Anthony Holzman-Escareno demystifies the jargon around free agency below:
The 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 fly fast and furious every year.
The NFL's newly minted 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 and contracts below.
First, let's consider a rundown of the free agency period itself. It begins when the NFL League Year does (in 2020: 4 p.m. ET on March 18), while team spending is limited by the annual salary cap ($198.2 million in 2020).
Teams are allowed to negotiate with the agents of upcoming unrestricted free agents during the "Two Day Negotiating Period" before free agency begins (in 2020: from 12 p.m. ET on March 16 until 4 p.m. ET on March 18). Self-represented players ("Unrepresented Player") can now speak with members of team front offices (but not coaching staffs) during this period, which was previously prohibited.
When the new league year begins, contracts from the previous season expire, the trading period opens and restricted free agent tenders must be submitted, etc. This is when free agents can officially sign new contracts, and trades (e.g., DeAndre Hopkins being traded to Arizona, Calais Campbell being traded to Baltimore or A.J. Bouye being traded to Denver) can become official.
And now, here's a glossary of free-agent 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 financial landscapes).
FREE AGENCY DESIGNATIONS
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 2020, teams must submit these tenders before 4 p.m. ET on March 18. These amounts change annually; the following numbers are for the 2020 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) $4.641 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 ($5.141 million in 2020).
Second-round tender: One-year contract worth the greater of (a) $3.259 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) $2.133 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 $2.133 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. As an example, the Saints are reportedly using a first-round RFA tender on QB/RB/WR/TE Taysom Hill this 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.
RFA tender salary increases: If there is an increase in the salary cap in the 2021 or 2022 league years, each of the tenders will increase by the percentage of the salary cap from one season to the next. In addition to this, each of the tenders will increase by an additional amount during the 2021 and 2022 league years as follows: Right-of-first-refusal tender ($0), original-round tender ($50,000), second-round tender ($125,000) and first-round tender ($125,000). Beginning in 2023, each of these tenders will only increase with the percentage of the salary cap (if any) from league year to league year.
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.
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 2020 based on Credited Seasons (CS):
0 CS: $610,000
1 CS: $675,000
2 CS: $750,000
3 CS: $825,000
4-6 CS: $910,000
7+ CS: $1,050,000
If the new collective bargaining agreement hadn't passed, teams would've had both the franchise and transition tenders at their disposal in the Final League Year of the old CBA. But the new CBA once again calls for teams to be allowed the usage of just one of the tags per offseason. 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).
Teams can use this designation from the 22nd day preceding until 4 p.m. ET on the eighth day preceding the new league year. The window was initially scheduled to open on February 25 and close on March 10, but CBA negotiations pushed back the deadline to March 16 this season.
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 15 (or the Monday after, if that date falls on a weekend). 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).
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 non-exclusive franchise tag in 2020: RB Derrick Henry (Titans), WR A.J. Green (Bengals), TE Hunter Henry (Chargers), OG Brandon Scherff (Redskins), OG Joe Thuney (Patriots), DT Chris Jones (Chiefs), DT Leonard Williams (Giants), DE Yannick Ngakoue (Jaguars), LB Matt Judon (Ravens), LB Bud Dupree (Steelers), LB Shaquil Barrett (Buccaneers), S Anthony Harris (Vikings) and S Justin Simmons (Broncos).
2020 non-exclusive franchise tag salaries:
QB: $26.824 million
RB: $10.278 million
WR: $17.865 million
TE: $10.607 million
OL: $14.781 million
DE: $17.788 million
DT: $16.126 million
LB: $15.828 million
CB: $16.338 million
S: $11.441 million
K/P: $5.019 million
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 17 in 2020) or (b) the amount of the non-exclusive franchise tag.
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. 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.
2020 transition tag salaries:
QB: $24.837 million
RB: $8.483 million
WR: $15.680 million
TE: $9.117 million
OL: $13.505 million
DE: $15.184 million
DT: $13.143 million
LB: $13.737 million
CB: $14.197 million
S: $9.860 million
K/P: $4.559 million
Multiple franchise tags: When a player receives the franchise tag for a second time, he's owed 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, DeMarcus Lawrence received the franchise tag from the Cowboys in 2018 and earned $17.143 million. The franchise tag for defensive ends in 2019 was $17.128 million. Before signing a long-term extension, Lawrence was scheduled to earn $20.5716 million (120 percent of his 2018 salary) due to it being his second franchise tag.
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.
