There are always lots of questions about rookie contracts in the NBA and fortunately, we have the knowledge to get those NBA rookie contracts explained.
The college basketball season is in full swing. As a result, there are mock drafts popping up all over the internet on a seemingly daily basis. That makes this as good a time as ever to look at the value of NBA rookie contracts and how they work. Look at this as your primary resource when it comes to NBA rookie contracts explained.
NBA rookie contracts explained
There are a number of rules when it comes to NBA rookie contracts. A rookie contract is given to any player that has never before played in the league regardless of age. The current NBA collective bargaining agreement prevents any player from entering the league under the age of 19. This is why the “one and done” term for top-end college players is so common. These players graduate high school, play one season of college ball, then enter the NBA (usually through the draft).
There is no upper age limit for an NBA player. Italian point guard Pablo Prigioni played all over Europe for years before signing for the New York Knicks on the NBA Rookie minimum at a record age of 35 years old in 2012.
Players selected in the first round of the NBA draft are given four-year contracts. Only the first two years of the deal are fully guaranteed with the team having options for the third and fourth years. Second-round draft picks and undrafted free agents can sign contracts that can be anything from one year to four years and that are either fully guaranteed or not guaranteed at all. This is where a good agent makes all the difference.
How much is an NBA rookie contract
The value of an NBA rookie contract is tied to two things. The first is the salary cap for the season.
For the 2021-22 season, the salary cap was set on August 2 as $112.414 million. That is the most that NBA teams can spend on salary for all their players combined for that season. There are a number of ways to work with the cap, such as backloading contracts and trading players, but that is for the capologists out there.
The second factor for the contract is where a player is drafted. This only counts for first-round picks, but it is a system that has proved so useful that the NFL adopted a similar strategy as player contracts in that league for rookies grew out of control.
Looking at NBA rookie contracts explained, here are the salary figures from Spotrac for the 2021-22 draft class.
One big thing to note with this scale is that though the dollar amount is fixed, it is not absolute and agents have a little room to work the ideal contract for their client.
Rookies on the scale must be paid between 80% and 120% of the given dollar amount. That means that the first overall pick in year one could sign a contract from anything between 80% and 120% of the $8,375,100 figure given.
When it comes to team options on NBA rookie deals, the third and fourth years are not guaranteed and the option for an extension is also written into the CBA.
What’s the minimum rookie contract?
Unlike first-round draft choices, any other rookie coming into the league has to negotiate a salary from scratch. The CBA, however, dictates that the NBA rookie minimum salary is a certain percentage of the salary cap. For the 2021-22 season, that amount is set at $925,258. That amount is guaranteed for any rookie that is on a team for the whole season, with the salary being prorated if a player is added at some point later on in the year on the minimum.
One thing to note here is that the NBA incentivizes teams to sign veterans as well as rookies. They do this by making any one-year veteran minimum cap hit max out at just over $1.6 million against the cap. That is despite the salary for a 10 or more year vet actually being over $2.5 million. That is why the NBA is not full of rookies on short, cheap deals each season.
How does an NBA rookie contract work?
In summary, the NBA rookie contract is a four-year deal for first-round picks with the team having an option to keep the player for years three and four.
The rookie salary is set by the total amount of the salary cap with each player getting wages based on a preset amount for their draft slot. The actual value of the contract may be anywhere from 80% to 120% of that slotted amount. Second-round picks and free agents sign contracts of differing lengths and there is a rookie minimum which for the 2021-22 season is close to $1 million.
Rules for rookie contract extensions
The final puzzle piece when looking at NBA rookie contracts explained is extensions to the deal. A regular extension adds four new years to the original rookie contract. This deal can only be done before the fourth year of the rookie deal, so in signing a player will (barring trade) be tied to the team for another five years at that point.
One way a team can keep a rookie for an extra (fifth) year is to give them a qualifying offer and make them a restricted free agent. This is a one-year deal with a value based on the player’s previous salary. This then allows the team a player is currently on to match any offer the player gets from another team.
Maximum rookie contract extensions
There are probably more max rookie contract extensions than you would expect in any given year. In 2006, for example, there were 10, with the likes of LeBron James, Dwayne Wade, and Carmelo Anthony all signing their second NBA deals.
The 2021 contract extension period set a new high watermark, with no less than 11 players signing extensions. Among those were league stars including Luka Doncic (five years max salary $207,060,000), Trae Young (five years max salary $172,500,000 with escalators that would match Doncic), and Michael Porter Jr. (five years max salary $172,500,000 with escalators).
The moral to this story is that proving your worth as a rookie can set you for life with a monster extension as a player hits his NBA prime.