Managing the NFL salary cap is a complex puzzle. Successful franchises like the Eagles and Rams are praised for their ability to “manipulate” the cap, while less aggressive teams, such as the Bengals, are often criticized for failing to take advantage of these tools. In this post, we’ll break down the main methods teams use to maximize their financial flexibility and stay competitive.
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1. Contract Incentives
One of the most common ways teams manage the salary cap is through contract incentives. Incentives come in two categories:
- Likely To Be Earned (LTBE)
- Not Likely To Be Earned (NLTBE)
The NFL determines these categories based solely on a player’s prior-year performance, regardless of circumstances like injuries.
Example:
- Saquon Barkley rushed for 1,140 yards last season. Let’s say theoretically his cap hit is $10 million this year.
- If the Eagles give him a $5 million incentive for reaching 1,100 yards next year, that incentive is LTBE because he surpassed that mark last year. His cap hit would immediately include the $5 million, totaling $15 million. If he hits the mark then all is well. If he doesn’t, the team gets $5 million credited to their cap space next year.
- If the incentive is set at 1,200 yards (which he didn’t hit last year), it is NLTBE, meaning the cap hit this season stays at $10 million. If he hits 1,200 yards, the $5 million counts against next year’s cap instead. If he doesn’t hit the mark then all is well.
This allows teams to manage when cap hits occur, creating flexibility between seasons.
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2. Contract Restructures
Teams often restructure contracts to push cap hits into future seasons. Here’s how it works:
- A player has a $20 million salary.
- The team converts $18 million of that into a signing bonus and leaves $2 million as base salary.
- If he has three years left on his deal, the $18 million bonus is prorated over those years: $6 million per year.
Result:
- Original cap hit: $20 million
- New cap hit: $2 million (base) + $6 million (bonus) = $8 million
- Additional $6 million cap hit the next two year
The player typically prefers this since they get most of the money upfront as a lump sum. Teams can spread out the bonus over a maximum of 5 years.
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3. Void Years
When a player is in the final year of his contract, teams can still spread out bonuses by adding “void years.” These are fake contract years used purely for cap accounting.
Example:
- Player has 1 year left with a $20 million salary.
- The team converts $18 million of that into a signing bonus and leaves $2 million as base salary.
- Team adds 2 void years.
- The $18 million bonus is spread over 3 years ($6M each), reducing the immediate cap hit to $8 million this year: $2 million (base) + $6 million (bonus) = $8 million
When the contract ends, the remaining bonus owed in the void years becomes dead money against the cap immediately. Even with void years, teams can still spread out the bonus over a maximum of 5 years.
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4. Post-June 1 Designation
Cutting or trading a player after June 1 allows teams to split dead money over two seasons:
- Pre-June 1: Entire remaining bonus a team owes a player hits that season’s cap immediately as dead money.
- Post-June 1: Current year’s bonus counts this season, while the rest is deferred to the following year.
This approach gives teams short-term cap relief, which is especially useful for contending teams.
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5. Cap Rollover
Cap space can also roll over to the following year:
- If a team finishes $40 million under the cap, that amount can be added to next year’s spending limit.
- Teams must still spend at least 89% of the cap over a four-year period to prevent abuse.
This strategy is ideal for struggling franchises that want to save money for future free-agent spending sprees.
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The Big Picture
Salary cap manipulation is a balancing act. Successful teams push cap charges into the future to maximize their current rosters, but eventually, dead money catches up.
Wheelhouse Blog 