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 1/17th (including the bye week) of his base salary in a 16-game season -- and will be 1/18th in a 17-game season. When a player is suspended for a game, he forfeits 1/17th of his base salary. For example, Cardinals CB Patrick Peterson had a base salary of $11.0 million entering 2019 ($647,059 per week) but forfeited $3.9 million (weekly salary multiplied by games suspended) for his six-game PED suspension last season.
In 2020 and in the Final League Year (2030), 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 a 17-week regular season, he would be paid over a 34-week period).
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 Lions could afford to give Matthew Stafford a $50 million signing bonus in 2017. For cap purposes, Stafford's signing bonus counts for $10 million against the Lions' salary cap for each of the first five seasons of his contract.
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. For example, Rams running back Todd Gurley will receive a $7.55 million roster bonus this season, which became fully guaranteed on March 15, 2019. He also has a 2021 roster bonus worth $5 million -- this becomes fully guaranteed on March 20, 2020. The Rams could avoid paying this by releasing Gurley prior to the date. His non-guaranteed $5.5 million 2020 base salary also becomes fully guaranteed on March 20.
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 16-game season, a player with a $1.6 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.
Note: Under the new 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).
Largest option bonus in 2020: Carson Wentz ($30 million with the Eagles; must be exercised by March 27, or 2020 salary becomes $31.383 million and the remaining years on the contract void).
Workout bonus: Compensation for attending an agreed-upon percentage of the offseason workouts. No workout bonus can require participation in beyond 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).
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.
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 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.
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.
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 $137,500 in additional compensation (i.e., signing bonus, roster bonus, incentive, etc. -- amount begins to increase in 2022). 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 $1.25 million more (set to increase in 2022) 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 $1.25 million in additional base salary between the two deals. Under such agreements, only the applicable minimum base salary (not the $1.25 million benefit) is charged against the salary cap.
Waivers: When a player contract is terminated, he is either free to negotiate and with a team at any time or 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
Now, let's take a full look at one veteran contract to explore some of these things in action ...
- Guaranteed money: $107.0 million.
- Fully guaranteed money: $70.0 million.
- Signing bonus: $65 million -- $13.0 million in cap space for five seasons (four years of extension plus one remaining season from prior contract).
2019: $26.3M cap hit - $78.3M in dead money = -$52.0M in cap savings
2020: $31.0M cap hit - $70.0M in dead money = -$39.0M in cap savings
2021: $32.0M cap hit - $39.0M in dead money = -$7.0M in cap savings
2022: $37.0M cap hit - $26.0M in dead money = +$11.0M in cap savings
2023: $39.0M cap hit - $13.0M in dead money = +$26.0M in cap savings
Cap savings: pre-June 1 release
Russell Wilson guarantees by year at signing:
- Signing bonus: $65 million
- 2019: $5 million base salary
- Full guarantee total: $70 million
Remaining partial guarantees (injury only)
- 2020: $18.0 million base salary (became fully guaranteed on Feb. 7, 2020)
- 2021: $19.0 million base salary (becomes fully guaranteed on fifth day of 2021 waiver period)
- Total partial guarantees: $37.0 million
TOTAL GUARANTEES: $107.0 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.
Players selected in the 2016 and 2017 NFL Drafts will have different fifth-year options thresholds than those selected in 2018 and beyond.
For players selected in the top 10 picks of the 2016 or '17 drafts, the fifth-year option will pay a base salary equal to the transition tag for the position at which he played the most plays in his fourth season (the season prior to the option year). For those selected from picks 11 to 32, the option will be equal to an amount calculated by using the formula for the transition tag but with the third- through 25th-highest PYS in the player's fourth season rather than the top 10 such salaries. The tender for the 2016 and '17 classes is guaranteed for injury only and becomes fully guaranteed for skill, cap and injury if the player is on the active roster at the start of the league year of his fifth (the option) season.
Starting with players selected in the first round of the 2018 NFL Draft, players can 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 (2018 draft class):
- Colts OG Quenton Nelson is already eligible for the highest fifth-year option (made 2019 and 2020 Pro Bowls on original ballot).
- Giants RB Saquon Barkley is already eligible for the second-highest fifth-year option (made 2019 Pro Bowl on original ballot) and is eligible for the highest such option if he makes the 2021 Pro Bowl on the original ballot.
- Browns QB Baker Mayfield has not been selected to a Pro Bowl on the original ballot, but he is already eligible for the third-highest fifth-year option because he played 75 percent of the Browns' offensive plays in each of the last two seasons (82.6 percent in 2018 and 99.2 percent in 2019, according to Next Gen Stats).
