NFL Salary Cap FAQ
Answering the questions you may have about the salary cap and NFL free agency.
With NFL free agency about to get underway, people may have questions about the NFL salary cap and the various terms getting thrown around.
Here, you will find explanations for the NFL salary cap, how contracts work and what various terms mean. Hopefully it will clear up some of the misunderstandings about the terms that get utilized during the free agency period.
1. What is the NFL salary cap?
The NFL salary cap is the means by which teams determine how much flexibility they have in terms of the money they can spend in a given year.
The NFL sets a base salary cap each year (for 2022, it's $208.2M) and teams are allowed to apply cap carryover from the previous year. Teams may also have to make adjustments if they are paying out incentives.
A team's salary cap differs from the base cap, because each team may add in cap carryover, then account for incentives paid, to determine its actual cap. The cap space a team has is active cap spending plus dead money.
2. What's the deal with cap carryover?
While teams may utilize all of their cap space, it's not considered ideal, because teams make moves throughout the season when players are lost to injury, suspension or other reasons.
Therefore, teams will usually keep a small amount of cap space to give them that flexibility. That unused cap space may be rolled over into the next season.
3. What's the "effective cap space" term all about?
Effective cap space takes into account the fact that teams need 51 players under contract to get an actual determination of how much cap space they have left, or how far over the cap they may be.
4. What's the top 51 cutoff rule?
The top 51 cutoff rules states that only the top 51 cap hits count toward the cap during the offseason. Teams may have up to 80 players on their roster during the offseason, so the cutoff is in effect because teams would be over the cap all the time if it wasn't in effect.
The top 51 cutoff only applies during the offseason. Once training camp is finished and teams finalize their 53-man rosters plus practice squad, and determine which players will be on injured reserve, all cap hits apply.
5. What's the difference between cap spending and cash spending?
Cap spending is the amount of cap space a team utilizes during a season. Cash spending is the actual amount of cash the team is spending.
Note that cap and cash spending aren't always equal. Most teams structure contracts so they can fit all their cash spending under the cap.
6. What are they talking about when they refer to contract structure?
When a team signs a player to a contract or gives the player an extension, the contract usually includes a signing bonus. This allows the team to spread out some of the money for cap purposes. In the case of a four-year contract, the signing bonus is spread out over the four years of the deal.
Note that a contract structure for cap purposes doesn't necessarily equal cash purposes. A player may collect a signing bonus in the first year of the contract, but the cap hit for the signing bonus is spread out over four years.
7. What's the difference between signing bonus, roster bonus, workout bonus and per-game roster bonus?
A signing bonus is money that may be spread out over the duration of the contract. In some cases, teams may add void years to the end of the contract to further spread out the hit.
A roster bonus is a lump sum payment due on a particular date. Sometimes teams will convert this into a signing bonus to create additional cap room.
Per-game roster bonuses are different, though. That's money that the player may earn for each game he is on the 53-man roster or the active (46-man) roster. A per-game roster bonus is divided among 17 games (for example, if a player gets a $500,000 per-game roster bonus, that's $29,412 for each game.)
A workout bonus is paid if a player participates in a certain percentage of the team's organized offseason workouts.
8. What is a contract restructure?
Simply put, it's a player agreeing to convert a base salary or a roster bonus into a signing bonus. Sometimes this gets portrayed as a player being generous in helping with a team's finances, but in reality, the player is still getting the money -- he's just getting in a different form of payout.
Base salaries, by the way, are paid out over the course of the 17-game season, which means you take the base salary and divide it by 17 to get the per-game payout.
9. Why do they call "converting base salary into incentives" a restructure, then?
It's people getting confused by what a restructure actually is. When you hear that a player is converting base salary into incentives, they have actually renegotiated the contract.
Another way to think of "converting base salary into incentives" is a "pay cut," because the player agreed to take less money, with the chance to earn some of it back if he achieves the incentives. If he does, the incentives are applied to next year's cap.
10. What is dead money?
It's either the remaining pro-rated signing bonus or any fully guaranteed money left over when a team cuts a player. That dead money counts against cap space.
Sometimes it's all right to cut such a player if the cap space gained is higher than the dead money. In other cases, a team might cut a player even if it gains cap space that's less than the dead money.
An exception on fully guaranteed salary comes if the player is traded. In that case, the team trading away the player doesn't take dead money there. (Pro-rated signing bonus dead money still applies to the team trading away the player, though.)
11. What's the difference between fully guaranteed money and injury-only guaranteed money?
Fully guaranteed money must be paid to a player unless the player is suspended. If a player is cut for skill, injury or cap reasons, the team must still pay the player that money.
