How Does the NFL Salary Cap Work?

Joshua LobdellCorrespondent IJuly 17, 2009

IRVING, TX - MAY 01:  (L-R)  Ryan Gibbons #62 , Matt Spanos #69 and Travis Bright #60 of the Dallas Cowboys during rookie mini camp on May 1, 2009 in Irving, Texas.  (Photo by Ronald Martinez/Getty Images)

Before we get in the mechanics of the NFL Salary cap, a few things about NFL contracts must be made clear.

The most important of these is that NFL contracts are not guaranteed. A NFL team can cut a player during his contract and the remainder of that contract does not count against the cap.

There is one notable exception to this rule. Let’s say a player signs a four-year deal, with a $20 million signing bonus. Under NFL rules that 20 million dollars would be prorated against the cap over the life on the contract.

Meaning, the $20 million bonus counts for $5 million per year against the cap for the life on the contract. If the player is cut before the end of the deal, say in year three, then the team is penalized the remaining amount of the signing bonus on that year’s cap.

In this case, cutting the player would count $10 million against the team cap for that year.

In essence the NFL salary cap, as negotiated by the players Union in the current collective bargaining agreement, is 62.24 percent of all football related revenue divided by 32 teams. For the 2009 season, that figure is $128 million.

It is important to note that there is also a minimum salary level for NFL franchises. This number is 75% of the salary cap. This means that each NFL team in 2009 must have at least 96 million dollars in salaries.

Now the NFL has given three tools to its franchises to help retain their free agent players. The first of these is the Exclusive Franchise tag. Each season each NFL team has one Franchise tag to use to retain one of its free agents to be.

Once the exclusive franchise tag is applied to a player that player is given a guaranteed one year contract worth the average of the five largest NFL contracts at that player’s position. If the Exclusive tag is placed the player may not negotiate with other teams.

If the team applies the non-exclusive franchise tag then the player is free to negotiate with other teams, but is original team is compensated with two first round draft picks if the player signs elsewhere. These exceptions are used quite often to keep big name players on their current teams.

The other exception the NFL gives its team as part of their salary cap rules is the Transition layer tag.

If a team applies this tag to a free agent to be they are assured the right to match any offer made to the player by the other NFL teams. Once the original team matches this offer, the player must sign with it.

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