The NFL free agency period is an opportunity for players to land lucrative paydays or find better team fits, while also serving as another avenue for teams to upgrade and improve their rosters. But a fairly basic premise — players sign contracts with teams they want to play for — involves a number of specific terms that are thrown around at this time of year.
The NFL’s collective bargaining agreement (CBA) is a thick, 456-page legal document. If you feel like reading the CBA itself, have at it. If you understandably don’t want to take on this task, I’ve underlined some of the most important terms in NFL free agency/contracts below.
First, let’s consider a rundown of the free agency period itself. It begins when the NFL League Year does (in 2023: 4 p.m. ET on March 15), while team spending is limited by the annual salary cap ($224.8 million per team in 2023).
Teams are allowed to negotiate with the agents of upcoming unrestricted free agents during the “Two Day Negotiating Period,” a window prior to the start of free agency (in 2023: from noon ET on March 13 until 4 p.m. ET on March 15). Self-represented players (“Unrepresented Player”) can also speak with members of team front offices (but not coaching staffs) during this period; this was previously prohibited.
When the new league year begins, contracts from the previous season expire, the trading period opens and tenders for restricted free agents must be submitted, etc. This is when free agents can officially sign new contracts, and trades can become official.
And now, here’s a glossary of free agency terms that range from free agent designations and franchise tags to contract language and rookie deals. This is followed by an explanation of a player’s cap hit in a given season, as well as an introduction (to some) to adjusted average per year — a metric to compare contracts that were signed in different years (and amid different financial landscapes).
NOTE: Player contract information from Over The Cap and Spotrac.
Unrestricted free agent (UFA): Any player with four or more accrued seasons and an expired contract; free to negotiate and sign with any team.
Restricted free agent (RFA): A player with three accrued seasons and an expired contract. RFAs are free to negotiate and sign with any team, but their original team can offer them one of various qualifying offers (“tenders”) that come with the right of first refusal and/or draft-pick compensation. If the tender is withdrawn by a team, the RFA becomes an unrestricted free agent. In 2023, teams must submit these tenders before 4 p.m. ET on March 15. These amounts change annually; the following numbers are for the 2023 season. Players can choose either (a) or (b) regardless of which is greater in the applicable tenders below.
The RFA tenders are classified as follows:
First-round tender: One-year contract worth the greater of (a) $6.005 million or (b) 110 percent of the player’s prior-year base salary. If the player’s original team decides not to match an offer sheet signed with another team, it is entitled to a first-round draft pick from the player’s new team. Unless received two days or later prior to the NFL draft, draft compensation for each tender is due in the same league year as the offer sheet is signed.
A signed offer sheet with a new team includes Principal Terms that must be matched by the prior club. However, if the new team includes terms that waive or limit its ability to designate the RFA a franchise player, the old team will not have to match this term if it has tendered the player with an offer worth $500,000 more than the first-round tender (with the first-round tender at $6.005 million in 2023, that offer would have to equal $6.505 million).
Second-round tender: One-year contract worth the greater of (a) $4.304 million or (b) 110 percent of the player’s prior-year base salary. Draft-choice compensation: second-round pick.
Original-round tender: One-year contract worth the greater of (a) $2.743 million or (b) 110 percent of the player’s prior-year base salary. Draft-choice compensation: a pick in the round the player was originally drafted in.
Right-of-first-refusal tender: One-year contract worth $2.627 million. Team has the right to match any offer sheet signed with another team, but there is no draft compensation tied to this tender.
Upgraded tender: If a team places a first-round tender on a player who was selected outside of the first round, it can only receive a second-round pick as compensation for any of its other RFAs who were first-round draft picks. The same is true for the second-round tender — if a team uses it on a player drafted in the third round or lower, it can only receive a third-round pick for any other second-round RFA it intends to tender. For example, the Saints used a first-round RFA tender on QB/RB/WR/TE Taysom Hill during the 2020 offseason. Had New Orleans had any RFAs who were former first-round picks, it could only receive a second-round selection in return for a declined offer sheet.
Notable restricted free agents in 2023: QB Tyler Huntley (Ravens), QB P.J. Walker (Panthers), RB James Robinson (Jets), WR Nick Westbrook-Ikhine (Titans), WR Marquez Callaway (Saints), TE Juwan Johnson (Saints), OT Terence Steele (Cowboys), IDL Teair Tart (Titans), CB Myles Hartsfield (Panthers), CB Dane Jackson (Bills), S Ryan Neal (Seahawks).
