Using a Signing Bonus vs. The Cap

Was hoping someone could help me understand this ...

If the FO and a player are pretty far apart on contract numbers, couldn't the difference be made up with a signing bonus?

Bonus money doesn't count against the cap, right?

Is a bonus only for players currently on your roster that you're re-signing?

Can it be done with FA's?

Just wondering why it isn't used more to soften contract negotiations.

SB money does count against the cap. It is pro-rated over (IIRC) the first four years of the deal (or the length of the contract in the case of shorter deals). As it is all up front, it is usually the larger issue in negotiating contracts. The rule applies to both rookie and FA deals.

So if you get a $20 mil bonus over 4 years, then it's $5 mil per year against the cap during that contract?

HawkHouse":570o8mg1 said:

Was hoping someone could help me understand this ...

If the FO and a player are pretty far apart on contract numbers, couldn't the difference be made up with a signing bonus?

Bonus money doesn't count against the cap, right?

Is a bonus only for players currently on your roster that you're re-signing?

Can it be done with FA's?

Just wondering why it isn't used more to soften contract negotiations.

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There are different types of bonuses, some are performance based, some are roster based and some are signing bonuses. All count against the cap eventually. Signing Bonuses are pro-rated through the length of the contract so if you have a $5 million signing bonus over a 5 year contract, the cap his is $1 million per year every year of the cap.

Roster bonuses are paid if the player is on the team's roster as of the date specified in the contract. Those bonuses are counted into the cap for the year they are scheduled to be paid, but a team can release a player before the roster bonus is due and get 100% of that money back in the cap. This was the case with Red Bryant. He was due a roster bonus of $3 million (I believe) in March, so they released him in lieu of paying it out.

Performance based bonuses are a bit trickier and I won't pretend to know the formula, but basically you are given a bonus based on your performance. Any value can be set into the contract for the player to meet. If the player meets it, then they get the bonus, if they don't, then the bonus goes unpaid. Sometimes it's games played, sometimes it's snaps or catches or TD's or whatever. The rule with these is that a performance bonus is counted against the cap if there is a likelihood of the player achieving the bonus. If the likelihood is that he doesn't, then the bonus doesn't count against the cap immediately and will only count if they reach it. I haven't heard of this being an issue too often, so I doubt too many players are signing contracts with unreachable bonus goals.

HawkHouse":2lw6c8ro said:

So if you get a $20 mil bonus over 4 years, then it's $5 mil per year against the cap during that contract?

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Generally speaking, yes, thats how it works. In addition to how much your base salary is.

Basis4day":s4ahsh98 said:

HawkHouse":s4ahsh98 said:

So if you get a $20 mil bonus over 4 years, then it's $5 mil per year against the cap during that contract?

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Generally speaking, yes, thats how it works. In addition to how much your base salary is.

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Yep, and that's why a guy could only have a $2 million salary, but count $7 million against the cap.

Basis4day":1chvflac said:

HawkHouse":1chvflac said:

So if you get a $20 mil bonus over 4 years, then it's $5 mil per year against the cap during that contract?

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Generally speaking, yes, thats how it works. In addition to how much your base salary is.

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Plus, if the player is released early, say in year 3, all remaining cap numbers are pulled forward into the year he's released. So, if the guy is released in year 3, the pro-rated cap numbers for years 3 and 4 are added together and count against the team cap in that year.

so as an example

Player A gets 40m dollar contract for 5 years, 14M guaranteed, 10M signing bonus.

the contract (assuming you divide the salary evenly) breaks down like this

10m signing bonus, divided by 5 years = 2m per year pro-rated bonus that counts against the cap

the remaining amount of 30 m divided by 5 years = 6m per year.

So each year would be 6m salary and 2m bonus counting against the cap = 8m per year against the cap.

HOWEVER

what you would really do is change the salary per year a bit to give yourself some cap relief. You already are committing 14m gauranteed to the player so what you'd want to do is shoot for getting that guaranteed money off your books in the first two years of the contract.

Something more like this:

10m signing bonus = 2m per year cap charge; leaves 30m

Salary per year:

Year 1 - 4m
Year 2 - 4m
Year 3 - 8m
year 4 - 7m
year 5 - 7m

this still ='s 30m. but what it does is it makes the cap hit for the first two years of the contract only 6m as opposed to 8m, and in those two years gets all the gauranteed money to the player. After that, you do some re-negotiating with the player, or you can cut him.

Once the player is cut, all that bonus money that has been prorated becomes due.

