A salary cap is a limit on the amount teams can spend on player
contracts, which helps to maintain competitive balance in the league.
Without a salary cap, teams with deeper pockets can simply outspend the
remaining teams for the better free agents. The basic idea is that a
team can only sign a free agent if the total payroll for the team will
not exceed the salary cap. So a team with deep pockets is playing on a
level
playing field with every other team.
The evidence bears this out: For the 01-02 NBA season, the correlation
between team payroll and regular season wins was about 0.13. In
other words, there as nearly no correlation between salary and wins.
By comparison, MLB (with no salary cap) had a much stronger
correlation of 0.43 for its 2002 season.
The NBA has a soft cap. A hard cap doesn't allow the cap to be exceeded for any reason. A soft cap, which the NBA has, contains exceptions which allow teams to exceed the cap under certian conditions. In fact, historically very few teams are ever under the cap during a season.
The basic idea is to try to promote players' ability to stay with their current teams. Nobody likes it when a player plays with a team his entire career, the fans love him, he wants to stay and the team wants to keep him, but he has to leave because the team is unable to offer him a large enough contract. The exceptions under a soft cap allow teams to keep players under these kinds of circumstances.
It's the contract between the league and the Players Association that sets up the rules by which they all operate. (It's commonly abbreviated as "CBA," which is not to be confused with the Continental Basketball Association. The abbreviation CBA will be used in the remainder of this document.)
The CBA defines the salary cap, the procedures for determining how it is set, the minimum and maximum salaries, the rules for trades, the procedures for the NBA draft, and a hundred other things that need to be defined in order for a league like the NBA to function.
Incidentally, the CBA is also what prevents the NBA from being in violation of antitrust laws. Many of the NBA's practices (salary cap, draft, etc.) would violate the Sherman act were the CBA not arrived at through collective bargaining.
The current CBA has been in effect since January 1999, and was arrived at after a long and bitter "lockout" which cost half of the 1998-99 season. It lasts for seven years, or until the end of the 04-05 season. It was the league's option to continue the agreement for the 04-05 season, and this option was exercised in December 2003. Sometime prior to the 05-06 season the league and players union will negotiate either a new agreement or an extension to the current agreement. If they're lucky, it won't cost them part of a season again.
The Players Association has the right to terminate the CBA early if any of the following occur:
It mainly hinged on the percentage of league revenues that are guaranteed for the players. The previous CBA set up the salary structure, but didn't define what percentage the players got. It did, however, contain an "out" clause for the league -- if the players' salaries exceeded 53% of revenues, then the league had the right to terminate the old CBA. It did (it was up to 58%) and they did. The league tried to put more severe salary restrictions in place. The players fought against any salary restrictions. The two sides eventually reached a compromise, agreeing to a new CBA just days before the "drop dead date" for canceling the season entirely, and a compacted 50-game season was played.
Two figures control this amount: the salary cap and the escrow tax
threshold. Here are both for all years of the agreement (BRI =
Basketball Related Income):
| Season | Defined salary cap | Actual salary cap | Escrow % |
| 98-99 | $30 million | $30 million | None |
| 99-00 | $34 million | $34 million | None |
| 00-01 | 48.04% of BRI* (see note below) | $35.5 million (see note below) | None |
| 01-02 | 48.04% of BRI* | $42.5 million | 55% of BRI |
| 02-03 | 48.04% of BRI* | $40,271,000 | 55% of BRI |
| 03-04 | 48.04% of BRI* | $43,840,000 | 55% of BRI |
| 04-05 | 48.04% of BRI* | $43,870,000** | 57%
of BRI |
*From the BRI percentage, they subtract benefits (about $71 million
in 99-00) and then divide by the number of NBA teams to arrive at the
cap. Note that they use projected BRI and
benefits when computing the salary cap.
**The 04-05 salary cap for the Charlotte Bobcats is $29,250,000.
NOTE: A special rule for the 00-01 season reduced the cap if the 99-00 salaries & benefits exceeded 55% of BRI. If 55% of BRI was exceeded, then the excess was subtracted from the cap in 00-01. Salaries & benefits did exceed 55% of BRI -- in fact, they were 61.14% according to the league's audit report. Therefore, the difference (about $138.5 million, or $4.8 million per team) was subtracted from the defined 48.04% of BRI to calculate the cap. But since this would have set the cap below the guaranteed minimum of $35.5 million, the 00-01 salary cap was set at the minimum $35.5 million.
The escrow system is a sort of guarantee that total salaries won't exceed the designated percentage. See question number 14 for more information.
At the other end of the spectrum there is a minimum team salary, which is defined as 75% of the salary cap. Any team that doesn't spend at least that much is surcharged at the end of the season, and that money is given to the players. In practice, most teams' salaries will be higher than the salary cap amount.
Right. The maximum player salaries are intended to keep costs in line with revenues. The team salary caps help ensure competitive balance.