Exclusive rights free agent (ERFA): Any player with fewer than three accrued seasons and an expired contract. If his original team offers him a one-year contract at the league minimum (based on his credited seasons), the player cannot negotiate with other teams.
Notable exclusive rights free agents in 2023: RB Craig Reynolds (Lions), WR Greg Dortch (Cardinals), WR Jauan Jennings (49ers), CB Michael Jackson Sr. (Seahawks)
Accrued seasons: Used to determine a player’s free agency status (unrestricted, restricted, exclusive rights). In order to accrue a season, a player must have been on (or should have been on*) full-play status for at least six regular-season games in a given season. A player under contract must report to his team’s training camp on his mandatory reporting date in order to earn an accrued season. If player holds out his services for a “material period of time,” he is also at risk of not accruing a season.
*When I write “or should have been on,” note that this is the language used in the CBA. Basically, in order to accrue a season, the player needs to be on the team’s active/inactive list, injured reserve or reserve PUP for at least six regular-season games in a given season.
Credited seasons: Used as a measure for many benefits, it’s most notably utilized to determine a player’s minimum salary. To earn a credited season, a player must be on (or should have been on) full-pay status for a total of three or more regular-season games.
Minimum salaries in 2023 based on Credited Seasons (CS):
The franchise (or transition) tag is employed by teams to limit the mobility of one of its upcoming free agents (can be restricted or unrestricted). Each team is allowed to use one tag per offseason.
Teams can use this designation from the 22nd day preceding the new league year until 4 p.m. ET on the eighth day preceding the new league year. The window this year was set to be open from February 21 to March 7.
Each of the different tags (non-exclusive, exclusive, transition) can be withdrawn by the team at any time before the player signs it. However, the tenders are guaranteed for skill, cap and injury once signed. A player must sign his tender to be traded to another team.
Teams and franchise players can sign multi-year extensions until July 17 (the typical deadline is July 15 unless on a weekend; because July 15 is on a Saturday this year, the deadline is the following Monday). If there is no extension in place by that date, the team and player can only agree to a one-year contract for the current season.
A designated player must sign his tender prior to the Tuesday following Week 10 in order to remain eligible to play in the current season.
Prior Year Salary (PYS): A player’s PYS is composed of his base salary, roster and reporting bonuses, prorated signing bonus and other payments to players for playing in the NFL for the previous league year — except any performance bonuses outside of roster and reporting bonuses. This is important because the PYS is used for the calculations of the tags.
Non-exclusive franchise tag: A player who receives the non-exclusive franchise tag is free to negotiate with other teams. The player receives a one-year deal with a salary set at the greater of (a) the cap percentage average for his position (an amount equal to the sum of the franchise-tag figures at a player’s position over the previous five seasons divided by the sum of the salary caps over the previous five seasons multiplied by the current year’s salary cap) OR (b) 120 percent of his PYS (the player’s cap number from the previous season, minus any performance incentives).
Let’s use receiver Davante Adams as an example of how the 120 percent increase of a Prior Year Salary could be applied. Adams was traded last offseason to the Raiders, who signed him to a new contract. But before then, the Packers applied the tag to him. If he had played on the tag in Green Bay last season, his tag would have been worth $20.145 million, which was $1.726 million more than the standard wide receiver tag in 2022 ($18.419 million). This is because Adams had a PYS of $16,787,500 in 2021, and 120 percent of that is higher than the standard tag was.
Teams that use the non-exclusive franchise tag hold the right of first refusal. If a designated player signs an offer sheet with another team, the player’s previous team has five days to match the offer sheet. Should it decide not to, the player’s original team shall be entitled to draft-choice compensation equivalent to two first-round picks.
Players to receive the non-exclusive franchise tag in 2023: DT Daron Payne (Commanders).
2023 non-exclusive franchise tag salaries:
Exclusive franchise tag: A player who receives the exclusive franchise tag cannot negotiate with other teams. The player receives a one-year deal for the greater of (a) the average of the five-largest PYS at his position at the conclusion of the restricted free agent signing period of the current league year (April 21 in 2023) or (b) the amount of the non-exclusive franchise tag. No player received the exclusive franchise tag in 2022.
Last player to receive an exclusive franchise tag: Dak Prescott (with the Cowboys in 2021), although Ravens QB Lamar Jackson appears to be a strong candidate for the non-exclusive tag this offseason.
