Like other leagues, the NFL salary cap is the upper limit to the total amount of money that each NFL team can pay its players in a given season. The cap is calculated based on a percentage of the league’s revenue and is adjusted each year.

The NFL has a “hard” salary cap, meaning that teams cannot exceed the cap at any point during the league year, which runs from the start of free agency in March to the end of the league year in February. Teams that exceed the salary cap can be penalized, including fines and the loss of draft picks.

The salary cap is divided into different portions for the signing of players, which include the base salary, signing bonuses, and performance incentives. Each team must also allocate a certain amount of money towards signing its draft picks and to signing players to fill out the team’s practice squad.

Teams can also use various mechanisms to create salary cap space, such as restructuring contracts, releasing players, or trading players. Additionally, teams can also carry over unused salary cap space from one season to the next.

The NFL also has a salary floor, which means that teams must spend a certain amount of money on player salaries each year. This is to ensure that teams do not hoard salary cap space and to promote parity among teams.

Generally speaking, the NFL salary cap is a mechanism that helps to promote parity among teams, something the NFL is perhaps the most concerned with than any other league. The NFL is uniquely formatted for every team to theoretically go 8-8 every year. The worst team gets the first pick (no lottery like the NBA) and teams in larger markets can only spend a set amount of money. This is where the salary cap comes in, it ensures that each team has a similar amount of money to spend on players. It also helps to control player salaries, making sure that they are not inflated to the point where it would become difficult for teams to afford them, and also helps to promote fair competition among teams by ensuring that each team can put a competitive team on the field.

How the NFL Salary Cap Can Be Manipulated

The NFL salary cap is not perfect and, given the stakes, teams have become masters at being able to manipulate the rules of the salary cap to create more space. Some of those techniques include:

  1. Restructuring contracts: Teams can restructure a player’s contract by converting a portion of his base salary into a signing bonus. This allows the team to spread out the cap hit for the signing bonus over the length of the contract, creating more cap space in the current year.
  2. Releasing players: Teams can release players that are no longer in their plans or that are considered overpaid. By releasing a player, a team can free up the remaining portion of his salary cap hit for that year.
  3. Trading players: Teams can trade players to other teams in exchange for draft picks or other players. This can help to free up cap space by moving a player’s salary to another team.
  4. Designated for Return: A team can place a player who is on injured reserve on the “designated for return” list, which allows that player to return to the active roster later in the season. This mechanism allows the team to not count the player’s salary towards the salary cap while the player is on injured reserve.
  5. Incentive Ladder: Teams can include incentives in player’s contract, that are likely to be achieved, but are not guaranteed. This allows teams to have a lower cap hit in the current year, while still being able to pay the player more if he achieves those incentives.
  6. Extend player’s contract: Teams can extend a player’s contract that has multiple years remaining, this way they can spread out the signing bonus over a longer period of time, reducing the cap hit in the current year.
  7. Carrying over unused salary cap space: Teams can carry over unused salary cap space from one season to the next. This allows teams to have more cap space in future seasons if they did not spend all their available cap space in the current year.

Overall, teams have several options to create salary cap space, and it’s common for teams to use a combination of these mechanisms to free up cap space. The goal is to free up enough cap space to sign new players, re-sign key players, and to field a competitive team. With that in mind, we would be remiss to not bring up the importance of the rookie pay scale and its influence on the modern NFL draft.

The NFL Rookie Pay Scale

After Matt Stafford and Sam Bradford were drafting number one overall in the NFL draft, their agents were increasingly able to negotiate the lion share of guaranteed money available to their team under the cap, it was clear that something needed to change. By promising that much money to an unproven commodity the franchise of an entire city was setup to fail because, on average, most quarterbacks taken first overall, those that are given the disproportionate amount of guaranteed money, fail. That’s just the reality of the situation. When they do fail, they take their city and franchise along with them. To overcome this, the league came up with the rookie pay scale.

The NFL has a rookie pay scale, which is a set of rules that govern the salaries of players who are entering the league for the first time. The scale is based on the NFL’s collective bargaining agreement (CBA) between the league and the NFL Players Association (NFLPA).

Under the rookie pay scale, the salaries of players who are selected in the NFL Draft are determined by their draft position. The amount of money that a player can earn is based on the position of the player in the draft, the number of years in the player’s contract, and the overall amount of money that is available under the salary cap.

The amount of money that a player can earn is also determined by the type of contract that the player signs. There are three types of contracts that a player can sign, which include:

  1. Four-year contract: This is the standard contract for players who are selected in the NFL Draft. Under this contract, a player is guaranteed a certain amount of money over the first four years of his career.
  2. Five-year contract: This is a contract that is offered to players who are selected in the first round of the NFL Draft. Under this contract, a player is guaranteed a certain amount of money over the first five years of his career.
  3. Six-year contract: this is a contract that is offered to players who are selected in the first round of the NFL Draft and play specific positions such as quarterback, left tackle, and pass-rusher. Under this contract, a player is guaranteed a certain amount of money over the first six years of his career.

The money that is guaranteed under these contracts is called the “signing bonus”. The signing bonus is paid to the player as soon as he signs his contract and is not subject to being earned. The rookie pay scale also includes a set of minimum salaries for players at each draft position. These minimum salaries are adjusted each year based on the league’s revenue.

You may see how this makes the NFL draft so valuable. If you have a late round selection in the draft you get him for far below market value for up to six years which, may well be, the entire career for a player in a high contact position (such as running back).