There are both minimum and maximum salaries, and both are based on
how long the player has been in the league. The minimum salaries
scale upward each season. Here are the minimum salaries:
|
Years in NBA
|
98-99
|
99-00
|
00-01
|
01-02
|
02-03
|
03-04
|
04-05
|
| 0 |
287,500
|
301,875
|
316,969
|
332,817
|
349,458
|
366,931
|
385,277
|
| 1 |
350,000
|
385,000
|
423,500
|
465,850
|
512,435
|
563,679
|
620,046
|
| 2 |
425,000
|
460,000
|
498,500
|
540,850
|
587,435
|
638,679
|
695,046
|
| 3 |
450,000
|
485,000
|
523,500
|
565,850
|
612,435
|
663,679
|
720,046
|
| 4 |
475,000
|
510,000
|
548,500
|
590,850
|
637,435
|
688,679
|
745,046
|
| 5 |
537,500
|
572,500
|
611,000
|
653,350
|
699,935
|
751,179
|
807,546
|
| 6 |
600,000
|
635,000
|
673,500
|
715,850
|
762,435
|
813,679
|
870,046
|
| 7 |
662,500
|
697,500
|
736,000
|
778,350
|
824,935
|
876,179
|
932,546
|
| 8 |
725,000
|
760,000
|
798,500
|
840,850
|
887,435
|
938,679
|
995,046
|
| 9 |
850,000
|
885,000
|
923,500
|
965,850
|
1,000,000
|
1,000,000
|
1,000,000
|
| 10+ |
1,000,000
|
1,000,000
|
1,000,000
|
1,000,000
|
1,030,000
|
1,070,000
|
1,100,000
|
And here are the maximum salaries:
| Years in NBA | Defined maximum salary | 98-99 | 99-00 | 00-01 |
|
02-03
|
03-04
|
04-05 |
| 0 | $9,000,000 or 25%* | $9,000,000 | $9,000,000 | $9,658,000 | $10,625,000 | $10,067,750 |
$10,960,000 |
$10,968,000 |
| 1 | $9,000,000 or 25%* | $9,000,000 | $9,000,000 | $9,658,000 | $10,625,000 | $10,067,750 |
$10,960,000 |
$10,968,000 |
| 2 | $9,000,000 or 25%* | $9,000,000 | $9,000,000 | $9,658,000 | $10,625,000 | $10,067,750 |
$10,960,000 |
$10,968,000 |
| 3 | $9,000,000 or 25%* | $9,000,000 | $9,000,000 | $9,658,000 | $10,625,000 | $10,067,750 |
$10,960,000 |
$10,968,000 |
| 4 | $9,000,000 or 25%* | $9,000,000 | $9,000,000 | $9,658,000 | $10,625,000 | $10,067,750 |
$10,960,000 |
$10,968,000 |
| 5 | $9,000,000 or 25%* | $9,000,000 | $9,000,000 | $9,658,000 | $10,625,000 | $10,067,750 |
$10,960,000 |
$10,968,000 |
| 6 | $9,000,000 or 25%* | $9,000,000 | $9,000,000 | $9,658,000 | $10,625,000 | $10,067,750 |
$10,960,000 |
$10,968,000 |
| 7 | $11,000,000 or 30%* | $11,000,000 | $11,000,000 | $11,589,000 | $12,750,000 | $12,081,300 |
$13,152,000 |
$13,161,000 |
| 8 | $11,000,000 or 30%* | $11,000,000 | $11,000,000 | $11,589,000 | $12,750,000 | $12,081,300 |
$13,152,000 |
$13,161,000 |
| 9 | $11,000,000 or 30%* | $11,000,000 | $11,000,000 | $11,589,000 | $12,750,000 | $12,081,300 |
$13,152,000 |
$13,161,000 |
| 10+ | $14,000,000 or 35%* | $14,000,000 | $14,000,000 | $14,000,000 | $14,875,000 | $14,094,850 |
$15,344,000 |
$15,355,000 |
* whichever is greater. The percentage refers to the
percentage of the team's salary cap.
Note that in the 00-01 season, the salary cap was adjusted downward because the players' salaries in 99-00 exceeded 55% of BRI (see question 7 ). The maximum salaries were not affected by this adjustment. The maximum salaries are based on 25%, 30% or 35% (per the chart above) of the salary cap before the adjustment..
In addition, up to 30% of a player's compensation can be deferred. Deferred compensation is included in team salary in the season in which it is earned , not the season in which it is paid .
One interesting thing about minimum-salary contracts is that for certain players, the league office actually pays part of their salary. This happens with players who have been in the NBA for five or more seasons and are playing under a one-year, ten-day or rest-of-season contract at the minimum salary. In these cases, the team pays the player at the minimum salary level for a four-year veteran, and the league pays the remainder. For example, in 99-00 the minimum salary for a four-year veteran is $510,000, so a ten-year veteran, with a minimum salary of $1,000,000, would be paid $510,000 by his team and $490,000 by the league. Only the four-year minimum is included in the team salary, not the player's full salary. The reason for doing this is so teams won't shy away from signing older veterans simply because they are more expensive.
First round draft picks have a more restrictive salary scale, based on their draft position (see question number 38 for more information).
Yes. In multi-year contracts, only the first season's salary is subject to the maximum (but there are restrictions about how big raises can be from year to year). Also, free agents whose salary for the previous season was higher than the maximum can sign for 105% of their salary in the previous season. So if Michael Jordan hadn't retired prior to the 98-99 season, he could have signed in 98-99 for 105% of his $30 million 97-98 salary, or $31.5 million. A free agent does not need to remain with the same team in order to qualify for this 105% exception, although the team that signs him is subject to the same salary cap restrictions as with any other free agent.
It may surprise you to learn that the NBA first had a salary cap in 1946-47, its first season. The cap that season was $55,000, with most players earning between $4,000 and $5,000 (star player Joe Fulks earned $8,000, and Tom King earned a league-highest $16,500 for his combined duties as player, publicity director and business manager for the Detroit Falcons).
The "modern" NBA salary cap began in 1984-85, at $3.6 million. It made steady but gradual increases of around $1-2 million each season until 1994-95, when it was at $15.964 million. Armed with a big TV contract from NBC, the salary cap jumped to $23.0 million in 95-96, and increased to $26.9 million in 97-98, the last season of the previous CBA (a 747% increase in 13 years). The ABC/ESPN TV contract which took effect with the 02-03 season provides $4.6 billion over six seasons, but less in 02-03 than NBC paid in 01-02. As a result, the salary cap went down for the first time ever in 02-03.
As detailed in question number 7 , the current CBA
defines the salary cap as follows (BRI = Basketball Related Income):
| 98-99 | $30 million |
| 99-00 | $34 million |
| 00-01 | 48.04% of BRI (but not less than $35.5 million) |
| 01-02 | 48.04% of Projected BRI |
| 02-03 | 48.04% of Projected BRI |
| 03-04 | 48.04% of Projected BRI |
| 04-05 | 48.04% of Projected BRI |
From the 48.04% of projected BRI they subtract benefits and then divide by 29 (the number of teams in the NBA) to arrive at the cap amount.
The salary cap adjusts each year on the first day following the July Moratorium. See question number 89 .
Basketball Related Income (BRI) includes:
When determining team salaries (for example, to determine whether a team is over the salary cap), the following are included:
The biggest factor behind the 1998 lockout was the amount of revenue
that went to player salaries. The owners did
not want salaries to exceed 53% of BRI, but by the
97-98 season salaries had risen to 58%, which triggered
an "out" clause allowing the owners to terminate the previous
CBA. With the new agreement, they put in the escrow system to
ensure that salaries & benefits did not exceed a designated
percentage of BRI. As described in question number
7 , the designated percentage of BRI that salaries & benefits
cannot exceed is as follows:
| Season | Designated Percentage |
| 01-02* | 55% of BRI |
| 02-03 | 55% of BRI |
| 03-04 | 55% of BRI |
| 04-05 | 57% of BRI |
* Escrow did not exist prior to the 01-02 season.