Transition tag: A player who receives the transition tag is free to negotiate with other teams. The player receives a one-year deal for the greater of (a) the cap percentage average (calculation as shown above) of the top 10 greatest PYS at the player’s position or (b) 120 percent of his own PYS. Should such a player sign an offer sheet with a new team, his former team has five days to match the offer sheet. The transition tag is a cheaper alternative to the franchise tag (i.e., the franchise tag for QBs in 2023 is worth $32.416 million, while the transition tag is $29.504 million). However, should his former team decide not to match, there is no draft-pick compensation tied to the transition tag. If a transition player has not signed an offer sheet with a new team by July 22, he can only negotiate and sign with his prior team that season. No player received the transition tag in 2022.
Last player to receive transition tag: Kenyan Drake (with the Cardinals in 2020).
Multiple franchise tags: When a player receives the franchise tag for a second time, he will receive a 120 percent increase of his previous franchise-tag salary (or the tag number for the current season, if higher). If a team places the franchise tag on a player for a third time, the player will receive the greater of (a) the quarterback tag, (b) 120 percent of the average of the top five PYS at his position or (c) 144 percent of his second franchise-tag salary.
As an example, let’s examine Chiefs left tackle Orlando Brown, who appears to be the most likely candidate to receive a second franchise tag this offseason. The franchise tag figure for offensive linemen in $18.244 million in 2023. However, should Kansas City decide to tag Brown, who was tagged in 2022, the tag would be worth $19.994 million ($1.75 million more). This is because 120 percent of Brown’s franchise tag last season ($16.662 million) is higher than the current tag for offensive linemen.
Guaranteed money: Media outlets typically announce and talk about the “guaranteed money” in a player’s contract. However, much of this money is only partially guaranteed. Compensation in NFL contracts can be guaranteed for three purposes: skill, cap and/or injury. Compensation in a player contract can be guaranteed for one, two, all or none of the guarantees (subject to some rules). If money in a player contract is protected for skill, cap AND injury, that money is fully guaranteed at signing and will be paid to the player. If money is only guaranteed for one or two of the three protections, that money is only partially guaranteed. Here is a quick breakdown of each guarantee category:
Skill guarantee: If a player contract is terminated because, in the team’s opinion, he does not have the requisite skill (due to a loss or lack of skills comparable to others on the team at his position), the player will be entitled to any money that is protected by a skill guarantee.
Cap guarantee: If a player contract is terminated so that a team can get under the salary cap, sign a free agent or re-sign one of its current players, the player is entitled to any money that is protected by a cap guarantee.
Injury guarantee: If a player is released but is currently unable to perform football duties (i.e., doesn’t pass a physical) as a result of team activities, the player is entitled to any money in his contract protected against injury. An injury-only guarantee is the most common in terms of partially guaranteed money.
Full guarantees (guaranteed at signing): Money is fully guaranteed at signing if it is guaranteed for skill, cap and injury purposes. The five-year, $230 million contract Deshaun Watson signed with the Browns last year is guaranteed for skill, cap and injury.
Most fully guaranteed money at signing: Deshaun Watson ($230 million with the Browns).
Contract renegotiations: The first renegotiation of a veteran contract can occur at any time, but any subsequent increase in salary during the original terms of the contract can only happen 12 months after the most recent renegotiation. Teams can’t renegotiate terms from any prior year of a contract. After the final regular-season game, terms for the current season can’t be renegotiated.
Base salary: Formally known as “Paragraph 5” salary due to its place in a standard NFL Player Contract, it is the compensation a player receives during the regular season. The collective bargaining agreement set league minimums for base salaries. A player’s “game check” is 1/18th (including the bye week) of his base salary in a 17-game season. When a player is suspended for a game, he forfeits 1/18th of his base salary.
In the Final League Year (2030) of the current CBA, players will be paid 100 percent of their base salary in weekly or bi-weekly amounts. This changes from 2021 to ’29, when players will be paid 50 percent of their salary over the course of a period that is double the number of weeks the player is eligible to be paid for (i.e., in an 18-week regular season, he would be paid over a 36-week period).
Largest base salary in 2023: Deshaun Watson, Browns ($46 million).
Signing bonus: Money earned by a player for signing his contract. Typically paid out within the first 12-18 months. Prorated against the salary cap for the life of the contract (five-season maximum). This is how the Cowboys could afford to give Dak Prescott a $66 million signing bonus in 2021. For cap purposes, The bonus counted for $13.2 million on the Cowboys’ cap in each of the five seasons following his signing (the four-year contract has a fifth season that voids).
