who took a huge pay cut to join the Patriots. Moss was agreeable to this both because he got to leave a loser team to join an elite one, and because he’s looking to rehabilitate his legacy as he approaches the twilight of his career. I forget the actual numbers, but roughly the $7 million he was due to earn this year dropped down to $4 million, or something close to that.
One final tidbit is that when you trade or release a player, the remaining balance of the prorated signing bonus is accelerated, meaning it immediately counts againts the cap. A recent rule change eased this somewhat, delaying that acceleration by a year, which also softened it because the intervening year works off another prorated year of the balance.
Yes, Aikman did this twice in his career. The first was in 1995, when the Cowboys needed cap space to sign Deion Sanders. Aikman took a lower salary in exchange for a signing bonus. He did a similar thing in 1999 or 2000 when the team had salary cap issues – roughly one-third of their payroll was committed to players who were no longer with the team.
There must be dozens of examples of this happening over the past fifteen years.
Correction:
The original bonus is worked off in full after the first five years.
You can see how using this technique, you can keep throwing money at the player in the form of signing bonuses in order to get cap relief. The downside for the team is that you are committing to the player regardless of injury, trade demands, or holdouts. If you cut or trade him, the accelerated cap hit could cripple you for the one season when the balance comes due.
I would also add to Ellis’ posts that this often happens to superstars in the twilight of their career. Superstar has had a dramatic loss of production due to age factors yet his contract calls for him to make $8 million this year. Team comes to him and gives him the choice of a paycut or a release. Usually if the player is a veteran of that team he’ll either take the cut or retire.
Player movement in the NFL is rarely the result of trades, and even then draft picks are usually involved. The only benefit of a trade to a team (versus a release) is reduced dead-money salary-cap figures, but a team that wants a given player can choose to simply wait until the player is released, then sign him, and not give anything in return to the original team.
I’ve thought for a long time NFL quarterbacks should take less money, and I’m glad to see a few do so. If it were me, I’d want a clause in my contract saying the difference between what I’m getting paid and what I “should” be paid be spent on quality offensive linemen.
There is absolutely no way to avoid cap penalties. Trading a player to another team incurs the exact same cap penalty (accelerated signing bonus) as releasing him. As I understand it, even an early retirement (eg: Tiki Barber) triggers the same cap penalty. (I could be wrong about retirement, though.)
I do like your “make up the difference in offensive linemen” clause in theory, but everything is a gamble. What if your pay cut brought in Robert Gallery to protect your blind side? Bet you’d wish you’d kept your money then, eh? hehheh.
Fair point about player movement not being related to trades, though. You are absolutely correct; the vast majority of player movement is in the form of free agency, not trades.
I was going to disagree with you on this, but Wiki agrees with you.
However, the rule wouldn’t make sense. A retirement of a player with a huge signing bonus could decimate a team’s salary cap. I can’t believe a team would agree to a CBA that would them to liquidate team salary because a player wanted to spend more time with their family. :dubious:
I’ll look into it and get back.
I don’t think that counts. He took a pay cut because he wasn’t going to get paid anyway. No guaranteed contract. He is going to retire so restructuring the contract just frees up money for the team that he wasn’t going to get paid anyway.
One story from baseball. I remember Ralph Kiner telling this story. At the end of the season he tries to get a pay raise. Branch Rickey (GM of the Pirates at the time) counter offers with a pay cut. Kiner says “But I led the league in home runs!” Rickey asks “What place did the team come in?” Last. Kiner took the pay cut.
I don’t know what exactly the CBA says but I remember them talking about capology and signing bonuses. They are usually structured over many years. They don’t get paid the day they retire. It depends on each individual deal.
Thanks folks.