Anthony Holzman-Escareno demystifies the jargon around free agency below:
The free agency period is an opportunity for players to land lucrative paydays or find better team fits, while also serving as another avenue for teams to upgrade and improve their rosters. But a fairly basic premise -- players sign contracts with teams they want to play for -- involves a number of specific terms that fly fast and furious every year.
The NFL's collective bargaining agreement (CBA) is a thick, 316-page legal document. If you feel like reading the CBA itself, you can get a copy by clicking here. If you understandably don't want to take on this task, I've underlined some of the most important terms in NFL free agency and contracts below.
First, let's consider a rundown of the free agency period itself. It begins when the NFL League Year does (in 2019: 4 p.m. ET on March 13), while team spending is limited by the annual salary cap ($188.2 million in 2019).
Teams are allowed to negotiate with the agents of upcoming unrestricted free agents during a specified period before free agency begins (in 2019: from March 11 until 4 p.m. ET on March 13). Self-represented players are not allowed to participate in this window prior to the new League Year.
When the new league year begins, contracts from the previous season expire, the trading period opens and restricted free agent tenders must be submitted, etc. This is when free agents can officially sign new contracts, and trades (e.g., Joe Flacco to Denver, Case Keenum to Washington) can become official.
And now, here's a glossary of free-agent terms that range from free-agent designations and franchise tags to contract language and rookie deals. This is followed by an explanation of a player's cap hit in a given season, as well as an introduction (to some) to adjusted annual value -- a metric to compare contracts that were signed in different years (and financial landscapes).
Unrestricted free agent (UFA): Any player with four or more accrued seasons and an expired contract; free to negotiate and sign with any team.
Restricted free agent (RFA): A player with three accrued seasons and an expired contract. RFAs are free to negotiate and sign with any team, but their original team can offer them one of various qualifying offers ("tenders") that come with the Right of First Refusal and/or draft-pick compensation. These amounts change by a minimum of 5 percent and a maximum of 10 percent (based on the salary cap) each League Year. Teams must submit these tenders before 4 p.m. ET on March 13. Tenders are classified as follows (tender amounts from Over The Cap):
First-round tender: One-year contract worth the greater of (a) $4.407 million or (b) 110 percent of the player's prior-year base salary. If the player's original team decides not to match an offer sheet signed with another team, it is entitled to a first-round draft pick from his new team.
Second-round tender: One-year contract worth the greater of (a) $3.095 million or (b) 110 percent of the player's prior-year base salary. Draft-choice compensation: second-round pick.
Original-round tender: One-year contract worth the greater of (a) $2.025 million or (b) 110 percent of the player's prior-year base salary. Draft-choice compensation: a pick in the round the player was originally drafted in.
Right-of-first-refusal tender: One-year contract worth the greater of (a) $2.025 million or (b) 110 percent of the player's prior-year base salary. Team has the right to match any offer sheet signed with another team, but there is no draft compensation tied to this tender.
Exclusive rights free agent (ERFA): Any player with fewer than three accrued seasons and an expired contract. If his original team offers him a one-year contract and the league minimum (based on his credited seasons), the player cannot negotiate with other teams.
Accrued seasons: Used to determine a player's free agency status (unrestricted, restricted, exclusive rights). In order to accrue a season, a player must have been on (or should have been on) full-play status for at least six regular-season games in a given season. A player under contract must report to his team at least 30 days prior to the start of the regular season to accrue a season.
Credited seasons: Used as a measure for many benefits, it's most notably used to determine a player's minimum salary. To earn a credited season, a player must be on full-pay status for a total of three or more regular season games.
Each team can apply a franchise or transition tender ("tag") to one player scheduled to become a free agent, which prevents the player from hitting the open market.
Teams can use this designation from the 22nd day preceding until 4 p.m. ET on the eighth day preceding the new League Year. The window this season ran from February 19 to March 5.
Each of the different tags (non-exclusive, exclusive, transition) can be withdrawn by the team at any time before the player signs it. However, the tenders are guaranteed for skill, cap and injury once signed. A player must sign his tender to be traded to another team.
Teams and franchise players can sign multi-year extensions until July 15. If there is no extension in place by that date, the team and player can only agree to a one-year contract for the current season.
A designated player must sign his tender prior to the Tuesday following Week 10 in order to remain eligible to play in the current season.