Largest signing bonus in a contract: Dak Prescott ($66 million with the Cowboys).
Roster bonus: Compensation earned by remaining on a team’s roster on a certain date. Roster bonuses count in full against the salary cap in the season in which they are earned, unless fully guaranteed at signing. They are used to avoid signing-bonus proration, which pushes dead money into the future.
Consider Super Bowl LVII MVP Patrick Mahomes, who is owed a $34.4 million roster bonus in 2023, the largest such bonus in the NFL in the 2023 season. Kansas City dealt with a similar situation last offseason, when the Chiefs converted Mahomes’ NFL-high $27.4 million roster bonus into a signing bonus in 2021. The move allowed the team to prorate that charge over the next five years of Mahomes’ contract.
Largest roster bonus in 2023: Patrick Mahomes ($34.4 million with the Chiefs).
Per-game roster bonus: A roster bonus awarded on a per-game basis for being on the team’s game day (47- or 48-man) roster (“Active List”) or its active (53-man) roster (“Active/Inactive List”), which varies by contract. For example, in a 17-game season, a player with a $1.7 million per-game roster bonus for being on the game-day roster would earn $100,000 for each game he is active. Any previous contract clauses for 46- and 53-man per-game roster bonuses will be amended to reflect the new roster sizes. Consider the Bills’ Von Miller, who has $255,000 in per-game roster bonuses for the 2023 season. He will earn $15,000 for each game he is active this season.
Note: Under the current CBA, teams are permitted to have 48 players active on game day if said team has eight active offensive linemen. If the team has fewer than eight players whose primary position is center, guard or offensive tackle, it can only have 47 game-day actives. A team still cannot exceed a 53-man Active/Inactive List unless it is promoting one or two practice-squad players using the “Standard Elevation Addendum,” in which case the team can expand its roster to 54 or 55 (only using said practice-squad players).
Option bonus: Gives a team (or, at times, a player) the ability to exercise the current or future years of the contract by paying a bonus. Prorated over the life of the contract (like a signing bonus, up to a max of five seasons). So, Kyler Murray‘s $36 million option bonus in 2023 (due the 10th day of the league year) will be charged as $7.2 million per season over the next five years.
Largest option bonus in 2023: Aaron Rodgers ($58.3 million with the Packers). Must be exercised between March 17 and Week 1.
Workout bonus: Compensation for attending an agreed-upon percentage of the offseason workouts. No workout bonus can require participation in more than 84.375 percent of the team’s scheduled workouts (i.e., a player can miss five of 32 scheduled workouts and still receive his bonus).
Largest workout bonuses in 2023: Kyler Murray ($1 million with the Cardinals).
Reporting bonus: Earned by reporting to team activities by a specified date. For example, Darrelle Revis had a $1 million reporting bonus in his 2010 contract with the Jets, as the team sought to avoid further training camp holdouts.
Incentives (LTBE/NLTBE): Incentives in a player contract are limited to the list provided in Exhibits A-C in Article 13 Section 6 of the NFL’s collective bargaining agreement (pages 116-119).
Player incentives are considered “likely to be earned” (LTBE) or “not likely to be earned” (NLTBE) based on the player or team’s prior-year performance. For example, if a player has a $500,000 incentive for accumulating 1,000-plus rush yards in the upcoming season and he had 1,000-plus rush yards the previous season, the incentive is considered LTBE. If he did not record 1,000-plus rush yards in the previous season, the incentive is considered NLTBE. Except in certain circumstances, LTBE incentives count against the team’s salary cap in the current season, and NLTBE incentives do not count against a team’s current year’s cap. Except in rare cases, unearned LTBE incentives are credited to the following season’s salary cap, while earned NLTBE incentives are charged against the following season’s salary cap.
For example, Chiefs DT Chris Jones earns $1.25 million each season he records 10 sacks. In 2021, he finished with 9.0 sacks, so the incentive was considered NLTBE and was not charged on the Chiefs’ salary cap for 2022. However, Jones finished 2022 with 15.5 sacks, creating a $1.25 million cap charge for the Chiefs in 2023. Since he finished with at least 10 sacks, the $1.25 million charge for the 2023 incentive will also be charged. In all, the Chiefs will be charged $2.5 million for Jones’ sack incentives this season. However, if he fails to reach 10 sacks in 2023, the Chiefs will be given a $1.25 million cap credit in 2024.