In order to keep salaries & benefits at or below the designated
percentage, beginning in 01-02 money is withheld from players'
paychecks and deposited into an escrow account. At the end of
each season they compare the league-wide salaries to the designated
percentage of
BRI to see if there was an overage. If there was not an
overage, then all of the money in escrow is given to the players.
But if there was an overage, then
the overage amount is returned to the owners (which lowers salaries
back to the designated percentage), and the players get
the rest. The amount withheld is the projected overage amount,
not to exceed 10% of salaries & benefits.
Here is an estimate of what actually happened, starting with the
01-02 season:
| Season: | 01-02 | 02-03 |
03-04 |
04-05 |
| BRI: | $2.667 billion | $2.662 billion |
$2.756 billion |
$3.037 billion |
| Designated percentage: | $1.467 billion | $1.464 billion |
$1.516 billion |
$1.731 billion |
| Salaries and benefits: | $1.598 billion | $1.744 billion |
$1.748 billion |
$1.834 billion |
| Held in escrow (projected overage, not to exceed 10% of salaries & benefits): |
$153 million | $174.4 million |
$165.4
million |
$183 million |
| Overage (amount salaries & benefits exceeded designated percentage): |
$131 million | $280 million |
$232 million |
$103 million |
| Returned to owners: | $131 million | $174.4 million |
$165.4 million |
$93 million |
| Given to players (remainder of escrow): | $22 million | $0 |
$0 |
$90 million |
Since $131 million was returned to the owners in 01-02, the net effect was to reduce the total salaries & benefits to $1.467 billion, or back to 55% of BRI. In other words, the money held in escrow was sufficient to cover the overage. This was not the case in 02-03 or 03-04. The players can have a maximum of 10% withheld, and when this is insufficient, then some teams will pay a tax. Question number 15 details the team tax, which is often referred to as the "luxury tax."
Note also that
what is written here reflects the
escrow process as it is defined, but in practice it is somewhat more
complicated.
For instance, one effect of reducing salaries through escrow is
to
reduce the amount teams otherwise would have been required to spend on
benefits.
Escrow money that is returned to the teams is not distributed
evenly. Question number 16 describes how the
escrow money is distributed.
As detailed in question number 14 , the escrow system helps to ensure that total salaries do not exceed a designated percentage of BRI. If the players are paid more than the designated percentage, then part of their salary (not to exceed 10%) is returned to the owners. However, if the players are paid so much that the maximum escrow withholding isn't enough to lower the league-wide salaries to the designated percentage, then some teams pay a tax. This is often referred to as a "luxury tax," but the CBA simply calls it a "tax" or a "team payment."
The tax is triggered when the league-wide salaries and benefits
exceed approximately 61.1% of BRI (technically, it's 61.111...%, a
repeating decimal. Also, it's 63.333...% in 04-05). If the
league-wide salaries & benefits are less than this amount, then no
team pays a tax, no matter how high their payroll. If the tax is
triggered, then it is paid by all teams that are over the luxury tax
threshold (called the "team escrow limit" in the CBA), in the amount by
which their team salary exceeds the tax threshold (see below).
In 01-02, salaries and benefits were approximately 59.8% of BRI (and
the escrow withholding was sufficient to return salaries to 55% of
BRI), so the team tax was not triggered. A similar thing happened
in 04-05, when salaries & benefits were 60.4% and the tax trigger
was 63.333%. The
salaries and benefits were 65.5% in 02-03 and 63.4% in 03-04, and the
tax was triggered in those years.
| Season: | 02-03 | 03-04 |
04-05 |
| BRI: | $2.662 billion | $2.756 billion |
$3.037 billion |
| Salaries + Benefits | $1.744 billion | $1.748 billion |
$1.834 billion |
| Percentage of BRI |
65.5% |
63.4% |
60.4% |
In 02-03 there was a $2.662 billion BRI and the designated percentage (55%) was $1.464 billion, so the overage (salaries and benefits minus the designated percentage) was $280 million. However, the maximum that can be withheld in escrow is 10% of salaries and benefits, or $174.4 million. This corroborates the idea that the tax is triggered when the maximum escrow withholding isn't enough to lower the league-wide salaries to the designated percentage. So the entire $174.4 million escrow withholding was returned to the teams, and the teams over the tax threshold paid the tax. The idea is that since the high-spending teams are the ones most responsible for the players' salaries being so high, they should be the ones making up the difference.
The tax threshold (team escrow limit) is 61.1% of BRI, minus benefits, divided by the number of teams in the NBA. Since 02-03 benefits were $93.4 million, the 02-03 tax threshold was $52.88 million. Teams with payrolls (based on their team salary as of the last day of the regular season, see question number 13 ) over the tax threshold pay a tax equal to the amount they are over. So a team with a $60.0 million team salary paid a tax of $7.12 million. Teams with payrolls below the tax threshold do not pay any tax.
Again, no team, no matter how high their payroll, pays any
tax unless the tax is triggered league-wide. For example, in
01-02 New York's team salary was approximately $85.5 million. But
since the tax was not triggered in 01-02, New York did not pay any tax.
There was a desire among some of the owners to exclude contracts that
existed prior to the signing of the CBA (contracts from 97-98 and
earlier) from the computation of the team tax. The owners decided
that all contracts would apply, no matter when they were signed.
The league did decide to credit teams that pay luxury tax for
players who
have been ruled permanently disabled. There is a one-year waiting
period
following the player's injury or illness. The credit is in the
amount
of the Disabled Player Exception (half the player's salary, or the
average
salary, whichever is less -- see question 22 for the
definition of "average salary") and is subtracted from the team's
luxury
tax payment. This prevents a form of double jeopardy, where a
team
would otherwise have to pay tax on an injured player's salary, and also
on
his replacement's. Interestingly, if the injured player is traded
before
he is deemed permanently disabled, then neither team receives the
credit.
This credit is subject to readoption on a year-to-year basis.
Where does the tax money go? This is described in question
number 16 .
As described in question number 14 , if the
salaries and benefits exceed a designated percentage of income for that
season, then some of the players' salary is returned to the teams.