Non-exclusive franchise tag: A player who receives the non-exclusive franchise tag is free to negotiate with other teams. The player receives a one-year deal with a salary set at the greater of (a) the cap percentage average for his position (the sum of the franchise tag figures at a player's position over the previous five seasons divided by the sum of the salary caps over the previous five seasons) OR (b) 120 percent of his prior-year salary (the player's cap number from the previous season, minus any performance incentives).
Teams that use the non-exclusive franchise tag hold the right of first refusal. If a designated player signs an offer sheet with another team, the player's previous team has five days to match the offer sheet. Should it decide not to, the player's original team shall be entitled to draft-choice compensation equivalent to two first-round picks.
Exclusive franchise tag: A player who receives the exclusive franchise tag cannot negotiate with other teams. The player receives a one-year deal for the greater of: (a) the average of the five-largest salaries at his position at the conclusion of the restricted free agent signing period of the current league year OR (b) the amount of the non-exclusive franchise tag.
Transition tag: A player who receives the transition tag is free to negotiate with other teams. The player receives a one-year deal for the greater of: (a) the cap percentage average of the top 10 greatest prior-year salaries at the player's position OR (b) 120 percent of his own prior-year salary. Should such a player sign an offer sheet with a new team, his former team has five days to match the offer sheet. However, should his former team decide not to match, there is no draft-pick compensation tied to the transition tag.
Multiple franchise tags: When a player receives the franchise tag for a second time, he will receive a 120 percent increase of his previous franchise-tag salary. If a team places the franchise tag on a player for a third time, the player will receive the greater of: (a) the quarterback tag, (b) 120 percent of the average of the top five prior-year salaries at his position or (c) 144 percent of his second franchise-tag salary.
Guaranteed money: Media outlets typically announce and talk about the "guaranteed money" in a player's contract. However, much of this money is only partially guaranteed. Compensation in NFL contracts can be guaranteed for three purposes: skill, cap and/or injury.
Compensation in a player contract can be guaranteed for one, two, all or none of the guarantees (subject to some rules). If money in a player contract is protected for skill, cap AND injury, that money is fully guaranteed at signing and will be paid to the player. If money is only guaranteed for one or two of the three protections, that money is only partially guaranteed.
Here is a quick breakdown of each guarantee category:
Skill guarantee: If a player contract is terminated because, in the team's opinion, he does not have the requisite skill (due to a loss or lack of skills comparable to others on the team at his position), the player will be entitled to any money that is protected by a skill guarantee.
Cap guarantee: If a player contract is terminated so that a team can get under the salary cap, sign a free agent or re-sign one of its current players, the player is entitled to any money that is protected by a cap guarantee.
Injury guarantee: If a player is released but is currently unable to perform football duties (i.e., doesn't pass a physical) as a result of team activities, the player is entitled to any money in his contract protected against injury. An injury-only guarantee is the most common in terms of partially guaranteed money.
Full guarantees (guaranteed at signing): Money is fully guaranteed at signing if it is guaranteed for skill, cap and injury purposes. Kirk Cousins' three-year, $84 million contract with the Vikings is guaranteed for skill, cap and injury.
Base salary: Formally known as "Paragraph 5" salary due to its place in an NFL player contract, it is the compensation a player receives during the regular season. The collective bargaining agreement set league minimums for base salaries. A player's "game check" is 1/17th of his base salary. When a player is suspended for a game, he forfeits 1/17th of his base salary.
Singing bonus: Money earned by a player for signing his contract. Typically paid out within the first 12-18 months. Prorated against the salary cap for the life of the contract (five-season maximum). This is how the Lions could afford to give Matthew Stafford a $50 million signing bonus in 2017. For cap purposes, Stafford's signing bonus counted for $10 million against the Lions' salary cap for each of the next five seasons.
Roster bonus: Compensation earned by remaining on a team's roster on a certain date. Roster bonuses count in full against the salary cap in the season in which they are earned, unless fully guaranteed at signing. They are used to avoid signing-bonus proration and pushing dead money into the future.
Per-game roster bonus: A roster bonus awarded on a per-game basis for being on the team's 46- or 53-man roster (this varies by contract). For example, a player with a $1.6 million per-game roster bonus for being on the 46-man roster would earn $100,000 for each game he is active.
Option bonus: Gives a team (or, at times, a player) the ability to exercise the current or future years of the contract by paying a bonus. Prorated over the life of the contract (up to five seasons).
Workout bonus: Compensation for attending an agreed-upon percentage of the offseason workouts.
Reporting bonus: Earned by reporting to team activities by a specified date.
Example: Darrelle Revis had a $1 million reporting bonus in his 2010 contract with the Jets, as the team sought to avoid further training camp holdouts.