Salary escalators: A salary escalator is similar to an incentive in that it is triggered by attaining certain performance thresholds. However, the extra money is not always guaranteed to be received. An earned escalator translates into a raise in a future year (or years) of the contract. If the escalator applies to a non-guaranteed season and the player is released prior to it, he would not receive the benefit of his escalator. Contracts can also contain de-escalators that lower a player’s salary for failing to reach performance measures.
Dead money: Refers to salary a team has already paid or has committed to paying (i.e., a signing bonus, fully guaranteed base salaries, earned bonuses, etc.) but which has not been charged against the salary cap. In business terms, it is essentially a “sunk cost.” Any money a team pays a player must be accounted for against the salary cap. If there is dead money in a player’s contract and he is released or retires, that charge will accelerate onto the team’s salary cap for the current year. For example, retired quarterback Tom Brady will leave behind $35.1 million in dead money on the Buccaneers’ salary cap, due to signing-bonus prorations spread over four void years.
There is one avenue to lower this cap hit in a current league year: the June 1 designation. Teams can spread the cap hit over two seasons by releasing or trading a player after June 1 — any signing bonus prorations for future seasons are charged to the following seasons’ salary cap. Teams are allowed to release two players prior to June 1 (but on or after the first day of the league year) while still using this designation and getting the same cap treatment. However, the cap savings created by a June 1 designation do not take effect until after June 1.
For example, should the Saints release WR Michael Thomas without a June 1 designation, the team would accelerate a cap charge of $26.2 million in dead money in 2023, $12.6 million higher than the $13.6 million cap hit Thomas was scheduled to carry if he was on the team. Should the team use the June 1 designation, it would face a $12 million dead cap hit in 2023 and a $14.2 million cap hit in 2024, creating $1.6 million in cap space in 2023 thanks to Thomas’ exit. However, that space would not be available until after June 1.
Essentially, the salary cap is like a credit card, minus the interest. Anything that is paid out to a player must be paid back to (and accounted for against) the salary cap at some point.
Veteran salary benefit: Formerly known as the minimum salary benefit, the veteran salary benefit allow teams to offer a “Qualifying Contract” to any player with at least four credited seasons at a reduced salary-cap hit. Under this provision, a qualifying contract is a one-year deal worth the minimum base salary applicable to a player with his number of credited seasons, plus $152,500 in additional compensation (i.e., signing bonus, roster bonus, incentive, etc. — amount begins to increase in 2024). These contracts are charged against the salary cap at the rate of a player with two credited seasons that league year.
Four-year qualifying contract: Another type of veteran salary benefit, it can be offered to a player with at least four credited seasons whose contract with a team has expired after being on said team for four or more consecutive, uninterrupted league years prior to his contract expiring. Such a player must have been on the team’s 90-man active/inactive list for said seasons (and every regular-season and postseason game). Teams can sign a maximum of two eligible players to this type of salary benefit.
A qualifying contract under this benefit is a one-year deal with a base salary of up to $1.35 million more (set to increase in 2024) than the minimum base salary for said player. However, if a team does sign two players to a qualifying contract, it can only give a combined $1.35 million in additional base salary between the two deals. Under such agreements, only the applicable minimum base salary (not the $1.35 million benefit) is charged against the salary cap.
Waivers: When a player contract is terminated, he is either free to negotiate and sign with a team at any time or is subject to waivers. When released, a contract for a player with fewer than four credited seasons is subject to waivers at all times. The waiver system allows teams to place a claim on a player contract before that player becomes a free agent. The team with the highest priority will be awarded the player. A contract for a player with four or more credited seasons is not subject to waivers when released from the day after the Super Bowl through the trade deadline. After this date and outside of this period, the contract must be placed on waivers and can be claimed by another team.
Guaranteed money, dead money and cap savings at signing
Let’s take a full look at one veteran contract to explore some of these things in action …
Example: Joey Bosa‘s 2020 contract extension (five years, $135 million)
2020: $15.0M cap hit – $78.0M in dead money = -$63.0M in cap savings if released
2021: $20.8M cap hit – $63.0M in dead money = -$42.3M in cap savings if released
2022: $28.3M cap hit – $42.3M in dead money = -$14.0M in cap savings if released
2023: $31.0M cap hit – $14.0M in dead money = $17.0M in cap savings if released
2024: $29.0M cap hit – $7.0M in dead money = $22.0M in cap savings if released
2025: $25.4M cap hit – $0M in dead money = $25.4M in cap savings if released
> Cap savings: pre-June 1 release (according to Spotrac)
Joey Bosa guarantees by year at signing:
Remaining partial guarantees (injury only)
TOTAL GUARANTEES: $102.0 million
Length: Contracts for drafted rookies are set at four years. Undrafted rookies receive three-year contracts.