For example, between year 2 and 3 you cut the player because they aren't performing well and you can't afford the 10m he's going to cost you in cap money (8m + the 2m prorated bonus). You no longer owe him any money; he's earned his guaranteed money + 4m, in the form of 8m in salary over two years + the 10m signing bonus.

You cut the player. Instead of being out 10m dollars for his salary for that year, you have to pay the remaining prorated bonus of 6M (2m for every year remaining) yes you are stuck with dead money, but at least you've rid yourself of an underperforming player and freed up 4M in cap room.

BHF":1pu3hbwk said:

SB money does count against the cap. It is pro-rated over (IIRC) the first four years of the deal (or the length of the contract in the case of shorter deals). As it is all up front, it is usually the larger issue in negotiating contracts. The rule applies to both rookie and FA deals.

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According to the CBA the pro-rating of a Signing Bonus can be for up to 5 years.

Proration. The total amount of any signing bonus shall be prorated over
the term of the Player Contract (on a straight-line basis, unless subject to acceleration or
some other treatment as provided in this Agreement), with a maximum proration of five
years, in determining Team Salary and Salary, except that:

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You can find more detailed rules regarding these rules. Specifically the one talked about above is mentioned and discussed further on page 93 of the CBA

This is the link to the actual CBA for those who are interested in looking up information:

[urltargetblank]http://nfllabor.files.wordpress.com/2010/01/collective-bargaining-agreement-2011-2020.pdf[/urltargetblank]

sutz":2p82uyy9 said:

Basis4day":2p82uyy9 said:

HawkHouse":2p82uyy9 said:

So if you get a $20 mil bonus over 4 years, then it's $5 mil per year against the cap during that contract?

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Generally speaking, yes, thats how it works. In addition to how much your base salary is.

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Plus, if the player is released early, say in year 3, all remaining cap numbers are pulled forward into the year he's released. So, if the guy is released in year 3, the pro-rated cap numbers for years 3 and 4 are added together and count against the team cap in that year.

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UNLESS... he is cut after June 1st, in which case the dead money can be split between the last two years.

Cut before June 1st?... all of the dead money counts against the current year's cap.

Early in the thread there was a post saying the singing bonus was spread over the first four years of the contract. It is actually the first five, not four. Just an FYI. Cheers.

the old way of doing things was to give BIG signing bonuses but then people realized this was a horrible way to run the organization.

Good GMs actually try to limit signing bonuses and try to guarantee money in other ways. Reason being, is that if you eventually need to cut a player - you have flexibility to do so without destroying your cap room for the year.

JS tends to frontload contract with guaranteed money to the point where every deal that the Seahawks sign invariably are actually 2-3 year deals with minimal issues after year 3. Even Percy Harvin.

The only albatross deal we had was Okung which was a product of the horrible previous CBA that destroyed the cap room of many bad teams. Moreover, it was why it was so important to trade Aaron Curry.

How about this... You are Paul Allen in this situation.

Your cousin's friend's brother owns a business. You pay that business 20 million dollars for some rendered service. In return, the business pays (insert expensive free agent here) 19 million dollars to appear in a commercial promoting a business. And, while all this is being arranged, the player signs with the Seahawks for less-than-expected.

This would be a politician's way of doing things.

minormillikin":juninak7 said:

How about this... You are Paul Allen in this situation.

Your cousin's friend's brother owns a business. You pay that business 20 million dollars for some rendered service. In return, the business pays (insert expensive free agent here) 19 million dollars to appear in a commercial promoting a business. And, while all this is being arranged, the player signs with the Seahawks for less-than-expected.

This would be a politician's way of doing things.

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You mean like "wink wink nudge nudge...Hey Bill, how about a Russell Wilson Microsoft Surface spokesman deal?" Is that how it would work?

In all seriousness, if you got caught there would be severe penalties that would harm the team for years to come. Look what the NFL did to the Cowboys and Redskins for simply paying players with legally front loaded contracts while the CBA had a non capped year.

kidhawk":3lvsl5x7 said:

If the likelihood is that he doesn't, then the bonus doesn't count against the cap immediately and will only count if they reach it. I haven't heard of this being an issue too often, so I doubt too many players are signing contracts with unreachable bonus goals.

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Just to add on a bit here - unexpected outcomes in performance bonuses affect the cap in the following year. They can be another way of pulling future money forwards to the present because you are extending your current spending potential at the risk of next year's spending. Team based incentives are of course correlated together, so you are much better off from a risk mitigation point of view of keeping these incentives played based.

