(Feb. 12)--Once upon a time, there was just salary. It was play for pay in the strictest sense of the words. There was no Collective Bargaining Agreement, players association or financial protections against injuries or failed careers.
These days, NFL players earn money by several means. There are signing bonuses, roster bonuses, option bonuses, reporting bonuses, workout bonuses, incentives, escalators, buy-backs and, of course, there's still salary.
So, to construct a firm foundation for understanding the salary cap strategies and circumstances that will be presented in jaguars.com's "Salary Cap 101" series, we offer the following explanations of the money-earning categories. OK, sit up straight, put both feet on the floor and pay attention. Here we go.
Salary--In salary cap parlance, salary is known as "paragraph five" money because its amount is provided in the fifth paragraph of the standard player contract. Salary is considered to be the most difficult wage-earning category to manage on a team's salary cap, because it is usually the most significant amount of money that must be declared in full in the year it's paid. In other words, if a player has a $5 million salary in 2004, $5 million must be deducted from the team's '04 cap. The positive aspect of salary is that a team recovers that amount if it cuts the player before the salary is paid. Remember, you pay it, you claim it. Of course, if you don't pay it, you earn the credit. In very few cases is salary guaranteed. Vested veterans (four or more pension-credited seasons before the start of a season) earn their season's full salary if they are on an opening-day roster before being released, however, that's a once-in-a-career situation. Non-vested veterans earn their salaries on a week-to-week basis for 17 weeks. The weekly deadline is Tuesday at four p.m. If a player is cut at 4:01 p.m. on Tuesday, he's paid his salary for that week. If he's released at 3:59 p.m., he doesn't earn the week's salary.
Split-salary contracts--Teams may negotiate contracts that provide lowered amounts of salary money for players not on the 53-man roster; who've been moved to injured reserve, for example. That lowered amount is negotiable to a minimum.
Signing bonus--Ah, yes, the most common form of guaranteed money. Every player wants it; the holy grail of every agent's objective, to get as much money up front as possible. It's also a temptation teams must discipline themselves to avoid, for a variety of reasons. For starters, too much money up front may damage a player's motivation, and if it turns out he's not much of a player, the club could be faced with a lot of money remaining to be capped after the player has been released. Signing bonus is the first major form of prorated amortization. It's tempting for teams to pay large amounts of signing bonus because it's money that must be amortized evenly over the length of the player's contract, so, in many cases, teams use signing bonus as a means of pushing money out of the present and into the future. For example, a player received a $5 million signing bonus on a five-year contract, which means $1 million will be assigned to the team's salary cap in each year of the contract. However, in year three of the contract the team converts a portion of the player's salary to signing bonus in a contract re-structuring, and that amount is amortized evenly over the remaining years of the contract, effectively assigning a portion of the third year's salary to future salary caps. As a result, the bonus amortization escalates as the years pass. Seven years is the maximum proration period, but there's a "capped year plus three" rule that means six years is the maximum period in 2004, because the current salary cap system is guaranteed only through '06.
Roster bonus--A player receives a specified bonus amount of money if he is on the team's roster on a specific day. In Mark Brunell's case, and in many cases, it's the first day of the league calendar year. Roster bonus money must be declared in full on a team's salary cap in the year the money is paid.
Option bonus--It's sort of a second kind of signing bonus. For example, two or three years into a player's contract, the team may be facing an option clause in the player's contract. If the team exercises the option to retain the player's services, he's paid a bonus amount of money that must be amortized evenly over the remaining years of the contract. That amortization begins in the year the option is exercised. Option bonuses are common in the rookie contracts of first-round picks.
Reporting bonus--It's a way of persuading a player not to be a training camp holdout. He receives a bonus for reporting to training camp on-time. It must be declared in full in the year it's paid.
Workout bonus--A player's contract may provide for an above-minimum amount of money per offseason workout, of which 56 are allowed. Workout bonuses usually demand that a player participate in 80-90 percent of the team's offseason conditioning. The CBA provides for a minimum payment of $100 per player per workout. Workout bonus money must be declared in full in the year it's paid.
Incentives--A player may write into his contract certain performance standards, for which he will earn more money when he attains those standards. For example, he's paid money over and above his salary for having scored a specific number of touchdowns. Incentives fall into two categories: Likely To Be Earned (LTBE) and Not Likely To Be Earned (NLTBE). If the incentive clause in the contract provides for 10 touchdowns and the player scored 11 in the previous season, then that money is LTBE and must be assigned to the coming season's salary cap. If the player only scored nine touchdowns the previous season, then the incentive money is NLTBE and, therefore, is not required to be assigned to the coming season's cap. Here's the catch: If a player equals the incentive in an NLTBE year, then the money paid must be assigned to the next year's cap and it automatically becomes LTBE, which results in a double hit. Rookies, of course, don't have a prior year, but the CBA provides for a list of likely rookie performance standards. Last season, Fred Taylor and Tony Brackens were the Jaguars' greatest incentives-earners. Brackens earned an extra $2.25 million and Taylor took away $1.475 million.
Escalators--Reaching a level of achievement in a specific performance category (touchdown passes, for example) will escalate a player's salary in the following year. Byron Leftwich's contract is loaded with escalators, which are common contract items in the rookie contracts of first-round picks.
Buy-backs--A contract may provide for a certain number of years being voided when a player achieves a certain condition of his contract. The team may have included a buy-back clause, however, that allows the team to recover those years by paying the player a designated amount of bonus money. This is a fading practice.
"You want to get the right player for the right price," Jaguars senior salary cap manager Tim Walsh said. "If you prorate too much out, you can create a wave of money you pushed out into the future that can create a problem. That's something you've got to watch. If you have hard salary, you don't have residue in the future years."
Once upon a time, there was no residue, but it's not that easy any more.
So, are you ready for some more? Study hard. It'll give you the foundation you need for what's going to be coming your way.