Fifth-year option: The fifth-year option got a makeover under the new CBA. Each player selected in the first round of the NFL draft has a team option for a fifth season automatically included in his contract, which extends the four-year rookie contract to a fifth season for a non-negotiable fixed amount. Teams must exercise this option in the time after the conclusion of the player’s third regular season but prior to May 3 of the following league year; the deadline for players drafted in the first round of the 2020 NFL Draft is May 1, 2023.
Starting with players selected in the first round of the 2018 NFL Draft, players could earn different fifth-year option salaries based on their performance in the first three seasons of their career. The fifth-year option for such players is fully guaranteed at the time it is exercised rather than on the first day of the league year of the option. If such a player’s fourth-year salary is not fully guaranteed for skill, cap and injury, it becomes guaranteed as well when the option in exercised.
First-round picks will receive a base salary equal to the cap percentage average of the transition tag for the player’s position in his fourth season but using the appropriate third- through 25th-highest PYS if they have not been selected to the Pro Bowl on the original ballot and did not (a) partake in at least 75 percent of his team’s offensive or defensive plays in two of his first three regular seasons or (b) play a cumulative average of 75 percent of his team’s offensive or defensive plays over the course of his first three regular seasons or (c) log at least 50 percent of his team’s offensive or defensive snaps in each of his first three regular seasons.
First-round picks will receive a base salary equal to the cap percentage average of the transition tag for the player’s position in his fourth season, but using the appropriate third- through 20th-highest PYS at the player’s position if they have not been selected to the Pro Bowl on the original ballot but did (a) partake in at least 75 percent of his team’s offensive or defensive plays in two of his first three regular seasons or (b) play a cumulative average of 75 percent of his team’s offensive or defensive plays over the course of his first three regular seasons or (c) log at least 50 percent of his team’s offensive or defensive snaps in each of his first three regular seasons.
A first-round pick named to the Pro Bowl on the original ballot in one of his first three regular seasons will receive a fifth-year option equal to the transition tag at his position for the league year of the player’s fourth year of his rookie deal. Those selected to two or more Pro Bowls in their first three seasons will receive a fifth-year option equal to the franchise tag applicable to his position in the player’s fourth season.
Players on the fifth-year option will be fined $40,000 for each day of any late reporting or absence from training camp (increased to $45,000 in 2026) and one week of regular-season salary for each preseason game missed.
Examples of fifth-year options exercised in 2022 (for players from the 2019 draft class):
Rookie salary: A player’s rookie salary is composed of the following: signing bonus, base salary, offseason workout per diem (beginning in the second season), base-salary guarantees, permitted performance incentives, roster bonuses and reporting bonuses.
Proven performance escalator (PPE): This is intended to reward non-first-round draft picks for contributions that exceed the expectations of their draft status. The PPE is not considered “Rookie Salary” and is not subject to the 25 percent rule (more on that below).
Beginning with the 2018 draft class, players drafted in the second through seventh rounds are eligible to receive the Level One, Level Two or Level Three PPE. Those selected in the first round, as well as undrafted players, are not eligible for any PPE. Any player who qualifies for multiple levels of the PPE will receive the highest escalator but can’t receive more than one.
The PPE is now a three-level, non-negotiable amount in which a player’s base salary in the fourth year of his rookie contract increases if he meets certain predetermined thresholds.
The Level One PPE is structured differently for second-round picks and those selected in Rounds 3 through 7. In order to qualify for Level One, second-round picks must either (a) play 60 percent of his team’s offensive or defensive plays in any two of his first three seasons or (b) participate in a cumulative average of 60 percent of his team’s offensive or defensive plays over the course of his first three regular seasons. For third- through seventh-round picks, players can hit either (a) or (b) above, but the threshold to reach drops to 35 percent of such plays.
For such players, the Level One PPE increases a player’s fourth-year base salary to the original-round tender for restricted free agents set for the player’s fourth season.