Also, as described in question number 15 , if
the salaries and benefits are sufficiently high, then some teams will
pay additional money to the league, which is known as the "luxury tax."
The CBA does not specify how this money is to be distributed to the
teams. It simply says that such money is the exclusive property
of the NBA, and that its use and/or distribution is at the league's
sole discretion. The NBA's Board of Governors met during the
02-03 season to determine the rules for the distribution of this money.
Note that these
details have been relayed by a number of reliable sources, but
may not be 100% accurate. In addition, the NBA Board of
Governors could decide to change these rules at any time.
A "cliff provision" was established to protect teams that end up
slightly over the tax threshold (essentially protecting them from
"falling off a cliff:"). This is important because the
tax threshold isn't determined until many months after teams make their
personnel decisions. A "cliff threshold" is designated at 65% of
BRI. Teams above the tax threshold (approximately 61.1% of
BRI) but below the cliff threshold (65% of BRI)
are penalized less severely than teams above the cliff threshold.
Also note that every team receives at least some of the
escrow
& tax money. In many cases, the money received more than
offsets
any luxury tax they pay. In addition, all teams
benefit from a reduction in the amount of benefits they are required to
pay.
The following rules govern the distribution of the tax and escrow
money:
Tax money:
- Teams under the tax threshold receive a full share (1/29) of the tax money.
- Teams over the cliff threshold do not receive any of the tax money.
- Teams between the tax threshold and cliff threshold receive a pro-rated amount between $0 and a full share, based on where they are between the two thresholds. For example, a team midway between the tax threshold and cliff threshold in 02-03 receives 50% of a share of tax money.
- Not all tax money is distributed under this formula. See "Surplus," below.
Escrow money:
- If there is no luxury tax, then all teams get an equal share of the escrow money.
- If there is a luxuy tax, then all teams receive at least a minimum share of the escrow money. In 02-03, a minimum share is 70% of a full share. In 03-04 it is 40%, and in 04-05 it is 0% (so in 04-05, teams over the cliff threshold receive no money from escrow). The money each team receives is this minimum share, or their tax share, whichever is greater. For example, in 02-03 a team that gets an 80% tax share also gets an 80% escrow share, and a team that gets a 50% tax share gets a (minimum) 70% escrow share.
- Not all escrow money is distributed under this formula. See "Surplus," below.
Surplus:
The above formulas do not result in all of the tax and escrow money being distributed (for example, in 02-03 $106.9 million was left over). Some of this money (about $3 million in 02-03, but $0 in 03-04) goes to the Toronto Raptors to help account for currency differences. Some (about $24.2 million in 02-03) goes to teams with permanently disabled players (see question number 15). The rest (about $79.7 million in 02-03, $86.0 million in 03-04) is divided evenly among all NBA teams.
So once teams cross the tax threshold, they start forfeiting both
luxury tax and escrow distributions. They stop losing escrow
distributions 30% (60% in 03-04) of the way to the cliff threshold.
They lose tax distributions in the entire range between the tax
threshold and cliff threshold.
Here is what happened in each season for which there was a tax:
| Season: |
02-03 |
03-04 |
| BRI: |
$2.662 billion |
$2.756 billion |
| Designated percentage: |
$1.464 billion (55% of BRI) |
$1.516 billion |
| Salaries & benefits: |
$1.744 billion |
$1.748 billion |
| Escrow withheld: |
$174.4 million |
$165.4 million |
| Overage: |
$280 million (salaries & benefits minus
designated percentage) |
$232 million |
| Escrow to players: |
$0 |
$0 |
| Escrow to owners: |
$174.4 million |
$165.4 million |
| Tax threshold (team escrow limit): |
$52.9 million (based on
61.1% of BRI) |
$54.6 million |
| Cliff threshold: |
$56.5 million (based on 65% of BRI) |
$58.3 million |
| Escrow share: |
$5.71 million |
$5.71 million |
| Tax share: |
$5.98 million
(even share of total luxury tax) |
$5.42 million |
| Surplus: |
$106.9 million |
$86.0 million |
| Surplus share: |
$2.75 million |
$2.97 million |
Here is an example (using the 02-03 numbers from the above table)
to illustrate how changes in team salary affect their net payout.
This example includes four teams: Team A is below the tax
threshold, Team B is midway between the tax threshold and cliff
threshold, Team C is moderately above the cliff threshold, and Team D
is far above the cliff threshold.
| Team |
Team A |
Team B |
Team C |
Team D |
| Team salary: |
$50.0 million |
$54.7 million |
$60.0 million |
$80.0 million |
| Over tax threshold? |
no |
yes |
yes |
yes |
| Over cliff threshold? |
no |
no |
yes |
yes |
| Tax paid: |
$0 |
$1.82 million |
$7.12 million |
$27.12 million |
| Percentage of escrow share: |
100% |
70% |
70% |
70% |
| Escrow received: |
$5.71 million |
$4.00 million |
$4.00 million |
$4.00 million |
| Percentage of tax share: |
100% |
50% |
0% |
0% |
| Tax received: |
$5.98 million |
$2.99 million |
$0 |
$0 |
| Surplus received: |
$2.75 million |
$2.75 million |
$2.75 million |
$2.75 million |
| Total received (escrow, tax & surplus): |
$14.44 million |
$9.74 million |
$6.75 million |
$6.75 million |
| Net (total received minus tax paid): |
$14.44 million |
$7.92 million |
$370,000 paid |
$20.37 million paid |
| Team |
Team E |
Team F |
| Team salary: |
$54.8 million |
$60.1 million |
| Over tax threshold? |
yes |
yes |
| Over cliff threshold? |
no |
yes |
| Tax paid: |
$1.92 million |
$7.22 million |
| Percentage of escrow share: |
70% |
70% |
| Escrow received: |
$4.00 million |
$4.00 million |
| Percentage of tax share: |
46.2% |
0% |
| Tax received: |
$2.76 million |
$0 |
| Surplus received: |
$2.75 million |
$2.75 million |
| Total received (escrow, tax & surplus): |
$9.51 million |
$6.75 million |
| Net (total received minus tax paid): |
$7.59 million |
$470,000 paid |
Yes. Here is what they are:
LARRY BIRD EXCEPTION -- This is the best known one. Players who qualify for this exception are called "Qualifying Veteran Free Agents" in the CBA. This exception allows teams to exceed the salary cap to re-sign their own free agents, up to the player's maximum salary. The free agent in question must have played for three seasons without being waived or changing teams as a free agent. This means a player can obtain "Bird rights" by playing under three one-year contracts, a single contract of at least three years, or any combination. It also means that when a player is traded, his Bird rights are traded with him, and his new team can use the Bird exception to re-sign him. These contracts can be up to seven years in length. A player can receive 12.5% raises using this exception. This exception is known as the Larry Bird exception because the Celtics were the first team allowed to exceed the cap to keep their own free agent, and the player happened to be Bird.
