When an NFL team finds itself short on cap flexibility and in need of some space, one of the most effective short-term fixes is to restructure a player’s long-term contract. While cutting or trading players can often be solutions as well, a contract restructure allows the team to keep its roster intact while also providing immediate cap relief.
The base salaries of NFL contracts typically aren’t guaranteed, but players can receive guaranteed money in the form of signing bonuses. While those bonuses are considered to be up-front payments, for cap purposes they can be spread out over up to five years of the contract. For instance, if a player were to sign a four-year deal with a $12MM signing bonus, that figure would prorate equally over the four years of the contract, amounting to a $3MM cap hit per year. If a team were to release that player one season into the deal, the club could avoid paying most of the player’s annual base salaries, but would still be on the hook for the remaining bonus money, along with the cap total for that money.
As such, the most common form of contract restructuring involves converting a portion of a player’s base salary for a given year into a new signing bonus. That bonus can then be spread out over several years, moving it away from the current season.
This is exactly the sort of agreement the Vikings and linebacker Eric Kendricks reached this offseason. In 2018, the Vikings signed Kendricks to a five-year, $50MM deal. This year, the Vikes moved some of that cash around to give themselves breathing room under the cap. Minnesota converted $2.15MM of Kendricks’ $4.15MM salary for 2019 into a salary bonus, which created about $1.72MM in space.
Restructuring a contract by converting base salary to a signing bonus creates immediate relief, but also creates problems in future years. A year from now, the Ravens may have to make another move with Kendricks, which will likely mean restructuring his deal once again, to reduce a larger cap number for 2019.
There are ways a player can remain under contract with a team while also helping to create or maintain both short-term and long-term cap flexibility. A player agreeing to take a pay cut, for instance, could allow a team to reduce his current cap number without necessarily moving that money further down the line in the contract. However, that generally happens in situations in which the team’s leverage outweighs the player’s leverage.
In most cases then, a restructured contract that sees base salary converted into bonus money is the simplest short-term fix for a club. The bill will come due eventually, but restructuring a deal allows a team to put off a more significant decision for at least one more year.
Note: This is a PFR Glossary entry. Our glossary posts explain specific rules relating to free agency, trades, or other aspects of the NFL’s Collective Bargaining Agreement. Information from Joel Corry and Over the Cap was used in the creation of this post.
2 comments on “PFR’s NFL Glossary: Restructuring Contracts”
It’s called kicking the can down the road…..
Gone are the days when a coach like George Allen only had to provide cake and ice cream to keep players happy. Darn shame too!