Salary cap terminology explained

The NFL salary cap remains a mystery to many fans. At Big Blue View, we don’t claim to be experts — we are football writers, not capologists. Combining what we do know with a variety of sources, though, here is a glossary of 20 basic salary cap and contract terms that we hope you find helpful.

Accrued season — A season that counts toward NFL free agency. Earned by being on a team’s active roster/inactive list, reserve/injured or reserve/physically unable to perform lists for six or more regular season games.

Average Per year (APY) — The total contract value divided by the number of years of the contract.

Cap carryover — The amount of unused cap space from the prior year. That amount can be added (carried over) into the current league year, increasing a team’s salary cap limit.

Cap savings — The amount of salary cap room saved or lost by terminating a player’s contract.

Credited season — A season that counts toward an increase in minimum P5 base salary. Earned for three weeks on the active roster.

Dead money — The salary cap charge that remains on a team’s payroll even after a player is traded or released.

Exclusive Rights Free Agent (ERFA) — A player with less than three credited seasons when his contract expires. If tendered by his prior team, the player can only sign a contract with that team. A tender for these players is a one-year contract at the league minimum (based on his credited seasons).

Franchise tag — A special designation available to a team that automatically tenders a potential free agent a one-year, fully guaranteed contract. Types of tags:

• Non-exclusive franchise tag — The most commonly used tag. When most refer to the “franchise tag,” they generally talk about the non-exclusive version. This is a one-year tender of the average of the top five salaries at the player’s position over the last five years, or 120 percent of his previous salary, whichever is greater. The tagged player can negotiate with other teams, but his current team has the right to match any offer or receive two first-round draft picks as compensation if he signs with another club.
• Exclusive franchise tag — Unlike the non-exclusive version, the tagging team retains the sole right to negotiate with the player. The exclusivity raises the pay scale (current average salary versus averaging of the previous five years). This is a one-year tender offer of the average of the top five salaries at the player’s position for the current year, or 120 percent of his previous salary, whichever is greater. Few receive the exclusive tag. Generally, players for whom other teams would gladly give up two first-round picks receive this version of the tag — read: quarterbacks.
• Transition tag — The transition tag is a one-year tender offer for the average of the top 10 salaries at the position — as opposed to the top five for the franchise tag. It guarantees the original club the right of first refusal to match any offer the player might receive from another club. The tagging team is awarded no compensation if it chooses not to match a deal.

Likely To Be Earned incentives (LTBE) — Incentives that will be included on a player’s salary cap charge for the current season. Likely To Be Earned incentives (are incentives based on performance levels that were reached in the prior season. If a player does not earn a LTBE Incentive, then the amount of the incentive will be credited against the following year’s salary cap and the team would have additional cap space in the following year.

Not Likely To Be Earned incentives (NLTBE) — Incentives that do not count toward a player’s salary cap charge for the current season.

NLTBE example:

If a running back gained 1,000 yards rushing last year and he has an incentive that will pay him $100,000 if he runs for 1,200 yards this year, that incentive would be Not Likely To Be Earned (NLTBE) and would not count against this year’s salary cap.

If an NLTBE incentive is earned, it is charged to the following year’s salary cap. In the situation above, that would add a $100,000 charge to next season’s salary cap.

P5 base salary — The amount of salary a player earns for weekly participation during the NFL regular season.

Performance-based pay — The performance-based pay program is a collectively bargained benefit that compensates all players based upon their playing time and salary levels.

Under the performance-based pay program, a fund is created and used as a supplemental form of player compensation based on a comparison of playing time to salary. In general, players with higher playtime percentages and lower salaries benefit most from the pool. Performance-based pay is computed by using a player index. To produce the Index, a player’s “PBP Playtime” (defined as the player’s regular season total plays played on offense, defense and special teams, divided by the number of plays of the player with the most total combined plays on that team) is divided by his “PBP Compensation” (defined as regular season full salary, prorated portion of signing bonus, earned incentives). Each player’s Index is then compared to those of the other players on his team to determine the amount of his performance-based pay.

Proven performance escalator — A clause that increases the fourth-year salary of any player drafted in Rounds 3 thru 7 who plays in at least 35% of a team’s cumulative snaps over three years or 35% in two of the three years.

Offset language — Contract clauses for guaranteed salary that define whether a player can collect salary from another team exclusive of the guaranteed salary he is already earning should he be released.

Offset language relates to what happens to a player’s salary if he’s cut during the first four years of his career, while he’s still playing on his rookie contract. For example, if a player has $4 million in guaranteed money remaining on his contract and is cut, he’ll still be owed that $4 million.

However, if a team has included offset language in the contract, that club can save some money if and when the player signs with a new team. For example, if that player who had $4 million in guaranteed money left on his contract signs with a new club on a $1 million deal, his old team would only be on the hook for $3 million, with the new team making up the difference. If there’s no offset language on that first deal, the old team would continue to be on the hook for the full $4 million, and the player would simply earn an additional $1 million from his new club.

Restricted free agent (RFA) — A player with three accrued seasons [see definition above] when his contract expires. A team has the ability to offer the player a one-year contract and retain the right to match any offer from another team.

Signing bonus — A bonus payment promised to a player as a prepayment of his contract at the time of signing. A signing bonus is prorated against the salary cap over the length of the contract.

Example: A four-year contract with a $16 million signing bonus will include a salary cap charge of $4 million in each year of the deal.

Top-51 rule — An accounting rule that runs from the start of the NFL league year through final roster cuts to a 53-man roster which states that only the top 51 P5 base salary cap charges count against the salary cap. Players outside the top 51 will not have their salary count against the cap.

Each time a player is signed to a contract equal to or for more than the 51st-highest paid player on the roster, that former 51st player drops off the list and his P5 base salary is no longer counted against the cap.

Unrestricted free agent (UFA) — Any player with at least four accrued seasons [see definition above] at the time his contract expires. A UFA is free to sign with any team.

Voidable years — Void years are contract years on which the player will never play. They are placeholders for prorated signing bonus money, used to lower the annual salary cap charge on a multi-year contract. [More on voidable years]

Veteran Salary Benefit (VSB) — The Veteran Salary Benefit allows veteran player to be signed to one-year contracts with the applicable minimum salary (based on the player’s service time) and a small signing bonus pre-determined in the Collective Bargaining Agreement, but only have to count that player at the salary level of a player with only two years of service time (plus the bonus).

Sources: ‘Crunching Numbers’ by Jason Fitzgerald and Vijay Natarajan, Russell Street Report, NFL Communications, NFL.com, Pro Football Rumors

[EDITOR’S NOTE: This is hardly complete list of every term that could impact the salary cap or NFL contracts. If there is something else that you would like defined or explained, please let us know.]