There is one more limit to the maximum salary that can be given
using the Larry Bird exception. If the player was a first round
draft pick and just completed his three-year rookie scale contract, but
his team did not exercise their option to extend the contract for the
fourth season (see question number 38 ), then this
exception cannot be used to give him a salary greater than he would
have received had the team exercised their fourth year option.
For example Devean George was selected by the Lakers with the
23rd pick in the 1999 draft. He finished his three-year rookie
scale contract in 2002. The Lakers had the option to extend him
for the 02-03 season for $1,415,722 until October31, 2001, but did not
do so. So while the Lakers were allowed to use the Larry Bird
exception to re-sign George, they were limited to a first-year salary
(using this exception) of $1,415,722. They instead used their
mid-level exception to re-sign him, which allowed them to give him more
money.
EARLY BIRD EXCEPTION -- This is a weaker form of the Larry Bird exception. Players who qualify for this exception are called "Early Qualifying Veteran Free Agents" in the CBA. A player qualifies for this exception after just two seasons without being waived or changing teams as a free agent. Using this exception, a team may re-sign its own free agent for 175% of his salary the previous season or the average player salary, whichever is greater (see question number 22 for the definition of "average salary"). Early Bird contracts must be for at least two seasons (which limits this exception's usefulness -- it's often better to take a lower salary for one more season and then have the full Bird exception available the next season) and no longer than six seasons. A player can receive 12.5% raises using this exception.
NON-BIRD EXCEPTION -- Players who qualify for this exception are called "Non-Qualifying Veteran Free Agents" in the CBA. They are defined as veteran free agents who are neither Qualifying Veteran Free Agents nor Early Qualifying Veteran Free Agents. This exception allows a team to re-sign its own free agent to a salary starting at 120% of the player's salary in the previous season or 120% of the minimum salary, whichever is greater, even if they are over the cap. Raises are limited to 10% and contracts are limited to six years when this exception is used.
MID-LEVEL SALARY EXCEPTION -- This exception is
also called the "Middle Class Exception." This exception says
that a team can offer any player a contract equal to the average NBA
salary every year,
even if they are over the cap. This exception is new to the
current CBA, and was "ramped up" to the average salary over a period of
four years (see question number 22 for the
definition of "average salary"). Here is the value of the mid-level
salary exception for each year of the CBA:
| 98-99 | $1.75 million |
| 99-00 | $2.00 million |
| 00-01 | $2.25 million |
| 01-02 | $4,538,000 |
| 02-03 | $4,546,000 |
| 03-04 |
$4,917,000 |
| 04-05 |
$4,903,000 |
This exception may be split and given to multiple players. It may be used for contracts of up to six years in length. Signing a player to a multi-year contract does not affect a team's ability to use this exception every year. For example, a team can sign a player to a six-year contract using this exception and still use the exception the following year to sign another player. Also see question number 18 for more information on the availability and use of this exception.
$1 MILLION EXCEPTION -- This exception carries over from the
previous CBA. Like the mid-level salary exception, it ramps up
over several years:
| 98-99 | $1.00 million |
| 99-00 | $1.10 million |
| 00-01 | $1.20 million |
| 01-02 | $1.30 million |
| 02-03 | $1.40 million |
| 03-04 | $1.50 million |
| 04-05 | $1.60 million |
This exception may not be used two years in a row. It may also be split and given to more than one player, and can be used to sign players for up to two years. Also see question number 18 for more information on the availability and use of this exception.
ROOKIE EXCEPTION -- Teams may sign their first round draft picks to rookie "scale" contracts even if they will be over the cap as a result.
MINIMUM PLAYER SALARY EXCEPTION -- Teams can offer players minimum-salary contracts even if they are over the cap. Contracts can be up to two years in length. For two year contracts, the second season salary is the minimum salary for that season. For example, when the capped-out Lakers signed Dennis Rodman in the middle of the 98-99 season, they used this exception to give Rodman the minimum salary, which was $1 million for the 10+ year veteran. This exception also allows minimum-salary players to be acquired via trade. See question number 69 for more information.
TRADED PLAYER EXCEPTION -- This is a "credit" teams can use to replace the salary of a player traded to another team. This credit cannot be used to sign free agents -- it is only available for trades. This exception is discussed in detail in question number 68 . Also see question number 18 for more information on the availability and use of this exception.
DISABLED PLAYER EXCEPTION -- This exception allows a team which is over the cap to acquire a replacement for a disabled player who will be out for the remainder of the season. This exception can also be granted in the event of a player's death. This exception can only be used to acquire one player. The maximum salary for the replacement player is 50% of the injured player's salary, or the average salary, whichever is less (see question number 22 for the definition of "average salary"). Approval from the league (based on a determination by an NBA-designated physician) is required for this exception to be used. This exception can be used to sign a free agent, or to create room to accept a salary in trade. When used for trade, it is treated in a similar fashion to the traded player exception (see question number 68 ). If a team is under the salary cap by more than the combined amount of their exceptions, or drops below the cap by more than the combined amount of their exceptions after receiving this exception, then they lose this exception. If a team is under the salary cap and has this exception available to use, then it is included in their team salary.
If a player is disabled between July 1 and November 30, the team must acquire the replacement player within 45 days. If the player is disabled between December 1 and June 30, and the physician determines that the player will be out the entire following season as well, then the team has until October 1 to sign a replacement. If the disabled player comes back sooner than expected, then he may be activated immediately, and the replacement player (or exception, if it hasn't been used yet) is not affected.
Teams sometimes have had difficulty getting the NBA to approve an
injury exception. For example, Danny Manning tore an ACL toward the end
of the 97-98 season, yet the NBA would not approve the Suns for an
injury exception.
