Explain the Game – Salary Cap

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In soccer, players can be bought for exorbitant numbers, such as the fact that Paris Saint-Germain bought Neymar for €222 million. Neymar himself will earn €36,8 million per season. Of course, players in the NBA can’t be bought, but they have to be traded, or signed when they are a free agent. But, Neymar will earn about two million dollars more than the highest grossing player in the NBA, Steph Curry. But, of course, the teams in the NBA have to take the salary cap into account, which means they can’t offer every player an exorbitant salary. But, what exactly is the salary cap?

In one sentence, the salary cap is the total amount of money a team is allowed to pay their players. The salary cap was introduced right at the start of the NBA, in 1946. Back then, clubs could play their players a maximum of $55.000 per season. Nowadays, more than 70 years later, the salary cap is set at $99 million per team per season. Ideally, the teams have to stay below the salary cap, otherwise it will result in a luxury tax.

The salary cap is based on the projected amounts for Basketball Related Income (BRI) and the benefits for the upcoming season. The BRI is the amount of income a team, or the basketball operations of a team, receives from the NBA per season. Examples are broadcast rights, parking, proceeds from summer camps/non-NBA basketball tournaments, 50% of proceeds from arena signage and proceeds from team sponsorships.

Then, there is a negotiation between the player association and the league where they try to decide on a number. If they can’t come to an agreement, the set amount for national broadcast rights plus the BRI from the previous season is used, which is increased by 4,5%.

The NBA’s salary cap is a soft cap, which means there are several scenarios when a team is allowed to sign players even if it exceeds the salary cap.

Mid-level exception

A team is allowed to sign one player to a maximum set amount, which changes every year. In the 2017-2018 season, the amount is $8.406 million if the team is already or will be over the cap after signing the contract or at $6 million if that team is already above the luxury tax amount.

Bi-annual exception

This exception can be used every other year, and not two years in a row. It can only be used when a team is below the ‘Apron’. The ‘Apron’ is set $6 million above the salary cap, and in this case, it is a sort of hard cap.  If a team qualifies for this, a team can offer a salary of $3.290 million (2017/2018) to any free agent.

Rookie exception

Rookies that are drafted in the first round can be given rookie scale contracts even if those contracts would mean that the teams exceed the cap.

Two-way contracts

The NBA introduced the two-way contracts at the beginning of this season. It means that every NBA team can sign two players to a special contract, as those players can spend up to 45 days with their NBA team and the rest of the time with their affiliated G-League team. Their salary does not count for the salary cap. At any time throughout the season, the contract can be changed to a normal NBA contract; but it still won’t count in that years cap.

Larry Bird exception

This rule was instated when the Celtics wanted to re-sign their own free agent, Larry Bird, and therefore they were the first team that was allowed to exceed the salary cap. To qualify for the Bird exception, a player has to have three seasons with one team, without being waived or traded, and they can be offered a salary up to the maximum salary. Nowadays, those free agents are called ‘Bird Free Agents’.

Early Bird exception

This exception is similar to the Bird exception, only in this case the veteran free agent only has to have played two years with the same team. If a player is traded or waived, the Bird right transfers to his new team.

Non-Bird exception

These are players who do not qualify as a Bird exception or Non-Bird exception. In this case, teams can offer the non-qualifying free agents a contract that is worth 120% of his last contract or 120% of the league’s minimum.

Minimum Salary exception

The teams can also go over the salary cap if they sign player to a NBA minimum salary for a maximum of two years. The teams can sign as many players as they want with this contract.

Traded player exception

This rule is used when teams trade players if they are already exceeding the cap. It doesn’t matter whether they go up or down in salary paid, but they still have to use this exception. Normally a trade is made with balanced salaries, but for example, if teams trade their upcoming draft picks, the salary will become balanced later on. That is called a non-simultaneous trade.

Disabled player exception

The disabled player exception allows a team to replace a player that will be out for the rest of the season, or the season thereafter. The salary can be for a maximum of 50% of the replaced players’ salary.

Reinstatement

This allows a team to reinstate a player with his previous salary after being banned for a drug-related incident.

The teams are always allowed to resign their own players, but if they exceed a certain ‘tax level’, they will have to pay ‘tax’. This means those clubs will have to pay a certain amount per dollar that they go over the tax level. This way, the league tries to control the spending of the teams.