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 by the difference of the original-round tender for restricted free agents set for the player's fourth season and the player's Year 4 rookie salary, less any signing bonus prorations. This amount is then added to the player's Year 4 base salary. Let's look at 49ers LB Fred Warner as an example. A third-round pick in 2018, Warner has played more than 95 percent of the 49ers' defensive plays in each of his first two seasons and is already eligible for the Level One PPE.
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 the difference of the original-round tender in the player's fourth season and his Year 4 rookie salary (minus any signing bonus prorations), plus $250,000. This amount is then added to the player's year-four base salary. For example: Warner, from above, will be eligible for the Level Two PPE if he plays in over 55 percent of the 49ers' defensive plays in 2020.
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, Colts LB Darius Leonard, a second-round pick in 2018, is eligible for the Level Three PPE because he was selected to the 2020 Pro Bowl on the original ballot.
Third- to seventh-round picks in the 2017 draft are eligible for the Level One PPE -- an escalation to their 2020 base salary. Those selected in the first or second round and undrafted players are not eligible, as well as any player selected in any draft prior. The Level One PPE for the 2017 draft class will increase a player's base salary by the difference between the right-of-first-refusal tender for restricted free agents and the player's rookie salary in his fourth season, less any signing bonus prorations. As an example, Rams WR Cooper Kupp, a third-round pick in 2017, missed eight games in 2018 and failed to reach 60 percent of the Rams' snaps that season. However, he has played in over 60 percent of the Rams' offensive snaps in two of his first three seasons (2017 and 2019), and he is eligible for the Level One PPE in 2020.
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.
ADJUSTED AVERAGE PER YEAR (Adjusted APY)
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 the cornerback position. The Dolphins just agreed to terms with Byron Jones on a contract that has an average annual salary of $16.5 million, which is the highest at his position in the NFL. With this year's salary cap at $198.2 million, his $16.5 million average salary accounts for 8.3 percent of the Dolphins' cap space (not including rollovers or adjustments). The adjusted APY of Jones' contract, then, is 8.3 percent of today's salary cap, but it needs no adjustment because it was signed this season.
Now consider Cardinals CB Patrick Peterson. Even though the APY ($14.0 million) of the contract he signed in 2014 is less than Howard's, Peterson's adjusted APY is higher. In 2014, $14.0 million was 10.5 percent of the $133.0 million salary cap; in 2020, 10.5 percent of $198.2 million equals $20.8 million.
WHAT MAKES UP A PLAYER'S CAP HIT?
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. For an example of this, let's consider how teams use prorated signing bonuses to pay out more cash than they are being charged for against the cap.
Rams defensive lineman Aaron Donald signed a six-year, $135 million contract extension with the Rams in 2018. Donald received a $40 million signing bonus, which will count for $8 million against the cap in each of the first five years of the contract. Donald's Year 1 cash flow (in 2018) consisted of $40.892 million, stemming from the signing bonus and his base salary of $892,000. But because his signing bonus was prorated, the signing bonus only counted for $8 million against the cap; when his $892,000 base salary was factored in, his cap charge in Year 1 was $8.892 million.
Now let's examine Packers quarterback Aaron Rodgers' contract. Rodgers signed a four-year, $134 million contract extension with the Packers in 2018, and he received a $57.5 million signing bonus. Prorated over the first five years of the contract (Rodgers had two seasons left on his prior contract), that signing bonus will count for $11.5 million against the cap in each of those seasons. Rodgers' Year 1 cash flow (in 2018) consisted of $66.9 million, stemming from his $57.5 million signing bonus, his $7.8 million roster bonus, a $1.1 million base salary and a $500,000 workout bonus. But because only $11.5 million of the prorated signing bonus counted against the cap, his cap charge was $20.9 million.
Postseason pay: In 2020, the NFL playoffs will expand from 12 to 14 teams. NFL players will be paid for postseason games in the following amounts: Wild-card winner ($33,000), Wild-card loser or team with first-round bye ($30,000), Divisional Round ($33,000), conference championship game ($59,000), Super Bowl winner ($130,000) and Super Bowl loser ($65,000). Players on the active list, inactive list or injured reserve list are paid this amount for the 2020 postseason (other players are subject to all or partial playoff compensation). 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 consists of 12 players in 2020 and 2021, before increasing to 14 players beginning in 2022.
Eligibility: 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 four players who have earned no more than two accrued seasons. The new CBA also allows for two players with unlimited accrued seasons on the practice squad; this number increases to four players beginning in 2022.
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 two regular-season or postseason games per player per season. If the team elevates a player for a third time and the team wishes to move him back to the practice squad, it has to waive or terminate his player contract. If a player is released or clears waivers (whichever is applicable) and he signs a practice squad contract with a new team, he is once again eligible to be elevated for the aforementioned maximum of two games.