More recently, the Magic did not receive this exception in 2003 for
Grant
Hill. However, this exception was granted in the 1999
offseason to San Antonio, so they could replace Sean Elliott, who was
disabled due to kidney problems. This exception was also granted
to Charlotte soon after Bobby Phills was killed. A vote of the
NBA Board of Governors
is actually required for this exception to be granted. Also see
question number 18 for
more information on the availability and use of this exception.
Don't confuse this exception with the salary cap relief teams can apply
for two years after losing a player to a career-ending injury or death
(see question number 51 ).
This exception allows a team to acquire a replacement player.
The salary cap relief removes a contract from the books.
QUALIFYING OFFER -- Certain players become restricted free
agents at the end of their contract if their team submits a qualifying
offer (see question number
34 ). For players who entered the NBA in 98-99
or later, through their third year in the league, the qualifying offer
must be for 125% of the
player's previous salary, or the player's minimum salary
(see question number 9 ) plus $150,000, whichever is
greater. Teams are given an exception in this amount
for the purpose of making a qualifying offer. This exception is
not necessary for players finishing the fourth year of their rookie
scale contracts, because teams may use the Larry Bird
exception for these players.
Summary of Salary Cap Exceptions
| Larry Bird | Early Bird | Non-Bird | Mid-Level | $1 Million | Rookie | Minimum | Disabled Player | Qualifying Offer | |
| Who Qualifies |
Own free agent, 3 seasons without changing teams as a free agent | Own free agent, 2 seasons without changing teams as a free agent | Own free agent, if not Larry Bird or Early Bird | Any | Any | Team's first round draft pick(s) | Any | Any |
|
| Minimum Years | 1 | 2 | 1 | 1 | 1 | 3 | 1 | 1 |
|
| Maximum Years | 7 | 6 | 6 | 6 | 2 | 3 + team option | 2 | 6 | 1 |
| Maximum Salary | Maximum salary (see note in text) |
Greater of 175% of previous salary or average salary | Greater of 120% of previous salary or 120% of minimum salary | $1.75 mil in 98-99, $2 mil in 99-00, $2.25 mil in 00-01, average salary thereafter | $1 mil in 98-99, increaeses $100,000 per year thereafter | 120% of scale amount | Minimum salary | Lesser of 50% of injured player's salary or average salary | Greater of 125% of previous salary or minimum salary plus $150,000 |
| Maximum Raises | 12.5% | 12.5% | 10% | 10% | 10% | 10% | 10% | 10% | N/A |
| Can be split? | No | No | No | Yes | Yes | No | No | No | No |
| Other | Cannot be used in consecutive seasons | Restricted free agency following option year | Approval from the league required. Can be used for a limited time only. | Makes player a restricted free agent |
Note: The Traded Player Exception is not listed because it cannot be used to sign free agents.
If a team has Disabled Player, $1 Million, Mid-Level and/or Traded Player Exceptions, and they are below the cap, then these exceptions are added to the team's team salary, and the league treats the team as though they are over the cap. This is to prevent a loophole. The concept is the same as the one behind free agent amounts (see question numbers 27 , 28 , 29 , 30 ). The idea is that the order in which exceptions are used should not matter. Free agent amounts keep teams from taking advantage of temporarily being under the cap by signing other teams' free agents using their cap room, and then re-signing their own free agents using a Bird exception. Because of free agent amounts, there's no difference between signing their free agents first and other teams' free agents second, or the other way around, signing other teams' free agents first and their own free agents second. Similarly, a team can't act like they're under the cap and sign free agents using cap room, and then use their Disabled Player, $1 Million, Mid-Level and/or Traded Player exceptions. Consequently, the exceptions are added to the team salary (putting the team over the cap) if the team is under the cap and adding the exceptions puts them over the cap. If a team is already over the cap, then the exceptions are not added to their team salary. There would be no point in doing this, since there is no cap room for signing free agents.
So it is not true that being under the cap necessarily means a team has room to sign free agents. For example, assume the cap is $42.5 million, and a team has $36 million committed to salaries. They also have a mid-level exception for $4.5 million and a traded player exception for $5 million. Even though their salaries put them $6.5 million under the cap, their exceptions are added to their salaries, putting them at $45.5 million, or $3 million over the cap. So they actually have no cap room to sign free agents, and must instead use an exception.
Teams have the option of renouncing their exceptions in order to claim the cap room. So in the example above, if the team renounced their traded player and mid-level exceptions, then the $9.5 million is taken off their team salary, which then totals $36 million, leaving them with $6.5 million of cap room which can then be used to sign free agent(s).
A team may lose their exceptions (Disabled Player, $1 Million, Mid-Level and/or Traded Player), or never receive them to begin with. This happens when their team salary is so low that when the exceptions are added to the team salary, the sum is still below the salary cap. If the team salary is below this level when the exception arises, then teams don't get the exception. If the team salary ever drops below this level during the year, then any exceptions they still have are lost.
For example, with a $42.5 million salary cap, assume it's the offseason, and a team has $34 million committed to salaries, along with a mid-level exception for $4.5 million, a traded player exception for $3 million, and an unrenounced free agent whose free agent amount is $2 million. Their salaries and exceptions total $43.5 million, or $1 million over the cap. What if their free agent signs with another team? Their salaries drop to $34 million, so their salaries and exceptions now total $41.5 million. This total is below the cap so the team loses their mid-level and traded player exceptions.
There is logic behind this. The whole idea behind an "exception" is that it is an exception to the rule which says a team has to be below the salary cap. In other words, an exception is a mechanism which allows a team to function above the cap. However, if a team salary is ever so low that they're not going to be over the cap even if they use all their exceptions, then the concept of an exception which allows them to function above the cap is moot. Therefore, if a team's team salary ever drops this far, its exceptions go away.
The team has the right to choose which of its available exceptions to use to sign a player. However, teams may not combine exceptions, or combine an exception with cap room, in order to sign a player. For example, a team with a $2.25 million mid-level exception and a $1 million in cap room may not combine them to sign a player for $3.25 million.
In certain situations, exceptions may be combined in order to acquire players via trade. This is discussed in question number 71 .
I suppose it could happen, but the NBA will investigate if it suspects that an outside person or organization is paying a player on behalf or at the request of a team. If they find out that such an event has occurred, they will penalize the team. For the first offense by a team, the fine can be up to $2,500,000, forfeiture of a first round draft pick, and/or voiding the player's contract. The penalties increase for subsequent violations.
