Front offices are expected to unearth talent year in and year out, but perhaps just as important as finding diamonds in the rough is navigating the NFL salary cap.
The salary cap is a league determined maximum amount that teams can spend on player salaries each season. The most savvy teams seem to find a way to maximize their flexibility under the salary cap, and reduce the amount of restrictive dead money on the books.
NFL Salary Cap explained
The biggest NFL contracts usually get the splashiest headlines and most air time, but analyzing how they affect a team’s salary cap as a whole can arguably be the most valid part of the discussion.
How does the NFL salary cap work?
All 32 NFL teams are limited to spending a certain amount of money on player salaries each year. In theory, this allows the league to level the playing field so that large market teams are not able to significantly outbid smaller market teams for talent.
There are a few different ways in which teams most commonly compensate their players each season. Each player has a base salary that they are slated to earn at minimum for the upcoming campaign. Teams can also allocate money via bonuses. The most common types of bonus payments are signing, roster, option, workout and restructure.
Each player’s base salary, plus all of the bonuses they are set to earn that season are known as the total cap hit.
For example, Green Bay Packers wide receiver Davante Adams is scheduled to account for a $16,761,764 cap hit in the 2021 NFL season. This is because he is due $12,250,000 as a base salary, $3,600,000 as a signing bonus, $411,765 as a roster bonus, and $500,000 as a workout bonus. The player with the largest cap hit for the 2021 season is slated to be Atlanta Falcons quarterback Matt Ryan, who will count $40.9 million against his team’s salary cap.
How does the NFL calculate the salary cap?
There are a few factors that go into determining what the ceiling will be each season with regards to team’s player spending limits. First and foremost, the NFL’s total revenue from the prior season is the basis for all ensuing.
This takes merchandise sales, ticket sales, concession sales, and television contract related revenues, among other earning streams, into consideration. The next item taken into account is the percentage of revenue the players are supposed to receive as negotiated in the collective bargaining agreement.
Once the player revenue total is calculated, there is a subtraction done based on benefits received such as a retirement fund for retired players. This leaves the final total available for player salaries. Finally, that final pot total for player salaries is divided by 32. The final figure represents the salary cap figure for each team for the upcoming season. Due to the pandemic, the NFL salary cap decreased ahead of the 2021 season, for the first time since 2011.
What if a team exceeds the NFL salary cap?
Unlike some other professional sports leagues, the NFL deploys what is called a “hard” cap. This means that teams are not allowed to spend more on player salaries than what the salary cap dictates for that season. The NBA for example, has a softer cap. Teams can go over the salary cap, but are subjected to luxury tax penalties for doing so.
In the NFL, each team must be under the salary cap for the upcoming season when the official league year begins. This usually happens in March. This can lead to a flurry of activity in late February by teams to ensure that they are compliant with this rule. If teams do spend over the salary cap, they can be fined heavily for each violation, and might face additional discipline such as the loss of draft picks.
What is the NFL salary cap figure for 2021?
The salary cap for the 2021 NFL season is $182.5 million. This presented an interesting challenge for teams heading into this offseason.
No one could have predicted the effect the pandemic was going to have on league operations, and a reduced salary cap for this season meant that higher compensated players took up a larger slice of their team’s budget.
However, as society slowly returns to pre-pandemic normalcy, it can be expected that NFL games will have more fans attending games in 2021.
As such, the 2022 NFL salary cap should increase in accordance with prior trends. The league as a whole and teams individually hope that this season will be much more lucrative from a revenue perspective.