Incentives (LTBE/NLTBE): Incentives in a player contract are limited to the list provided in Exhibits A-C in Article 13 Section 6 of the NFL's collective bargaining agreement.
Player incentives are considered "likely to be earned" (LTBE) or "not likely to be earned" (NLTBE) based on the player or team's prior-year performance. For example, if a player has a $500,000 incentive for accumulating 10 sacks in the upcoming season and he had 10 sacks the previous season, the incentive is considered LTBE. If he did not record 10 sacks in the previous season, the incentive is considered NLTBE. Except in certain circumstances, LTBE incentives count against the team's salary cap in the current season, and NLTBE incentives do not count against a team's current year's cap. Except in rare cases, unearned LTBE incentives are credited to the following season's salary cap, while earned NLTBE incentives are charged against the following season's salary cap.
Salary escalators: A salary escalator is similar to an incentive in that it is triggered by attaining certain performance thresholds. However, the extra money is not always guaranteed to be received.
An earned escalator translates into a raise in a future year of the contract. If the escalator applies to a non-guaranteed season and the player is released prior to it, he would not receive the benefit of his escalator. Contracts can also contain de-escalators that lower a player's salary for failing to reach performance measures.
Dead money: Refers to salary a team has already paid or has committed to paying (i.e., a signing bonus, fully guaranteed base salaries, earned bonuses, etc.) but has not been charged against the salary cap.
In business terms, it is essentially a "sunk cost." Any money a team pays a player must be accounted for against the salary cap. If there is dead money in a player's contract and he is released or retires, that charge will accelerate onto the team's salary cap for the current year.
There is one avenue to lower this cap hit in a current season: the June 1 designation. Teams can spread the cap hit over two seasons by releasing or trading a player after June 1. Teams are allowed to release two players prior to June 1 while still using this designation and getting the same cap treatment. However, the cap savings created by a June 1 designation do not take effect until after June 1.
Essentially, the salary cap is like a credit card, minus the interest. Anything that is paid out to a player must be paid back to (and accounted for against) the salary cap at some point.
Guaranteed money, dead money and cap savings
Example: Odell Beckham Jr. Contract (Total value: 5 years, $90.0 million)
- Guaranteed Money: $65.0 million.
- Fully Guaranteed Money: $40.959 million.
- Signing Bonus: $20 million ($4.0 million in cap space for first five seasons).
- 2018: $5.459M cap hit - $40.959M in dead money = -$35.0M in cap savings.
- 2019: $21.0M cap hit - $35.5M in dead money = -$14.5M in cap savings.
- 2020: $18.25M cap hit - $14.75M in dead money = +$3.5M in cap savings.
- 2021: $19.75M cap hit - $8.0M in dead money = +$11.75M in cap savings.
- 2022: $19.0M cap hit - $4.0M in dead money = +$15.0M in cap savings.
- 2023: $15.0M cap hit - $0.0M in dead money = +$15.0M in cap savings.
Cap savings: pre-June 1 release.
Odell Beckham Guarantees by Year
- Signing Bonus: $20M
- 2018: $1.459M base salary.
- 2019: $16.75M base salary.
- 2020: $2.75M of $14.0M base salary.
Full Guarantee total: $40.959M.
Remaining Partial Guarantees (Injury Only).
- 2020: remaining $11.25M of 2020 base (fully guaranteed third day of 2020 League Year).
- 2021: $12.791M of 2021 $14.5M base (fully guaranteed third day of 2021 League Year).
Total Partial Guarantees: $24.041M.
Total Guarantees: $65.0M
Length: Contracts for drafted rookies are set at four years. Undrafted rookies receive three-year contracts.
Fifth-year option: Each player selected in the first round of the NFL draft has a team option for a fifth season automatically included in his contract, which extends the four-year rookie contract to a fifth season.
The salary for the fifth-year option is broken into two-tiers. The top 10 picks of the draft receive an average of the top 10 prior-year salaries at his position. Picks 11-32 receive the average of the 3rd-25th prior-year salaries at his position.
Teams must exercise this option in the time after the conclusion of the player's third regular season and prior to May 3 of the following League Year. When exercised, the option is guaranteed for injury only. If the player remains on the roster at the start of the League Year of his option season, it becomes fully guaranteed (skill, cap and injury).
Rookie salary: A player's rookie salary is composed of the following: signing bonus, base salary, offseason workout per diem (beginning in the second season), base-salary guarantees, permitted performance incentives, roster bonuses and reporting bonuses.