Incidentally, with the new CBA they did away with the ability for players to become player-coaches. This is because it would be possible to circumvent the cap by signing a player as a player-coach, and paying him less as a player but overpaying him as a coach.
If a team makes a direct agreement with a player that is not reported to the league, the penalties can be even harsher than those described in question number 20 . Such a violation is considered by the league to be among the most serious a team can commit. Again, the league will investigate any allegations of wrongdoing. A violation can result in a fine up to $3,500,000, forfeiture of draft picks, voiding the player's contract(s), and/or the suspension for up to one year of any team personnel who were involved.
This is exactly what happened in 2000 with Joe Smith and the Minnesota Timberwolves. Smith left the Philadelphia 76ers in 1999 (following the lockout) to sign with the Minnesota Timberwolves for their $1.75 million mid-level exception. They made an under-the-table agreement that Smith would play under three consecutive one-year contracts at below market value, and the Timberwolves would reward him by using their Bird rights to sign him to a huge contract beginning with the 2001-02 season. Unfortunately, they reduced this agreement to writing, and the written agreement eventally found its way into the league's hands.
It had long been rumored that such under-the-table agreements existed, but this was the first time the league had hard evidence in the form of a signed contract. The league responded by fining the team the maximum $3.5 million, taking away their next five draft picks (two were later returned), and voiding Smith's current contract. Owner Glen Taylor and GM Kevin McHale also agreed to leaves of absence (in lieu of suspensions, at which time the fifth draft pick was returned). Most interestingly, the league also voided Smith's two previous, already-completed contracts. This essentially stripped the Timberwolves of any Bird rights to Smith, preventing them from re-signing Smith for any salary above the minimum (they had already used their other exceptions). Smith then left Minnesota and signed with the Detroit Pistons, but returned to Minnesota in 2001.
The league computes the average salary by taking the total salaries
paid during the previous season, dividing by 362.5 (29 teams, times
12.5 players per team) and then adding eight percent. This
average salary figure is used when determining the salaries payable
using the Early-Bird, Disabled Player and Mid-Level exceptions; and
when determining an unsigned free agent's affect on team salary.
Note that they do not count expansion teams in their first two seasons
when computing the average salary. So when a 30th team is added
in 03-04, the divisor will still be 362.5. It
will change to 375 in the 05-06 season.
Theoretically, a player with Bird rights can be traded right before becoming a free agent and his new team can use the Bird exception to re-sign him. There is no specific tenure requirement with one team. The only rule is that the player can't have been waived or changed teams as a free agent for three years. However, if a team renounces a player (see question number 31 ), they can't use the Bird exception to re-sign him for one year.
It closed a salary cap loophole. There used to be no waiting period, but this was abused by Portland with Chris Dudley and Phoenix with Danny Manning. Both teams signed these players to one-year deals at small salaries, and the next year, Bird rights in hand, signed new contracts for far in excess of the cap. The three year rule prevents these types of cap circumventions.
All salaries are included in team salary (and count against the cap). The Bird exception simply says a team can exceed the cap to sign certain players. The new salary applies toward the team salary just like the salaries of the team's other players. So if a team is over the cap and uses the Bird exception to re-sign its own free agent, it will end up farther over the cap.
If one of the other exceptions wasn't used, it may just be the way the deal was reported. Only the first season's salary must fit under the cap, but signings are often reported using the total salary for the entire contract. For example, if a team is $10 million under the cap, they can sign a player to, say, a five-year contract for $10, $11, $12, $13 and $14 million in each of the five seasons. The deal then gets reported as five years for $60 million. But the first year salary is what counts, and it fits perfectly.
Yes, but there's a restriction. A team's free agents continue to count as team salary (against the salary cap). This charge is called the "free agent amount." So there may not be enough money under the cap to sign another team's free agent, because the team's own free agents are taking up all the cap room.
The free agent amount depends on the player's previous salary and
what kind of free agent he is:
| Kind of free agent | Previous salary | Percentage of previous salary |
| Larry Bird, except when coming off rookie "scale" contract | At least the average salary | 150%* |
| Larry Bird, except when coming off rookie "scale" contract | Below the average salary | 200%* |
| Larry Bird, coming off rookie "scale" contract | At least the average salary | 200% in 98-99* 225% in 99-00* 250% in the remaining seasons* |
| Larry Bird, coming off rookie "scale" contract | Below the average salary | 300%* |
| Early Bird | Any | 130%* |
| Non-Bird | Any | 120%* |
*Not to exceed the player's maximum salary, based on years of service (see question number 9 ). Also, if the difference in salary between the last two seasons of the player's contract exceeded $4 million, then the percentage is based on the average salary in the last two seasons of the contract.
See question number 38 for more information on rookie "scale" contracts.
Here's an example of how to use this chart: Let's say a player who made $5 million during the previous season becomes an Early-Bird free agent. According to this chart, the player's free agent amount is 130% of his previous salary. So $6.5 million is included in his team's team salary while he is a free agent.
Also see question number 31 for information on renouncing players.
It closes another loophole. Teams otherwise would have been able to do exactly what was described -- sign other teams' free agents, and then turn their attention to their own free agents. This rule restricts their ability to do that.
When any one of the following three things happen:
As detailed in question number 28 , free agents continue to be included in team salary. By renouncing a player, a team gives up its right until the following June 30 to use the Larry Bird, Early Bird, or Non-Bird exceptions (see question number 17 ) to re-sign that player. A renounced player no longer counts toward team salary, so teams use renouncement to gain additional cap room. After renouncing a player, the team is still permitted to re-sign that player (the previous CBA prevented teams from re-signing a renounced player until 55 days into the regular season), but they must either have enough cap room to fit the salary, or sign the player without using one of the three "Bird" exceptions.
For example, in August 1999 Charles Oakley was renounced by the Toronto Raptors. Had they not renounced him, the Raptors could have re-signed Oakley for any amount up to the maximum $14 million using the Larry Bird exception. Following the renouncement, they were only allowed to give him up to the $6 million they had available under the cap.
After renouncing a player, a team can still trade the player in a sign-and-trade agreement (see question number 75 ).
Only in one specific circumstance -- when they renounce one or more of their players in order to create enough cap room to sign another team's restricted free agent, but the restricted free agent's original team matches the offer sheet and keeps him. If that happens, the team can un-renounce their own free agent(s). See question number 34 for more information on restricted free agency.