In soccer, players can be bought for exorbitant numbers, such as the fact that Paris Saint-Germain bought Neymar for €222 million. Neymar himself will earn €36,8 million per season. Of course, players in the NBA can’t be bought, but they have to be traded, or signed when they are a free agent. But, Neymar will earn about two million dollars more than the highest grossing player in the NBA, Steph Curry. But, of course, the teams in the NBA have to take the salary cap into account, which means they can’t offer every player an exorbitant salary. But, what exactly is the salary cap?

In one sentence, the salary cap is the total amount of money a team is allowed to pay their players. The salary cap was introduced right at the start of the NBA, in 1946. Back then, clubs could play their players a maximum of $55.000 per season. Nowadays, more than 70 years later, the salary cap is set at $99 million per team per season. Ideally, the teams have to stay below the salary cap, otherwise it will result in a luxury tax.

The salary cap is based on the projected amounts for Basketball Related Income (BRI) and the benefits for the upcoming season. The BRI is the amount of income a team, or the basketball operations of a team, receives from the NBA per season. Examples are broadcast rights, parking, proceeds from summer camps/non-NBA basketball tournaments, 50% of proceeds from arena signage and proceeds from team sponsorships.

Then, there is a negotiation between the player association and the league where they try to decide on a number. If they can’t come to an agreement, the set amount for national broadcast rights plus the BRI from the previous season is used, which is increased by 4,5%.

The NBA’s salary cap is a soft cap, which means there are several scenarios when a team is allowed to sign players even if it exceeds the salary cap.

Mid-level exception

A team is allowed to sign one player to a maximum set amount, which changes every year. In the 2017-2018 season, the amount is $8.406 million if the team is already or will be over the cap after signing the contract or at $6 million if that team is already above the luxury tax amount.

Bi-annual exception

This exception can be used every other year, and not two years in a row. It can only be used when a team is below the ‘Apron’. The ‘Apron’ is set $6 million above the salary cap, and in this case, it is a sort of hard cap.  If a team qualifies for this, a team can offer a salary of $3.290 million (2017/2018) to any free agent.

Rookie exception

Rookies that are drafted in the first round can be given rookie scale contracts even if those contracts would mean that the teams exceed the cap.

Two-way contracts

The NBA introduced the two-way contracts at the beginning of this season. It means that every NBA team can sign two players to a special contract, as those players can spend up to 45 days with their NBA team and the rest of the time with their affiliated G-League team. Their salary does not count for the salary cap. At any time throughout the season, the contract can be changed to a normal NBA contract; but it still won’t count in that years cap.

Larry Bird exception

This rule was instated when the Celtics wanted to re-sign their own free agent, Larry Bird, and therefore they were the first team that was allowed to exceed the salary cap. To qualify for the Bird exception, a player has to have three seasons with one team, without being waived or traded, and they can be offered a salary up to the maximum salary. Nowadays, those free agents are called ‘Bird Free Agents’.

Early Bird exception

This exception is similar to the Bird exception, only in this case the veteran free agent only has to have played two years with the same team. If a player is traded or waived, the Bird right transfers to his new team.

Non-Bird exception

These are players who do not qualify as a Bird exception or Non-Bird exception. In this case, teams can offer the non-qualifying free agents a contract that is worth 120% of his last contract or 120% of the league’s minimum.

Minimum Salary exception

The teams can also go over the salary cap if they sign player to a NBA minimum salary for a maximum of two years. The teams can sign as many players as they want with this contract.

Traded player exception

This rule is used when teams trade players if they are already exceeding the cap. It doesn’t matter whether they go up or down in salary paid, but they still have to use this exception. Normally a trade is made with balanced salaries, but for example, if teams trade their upcoming draft picks, the salary will become balanced later on. That is called a non-simultaneous trade.

Disabled player exception

The disabled player exception allows a team to replace a player that will be out for the rest of the season, or the season thereafter. The salary can be for a maximum of 50% of the replaced players’ salary.

Reinstatement

This allows a team to reinstate a player with his previous salary after being banned for a drug-related incident.

The teams are always allowed to resign their own players, but if they exceed a certain ‘tax level’, they will have to pay ‘tax’. This means those clubs will have to pay a certain amount per dollar that they go over the tax level. This way, the league tries to control the spending of the teams.

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