Proven performance escalator (PPE): This is intended to reward late-round draft picks for contributions that exceed the expectations of their draft status.
Players drafted in the third through seventh rounds are eligible to receive the PPE. Those selected in the first and second rounds, as well as undrafted players, are not eligible for the PPE.
A player can earn an increase to his fourth-year base salary by playing 35 percent of his team's offensive or defensive snaps in either (a) two of his first three seasons or (b) a cumulative average over his first three seasons.
Players' fourth-year base salaries are raised to the amount of the Right of First Refusal Tender ($2.025 million in 2019).
Performance incentives: While veterans can agree to various incentives, rookie incentives are based on playing an agreed-upon amount of a team's offensive or defensive plays. All incentives are considered Likely To Be Earned (LTBE).
Rookie performance incentives rules differ by the round a player was drafted in. For first- and second-round picks, the minimum amount of playtime a player can be rewarded for is set at 35 percent in the initial contract year and 45 percent in any other year of the deal.
For players drafted in the third round and later, along with players who go undrafted, the minimum playtime incentive is set at 15 percent for the first year and 30 percent for any subsequent years.
These incentives can't be guaranteed for skill, injury or cap and can only be based on playtime in the current League Year. Earning or failing to earn an incentive cannot modify, nullify or create another incentive clause. Unearned incentives cannot be carried over into future seasons.
Renegotiations: Rookie contracts can't be renegotiated or altered in any way until after the last regular-season game of the third contracted year. Undrafted rookies must wait until after the second season to amend a contract.
25 percent increase rule: Unless a player's P5 Salary is set at the minimum every year, no team can sign a player to a contract that would give him a raise of more than 25 percent annually [Sec. 3, (e), 26]. So, the second year of the contract can't provide a salary more than 25 percent of the first year, and after that, each subsequent year can't offer an increase of more than 25 percent of his previous year's salary.
Adjusted average annual value: When gauging a free agent's value, it can be helpful to compare him to what other players at his position receive in salary. However, it can be misleading to simply look at the average annual value (AAV) of a contract that was signed in a previous year, when the salary cap was smaller. A more realistic picture of a signed player's value can be attained by using adjusted AAV. This allows those involved in negotiations to identify true financial benchmarks with a common denominator.
Consider the wide receiver position. Giants receiver Odell Beckham's current contract has an average annual salary of $18.0 million, which is the highest at his position in the NFL. He signed that deal in 2018, when the salary cap was $177.2 million -- meaning his $18.0 million average salary accounted for 10.2 percent of the Giants' cap space (not including rollovers, adjustments). The adjusted AAV of Beckham's contract, then, is 10.2 percent of today's salary cap of $188.2 million: That works out to $19.1 million.
Now consider Bengals receiver A.J. Green. Even though the average annual salary ($15.0 million) of the contract he signed in 2015 is less than Beckham's, Green's adjusted AAV is higher. In 2015, $15.0 million was 10.5 percent of the $143.28 million salary cap; in 2019, 10.5 percent of $188.2 million equals $19.7 million.
What makes up a player's cap hit?
A player's cap hit is made of various elements and does not reflect how much a player is paid in a given season -- but rather, how much a team is charged against the salary cap in that season. For an example of this, let's consider how teams use prorated signing bonuses to pay out more cash than they are being charged for against the cap.
Rams defensive lineman Aaron Donald signed a six-year, $135 million contract extension with the Rams in 2018. Donald received a $40 million signing bonus, which will count for $8 million against the cap in each of the first five years of the contract. Donald's Year 1 cash flow (in 2018) consisted of $40.892 million, stemming from the signing bonus and his base salary of $892,000. But because his signing bonus was prorated, the signing bonus only counted for $8 million against the cap; when his $892,000 base salary was factored in, his cap charge in Year 1 was $8.892 million.
Now let's examine Packers quarterback Aaron Rodgers' contract. Rodgers signed a four-year, $134 million contract extension with the Packers in 2018, and he received a $57.5 million signing bonus, the largest signing bonus in NFL history. Prorated over the first five years of the contract (Rodgers had two seasons left on his prior contract), that signing bonus will count for $11.5 million against the cap in each of those seasons. Rodgers' Year 1 cash flow (in 2018) consisted of $66.9 million, stemming from his $57.5 million signing bonus, his $7.8 million roster bonus, a $1.1 million base salary and a $500,000 workout bonus. But because only $11.5 million of the prorated signing bonus counted against the cap, his cap charge was $20.9 million.