National Football League (NFL) contracts contain components and terms that may be alien to those new to the world of sports contracts. Understanding the components and terms provides insight into the standards of NFL contracts and similar sports deals.
The term “base salary” or just “salary” refers to the annual amount players receive. A player on the team roster earns the base salary, which usually is paid in 17 installments. However, there is usually a yearly cap that the payment cannot exceed. For example, a four-year contract of $12 million with an annual cap of $4 million can be paid in a 3-3-3-3 series, meaning $3 million every year for four years to a maximum of $12 million. But it can also be delivered in a 4-2-4-2 series by paying the total cap amount in one year and following the next year with half the cap. The deal stands unbroken as long as the sum is met and the yearly cap is not exceeded.
Depending on the deal and circumstances, base salaries may be guaranteed or non-guaranteed. The player’s goal is to receive some degree of protection and determine how much risk the signing team is willing to bear. For example, a four-year contract may provide a $3-million annual salary and a guaranteed sum of $8 million for the deal's first two years.
When the team cuts a player, most of the money the player loses comes from the base salary. Any future or current earnings are lost unless the contract guarantees it. However, there are different guarantees, such as injury guarantees, skill guarantees, and cap guarantees. An injury guarantee, the most popular guarantee, protects a player if the team decides to release him when he cannot participate in any football activities or meet the physical criteria.
A skill guarantee safeguards the player who lacks the necessary skill by the team’s reckoning. A cap guarantee protects a player when the team wants to re-sign another player or escape the salary cap. Combining the skill guarantee and cap guarantee is common.
Most NFL deals also offer bonuses to players. A signing bonus is an immediate guaranteed payment given to a player who signs the contract. Since signing bonuses count toward the cap, the team may have to divide the bonus over the length of the deal.
Other bonuses include the roster bonus and the workout bonus. The second most common bonus in contract negotiations is a roster bonus that covers a player’s presence on the roster on a fixed date. This bonus specifies that the team will pay a player a certain amount if he is on the roster on the agreed date. A workout bonus offers incentives to players who participate in a certain number of off-season exercises.
An option bonus is a combination of a guarantee and a bonus. They are very similar to signing bonuses, but these occur later than signing bonuses. Option bonuses are typically used to give guaranteed money to a player later in the deal. They are usually spread out over a long-term once the option begins, making them similar to signing bonuses.