Injury-only guaranteed money is paid out to a player if he is cut for injury reasons, but not skill or cap reasons. Injury-only guaranteed money will, in most cases, become fully guaranteed if a condition is met (usually the player being on the roster by a certain date).
There's also the "vested veteran" rule, which means that any player who has accrued at least four seasons will get his base salary fully guaranteed if he's on the 53-man roster for the first week of the NFL season.
12. What's the difference between an unrestricted free agent, a restricted free agent and an exclusive rights free agent?
An unrestricted free agent is a player with at least four accrued seasons whose previous contract expired. He is eligible to sign with any team.
A restricted free agent is a player (usually one who went undrafted) who accrued three seasons and may be tendered by his team. Other teams may sign these players to offer sheets which, if unmatched, could result in the first team getting draft pick compensation.
First-round tenders mean a first-round pick is sent, second-round tenders mean a second-round pick is sent, and original round tenders mean the pick corresponds to the round the player was selected, provided he was drafted.
The original round tender is usually applied to players who were drafted, but then waived from their rookie contracts. They then fall under the RFA designation after they accrue three seasons. For example, the Pittsburgh Steelers have used the original round tender on Dwayne Haskins, meaning, if another team signs him to an offer sheet that isn't matched, they get a first-round pick as compensation because Haskins is a former first-round pick.
One other RFA tender is the right of first refusal tender, which is slightly less than the original round tender. It's mostly used on undrafted players, but there's no draft pick compensation if a team signs him to an offer sheet that isn't matched.
Finally, the exclusive rights free agent is a player with two accrued seasons (and in this case, they are almost always undrafted players) who are given low-cost tenders that tie them to the tendering team. The player must either sign the tender, retire or hope he's traded. No other team may sign ERFAs to an offer sheet.
RFAs and ERFAs who don't get tendered by their teams are eligible to sign with any team.
13. Why do they use the term "street free agent"?
Street free agent refers to a player who is released from his contract before it expires. These players are free to sign with any other team as soon as they are released.
14. What's the difference between a franchise tag and a transition tag?
A team may apply the franchise tag to one player, who is to be paid an amount equal to the average of the top five paid players at his position, though additional adjustments may need to be made.
Teams may use the exclusive franchise tag, which means the player may not negotiate with another team, but that tag costs a little more. The non-exclusive franchise tag allows a player to negotiate with other teams and, if signed to an offer sheet the tagging team doesn't match, the tagging team gets two first-round picks in return.
The transition tag comes at a lower cost but there is no draft pick compensation for the tagging team, should the player be signed to an offer sheet the tagging team doesn't match.
Teams are free to trade players if they give them a franchise or transition tag. A team has the option of removing the tag at any point before the player signs the tag, but once a player signs the tag, it may not be removed.
Teams have until July 15 to sign tagged players to long-term extensions or the only option the team has is to sign the player to a one-year contract.
15. What's the deal with compensatory draft picks?
The NFL, each year, awards teams draft picks for unrestricted free agents they lost the year before. The NFL awards up to 32 picks, with each team eligible for a maximum of four picks.
The formula is based on unrestricted free agents a team lost compared to such free agents the team signed. I'll refer you to Over the Cap's compensatory formula page, which tells you how compensatory picks are determined.
Compensatory picks are awarded the following year, meaning for 2022 free agency, teams that lose more UFAs than they sign would get the picks in 2023.
The NFL also awards compensatory picks for teams if they have an executive or coach who is a minority candidate, hired by another team.
Restricted free agents and exclusive rights free agents not tendered by their teams do not count toward the compensatory pick formula. The same is true for street free agents and any unrestricted free agent who had a contract renegotiated to void the final year of his deal.
16. What's the rookie pay scale all about?
The rookie pay scale sets the amount of money that drafted players will receive in a given year. For example, the first overall pick in the 2022 NFL Draft is set to receive an estimated $43.3M over four years. You can look at Over the Cap's rookie pool page for more information.
All drafted players get four-year contracts, though first-round picks get a fifth-year option. First-round picks get all four years fully guaranteed, while second and third-round picks get the first two years guaranteed. All others get only the first year fully guaranteed.
For players taken in the second round or later, they are eligible for proven performance escalators, which will increase their salaries in the fourth year of their contracts. You can learn more about them at Over the Cap's page about PPEs.
17. Why is cap space needed to sign rookies not the same as their cap hits?
That brings us back to the top 51 cutoff rule. Players taken in the final rounds (usually sixth and seventh) will often have cap hits that fall under that cutoff. But keep in mind that, once teams finalize their 53-man rosters, all cap hits count.
18. What's the fifth-year option all about?
For first-round picks, there is a fifth-year option that teams may exercise if they wish to keep the player for another year. That money is fully guaranteed. The money is determined based on the player's position, the percentage of snaps he has played and Pro Bowl nominations.