A player selected in the second through seventh round will qualify for the Level Two PPE if he participates in 55 percent of his team’s offensive or defensive plays in each of his first three regular seasons. The amount of the Level Two PPE is right of first refusal tender in the player’s fourth season, plus $250,000. Panthers safety Jeremy Chinn, a second-round pick in 2020, has played 80.6 percent of the team’s defensive snaps since 2020, according to Next Gen Stats, and will earn the Level Two PPE ($2.918 million in 2023).
To qualify for the Level Three PPE, a second- through seventh-round pick must be selected to the Pro Bowl on the original ballot in at least one of his first three seasons. The Level Three PPE is equal to the difference between the second-round tender for restricted free agents and the player’s Year 4 rookie salary, less any signing bonus prorations. The player’s Year 4 base salary increases by this amount. For example, Eagles quarterback Jalen Hurts, a second-round pick in 2020, will earn the Level Three PPE because he was selected to the 2023 Pro Bowl on the original ballot ($4.204 million in 2023).
Notable players who earned the PPE in 2023:
Performance incentives: While veterans can agree to various incentives, rookie incentives are based on playing an agreed-upon amount of a team’s offensive or defensive plays. All incentives in Year 1 of a rookie contract are considered Likely To Be Earned (LTBE).
Rookie performance incentives rules differ by the round a player was drafted in. For first- and second-round picks, the minimum amount of playtime a player can be rewarded for is set at 35 percent in the initial contract year and 45 percent in any other year of the deal. For players drafted in the third round and later, along with players who go undrafted, the minimum playtime incentive is set at 15 percent for the first year and 30 percent for any subsequent years. Rookie incentives must be set for a specific playtime percentage (i.e., 40 percent of plays) and can’t be awarded based on improving in such percentage year over year.
These incentives can’t be guaranteed for skill, injury or cap and can only be based on playtime in the current league year. Earning or failing to earn an incentive cannot modify, nullify or create another incentive clause. Unearned incentives cannot be carried over into future seasons.
Renegotiations: Rookie contracts for drafted players can’t be renegotiated or altered in any way until after the last regular-season game of the third contracted year. Undrafted rookies must wait until after their second season to amend a contract. Any rookie contract that is renegotiated or extended in any way is no longer considered a rookie contract and is not restricted by the rules governing such contracts.
25 percent increase rule: Unless a player’s base salary is set at the minimum every year, no team can sign a player to a contract that would give him a raise of more than 25 percent annually. So, the second year of the contract can’t provide a salary more than 25 percent of the first year, and after that, each subsequent year can’t offer an increase of more than 25 percent of his previous year’s salary.
When gauging a free agent’s value, it can be helpful to compare him to what other players at his position receive in salary. However, it can be misleading to simply look at the average per year (APY) of a contract that was signed in a previous year, when the salary cap was smaller. A more realistic picture of a signed player’s value can be attained by using adjusted APY. This allows those involved in negotiations to identify true financial benchmarks with a common denominator.
Consider two of the NFL’s highest-paid pass rushers: Myles Garrett and Khalil Mack. The Browns signed Garrett to a five-year, $125 million deal in 2020, which was the highest among all pass rushers at the time it was signed. The 2020 salary cap was $198.2 million, and Garrett’s $25 million average salary accounted for 12.6 percent of the Browns’ unadjusted 2020 cap space. When adjusted for 2023, his adjusted APY is $28.3 million.
Now consider Mack, who was traded from the Bears to the Chargers last year. He signed a six-year, $141 million deal with the Bears in 2018. Even though the APY of Mack’s contract ($23.5 million) is lower than Garrett’s ($25 million), the former’s adjusted APY is higher. In 2018, $23.5 million was 13.3 percent of the salary cap; 13.3 percent of the $224.8 million 2023 cap is $29.9 million. The Chargers have Mack under contract for a total of $46.15 million over the next two seasons.
A player’s cap hit is made of various elements and does not reflect how much a player is paid in a given season — but rather, how much a team is charged against the salary cap in that season. Multiple examples are provided below:
Let’s then use Broncos’ quarterback Russell Wilson‘s extension as an example. Wilson signed a five-year, $242.5 million deal with the Broncos after being traded by the Seahawks. Wilson received a $50 million signing bonus, which was set to count $10 million against the salary cap in each of the first five years of the deal (Wilson had two years remaining on his previous contract, equaling seven total years). Wilson’s Year 1 cash flow (in 2022) consisted of $57 million, stemming from his signing bonus, $2 million base salary and $5 million roster bonus. But due to signing bonus proration, Wilson’s 2022 cap charge was just $17 million (2022 base salary + roster bonus + $10 million signing bonus proration).