Hawknballs":30bni2k2 said:

so as an example

Player A gets 40m dollar contract for 5 years, 14M guaranteed, 10M signing bonus.

the contract (assuming you divide the salary evenly) breaks down like this

10m signing bonus, divided by 5 years = 2m per year pro-rated bonus that counts against the cap

the remaining amount of 30 m divided by 5 years = 6m per year.

So each year would be 6m salary and 2m bonus counting against the cap = 8m per year against the cap.

HOWEVER

what you would really do is change the salary per year a bit to give yourself some cap relief. You already are committing 14m gauranteed to the player so what you'd want to do is shoot for getting that guaranteed money off your books in the first two years of the contract.

Something more like this:

10m signing bonus = 2m per year cap charge; leaves 30m

Salary per year:

Year 1 - 4m
Year 2 - 4m
Year 3 - 8m
year 4 - 7m
year 5 - 7m

this still ='s 30m. but what it does is it makes the cap hit for the first two years of the contract only 6m as opposed to 8m, and in those two years gets all the gauranteed money to the player. After that, you do some re-negotiating with the player, or you can cut him.

Once the player is cut, all that bonus money that has been prorated becomes due.

For example, between year 2 and 3 you cut the player because they aren't performing well and you can't afford the 10m he's going to cost you in cap money (8m + the 2m prorated bonus). You no longer owe him any money; he's earned his guaranteed money + 4m, in the form of 8m in salary over two years + the 10m signing bonus.

You cut the player. Instead of being out 10m dollars for his salary for that year, you have to pay the remaining prorated bonus of 6M (2m for every year remaining) yes you are stuck with dead money, but at least you've rid yourself of an underperforming player and freed up 4M in cap room.

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This is good stuff, totally debunks how I thought it worked, lol ...

I thought the signing bonus was given, right away, in it's entirety. But it's spread out evenly over 5 years, got it.

In this scenario, if you cut the player after year 2 and he was to receive 14mil guaranteed, that's covered by

6m year 1 (4m salary + 2m bonus)
6m year 2 (4m salary + 2m bonus)
6m in bonus money (2m for the remaining 3 years that comes due upon release)

And that's the 14 + 4 that's mentioned, right?

HawkHouse":2bmar9u0 said:

This is good stuff, totally debunks how I thought it worked, lol ...

I thought the signing bonus was given, right away, in it's entirety. But it's spread out evenly over 5 years, got it.

In this scenario, if you cut the player after year 2 and he was to receive 14mil guaranteed, that's covered by

6m year 1 (4m salary + 2m bonus)
6m year 2 (4m salary + 2m bonus)
6m in bonus money (2m for the remaining 3 years that comes due upon release)

And that's the 14 + 4 that's mentioned, right?

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THe signing bonus is given to the player in it's entirety - the pro-rated money over time is just a cap penalty to the team for that amount basically, and then it all becomes due at once if the player is cut as a dead money cap charge for that year.

So the 14M would be covered already by the 10m signing bonus and his first year salary so technically they would have earned their gauranteed money already.

but if you cut them after year one, you'd be charged 8m to the cap for the remaning pro-rated money that year.

However if you were to restructure him and gave him a new signing bonus, the 2m proration of the original bonus is still there tagged to the same years, any new signing bonus would be prorated for the contract the same way as the original, just added on.

This is why teams renegotiate QB's a lot - you sate them by giving them a lot of guaranteed up front money, pro-rate it, and then give them a low salary and a back-loaded contract. but you only want to do this with usually QB's becuase you can count on them being around for a while, whereas with other players, you don't want to keep adding on to pro-rated bonus money because it would make it a financial disaster to ever have to cut them. Franchise QB's aren't likely to be cut, thats why you see guys like Brady restructure.

They get that bonus money in their pocket right away.

This is why I say we give RW a 7 year, 70m dollar fully guaranteed contract with a 70m signing bonus or something complete unorthodox and crazy.

It would put 70m in his pocket instantly. Go invest it however he wants and grow it to more than he would ever earn in a conventional contract.

Then his cap charge per year would be an even 10m dollars a year over 70 years for the pro-rated bonus.

This would be half the cap charge every year on average of say a Mat Ryan whom in 2016 will count 24m against the cap, but RW would also get nearly twice as much money gauranteed, and two and a half times as much up front.

Now whether an agent would ever do a deal like that, i dont even know.