A typical contract restructure is when a team converts part of a player’s base salary into a signing bonus to create immediate cap relief. This does, however, increase the player’s yearly cap hits thereafter by pushing more dead money into future years.
Josh Allen ($27.5 million base salary) and Patrick Mahomes ($34.4 million roster bonus) are two examples of players who will likely have their contracts restructured this offseason.
To see how the Rams created cap relief in the 2021 offseason, we can examine what transpired with DT Aaron Donald. Donald had a base salary of $19.9 million in 2021. Los Angeles dropped his base salary to $1.9 million in 2021. The Rams converted the remaining $18 million into a signing bonus, which allowed them to spread that money over the remaining four years of the contract ($4.5 million per season). This allowed the Rams to reduce his cap hit from $27.9 million to $14.4 million in 2021, creating $13.5 million in cap space. However, this restructure increased his cap hits from 2022 to 2024 by $4.5 million each season: from $22.3 million to $26.8 million in 2022 and $19.0 million to $23.5 million in 2023. (His cap hit included an additional $4.5 million in 2024 as well, but with his base salary lowering that year from $16.75 million to $14 million, his cap hit only jumped from $21.8 million to $23.5 million.)
The following is a breakdown of Donald’s contract restructure using the format above:
> Previous hits: 2021 ($27.9M), 2022 ($22.3M), 2023 ($19.0M), 2024 ($21.8M)
(Note that these numbers predate a three-year, $95 million extension Donald signed last year, which changed his cap hits for 2023 and ’24.)
Postseason pay: In 2023, NFL players will be paid for postseason games in the following amounts: Players on teams to win their division will earn $50,500 for their wild-card game, while players on non-division winners or teams on a bye (No. 1 seeds) will earn $45,500 for the initial round. Players will earn $50,500 for a Divisional Round game and $73,000 for the Conference Championship. The Super Bowl winners will earn $164,000 each, and the losers will take home $89,000. Players on the active list, inactive list or injured reserve list are paid this amount for the 2023 postseason (other players are subject to all or partial playoff compensation). These amounts increase annually over the course of the CBA.
Pro Bowl pay: Players on the team that wins the Pro Bowl Games will receive $84,000 for participation. Players on the losing team will receive $42,000 this season. These amounts increase annually over the course of the new CBA.
Active (“Gameday”) list: If a team has a minimum of eight offensive linemen (primary position being center, guard or offensive tackle) on the active game-day roster, the maximum roster size is 48 players. If a team has fewer than eight offensive linemen, the maximum drops to 47 players.
Active/inactive (“53-Man”) list: The active/inactive list remains at 53 players for the regular season and playoffs. However, a team can increase its roster to 54 or 55 players only by using the standard elevation addendum (explained below) to bring one or two practice squad players to the active/inactive list.
Roster size: The practice squad now consists of 16 players as of 2023. The max was 12 players in 2021.
Eligibility: The rules for roster size and eligibility for the practice squad were amended by the NFL and NFL Players Association in May 2022. Players with no accrued seasons and those with fewer than nine regular-season games in their lone accrued season are eligible for the practice squad. Teams can also have a maximum of 10 players who have earned no more than two accrued seasons. Each team can have up to six players with unlimited accrued seasons on the practice squad. However, the number of players in the last two categories cannot exceed 10 players combined.
Standard elevation addendum: Now included in all practice squad contracts, the standard elevation addendum allows teams to move a player from the practice squad to the active/inactive list for one week and then back to the practice squad without subjecting him to waivers. Under this addendum, a player reverts back to his team’s practice squad on the first business day after the game in which he is elevated. These players receive the applicable minimum salary for a player with his number of credited seasons (prorated for one week of regular-season pay or the applicable postseason amount). This clause can be used by a team for a maximum of three regular-season or postseason games per player per season. Each practice-squad player can be elevated for a maximum of three regular-season games in the same league year. After this, any subsequent elevation of the player will require the team to add him to their 53-man Active/Inactive List. The team must then waive or terminate his player contract before the player can be re-signed to the practice squad. If the player is re-signed to the practice squad this way, the player is again eligible to be elevated for the previously mentioned maximum of three games.
The 2023 salary cap was set at $224.8 million, an increase of $16.6 million from 2022 ($208.2 million). Below is the NFL’s salary for each season since it was conceived in 1994:
Follow Anthony Holzman-Escareno on Twitter @FrontOfficeNFL.
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