No. The scale amount for first round draft picks are included in team salary (unless they are renounced, see question number 31 ). In addition, if a team has fewer than 11 contracted players, unrenounced free agents, and unsigned first-round draft picks, then an amount equal to the rookie minimum salary is charged for each empty roster spot fewer than 11. For example, if a team has three players under contract, two unrenounced free agents, and one first-round draft pick, the total number of players is six. Their team salary is charged for the five remaining roster spots to bring the total to 11. In the 99-00 season, with a rookie minimum salary of $301,875, their team salary would include an extra $1,509,375.
There are two types of free agency: restricted and unrestricted. An unrestricted free agent is free to sign with any other team, and there's nothing the player's original team can do to prevent it. Restricted free agency gives the player's original team the right to match an offer sheet the player signs with another team and keep the player. One example is from August 2002, when Minnesota signed Ricky Davis, but Cleveland matched the contract and retained him.
Restricted free agency was an option for all contracts two CBA's ago. The previous CBA eliminated restricted free agency altogether (and reclassified all restricted free agents as unrestricted. This is how Orlando lost Shaquille O'Neal, whose contract called for restricted, not unrestricted free agency).
The current CBA provides restricted free agency on a limited basis. It is allowed following the fourth year of rookie "scale" contracts for first-round draft picks (see question number 38 ). It is also allowed for all veteran free agents who entered the NBA in 98-99 or later, who have been in the league three or fewer seasons (however, first round draft picks are unrestricted free agents following their third season if their team does not exercise their option to extend their rookie scale contract for the fourth season). All other free agency is limited to unrestricted free agency.
In order to make their free agent a restricted free agent, a team must submit a qualifying offer to the player by June 30. The amount of the qualifying offer for players on rookie "scale" contracts is based on the player's draft position (see question number 38 ). The qualifying offer for all other players must be for 125% of the player's previous salary, or the player's minimum salary (see question number 9 ) plus $150,000, whichever is greater. The qualifying offer must be for one season. The team automatically gets an exception in the amount necessary to make this qualifying offer if they are over the salary cap.
When another team wants to sign a restricted free agent, it signs the player to an offer sheet, the principal terms of which the original team is given 15 days to match. The offer sheet must be for at least three seasons. The principal terms of the offer sheet cannot include non-cash forms of compensation. For example, it doesn't work to offer Denver's free agent a house on the beach within 15 minutes of the arena, knowing that it's impossible for Denver to match those terms. If the player's original team exercises its right of first refusal by matching the principal terms of the offer sheet, the player is then under contract to his original team and is no longer a free agent. If the player's original team does not exercise its right of first refusal within 15 days, the offer sheet becomes an official contract with the new team, and the player is no longer a free agent.
There can be no compensation given to a team in return for their not
matching an offer to a restricted free agent. For example,
Houston could not sign Golden State's restricted free agent, then send
Golden State a draft pick in exchange for their not matching the offer
and retaining the player.
Teams can rescind their qualifying offer to a restricted free agent,
in which case the player becomes unrestricted. This happened with
Toronto and Keon Clark in 2002.
A signed offer sheet can be rescinded within the 15 day waiting
period if all three parties (the player and the two teams) agree.
However, they could not do this in order to engineer a better
deal (such as a sign-and-trade arrangement) between the teams.
35. Haven't some restricted free agents
gotten away anyway? How did this happen?
For one, the team can simply decide not to match the offer sheet. If this happens, the offer sheet becomes an official contract with the new team after 15 days. This is how Wang Zhi-Zhi went from Dallas to the LA Clippers prior to the 02-03 season.
It may also have been that the original team was incapable of
matching the offer sheet. The NBA has a limited right of
first refusal for restricted free agents. A team gets an
exception big enough to make a qualifying offer, but the team must use
its cap room (if it has any) or a different exception to match another
team's offer. If a new team signs the player to a very large
offer sheet, the player's original team may not be able to match it.
If this happens, the original team has no choice but to lose the
free agent. This is how Chicago was able to sign Brad Miller
in 2000 -- Miller was Charlotte's restricted free agent, but
the most Charlotte could give him was $3.9 million (using the Early
Bird exception). Chicago signed Miller to an offer sheet with a
first-year salary just over Charlotte's limit,
and Charlotte was unable to match.
Note that for first-round draft picks following their fourth (option) season, there is no way to make an offer the original team cannot match. The teams have full Bird rights to these players, so they can re-sign them (or match another team's offer sheet) for any amount up to the maximum salary.
If the player is a first-round draft pick who just
finished his fourth (option) season, his original team can use their
Bird rights to match any offer. For other players, it may be
possible for another team to make an offer that the original team
cannot match (see question number 35 ).
Most teams won't even bother signing first round picks coming off
their fourth season to offer sheets, because it is often a given that
the offer will be matched by the original team. So if the player
really wants to leave, he can accept his original team's qualifying
offer, which constitutes a one-year contract at a scale salary.
The player must play with his original team for one more season,
but following that season he will be an unrestricted free agent, and
can then sign with any other team. For example, Michael
Olowokandi accepted the LA Clippers' qualifying offer prior to the
02-03 season. He was then an unrestricted free agent in 2003, and
signed with Minnesota
No. A team that loses a free agent does not receive anything. It used to be the case in the NBA a long time ago, but not any more. The most famous example of this is when Gail Goodrich signed as a free agent with the New Orleans Jazz. The Lakers, Goodrich's previous team, received a draft pick as compensation. That draft pick turned out to be Magic Johnson.
Yes. There's actually a very strict salary scale for first round draft picks and their first contracts. They do this because it was previously common for rookies to hold out, not signing with their team until they got the contract they wanted. In addition, there was backlash from the veteran players who saw rookies with no NBA experience getting contracts that were bigger than theirs. The last year without a salary scale was 1994, when it was rumored that first overall pick Glenn Robinson was going to hold out for a $100 million contract, and he eventually signed a 10-year, $68.15 million contract.
Beginning in 1995, salaries for first round picks were set according
to a very strict scale, determined by their exact draft position.
In the previous CBA, this was calculated using a weighted average of
the first year salary of the same pick in the previous seven drafts. In
the first year of the current CBA (98-99), salaries were computed using
this same weighted average. In subsequent years of the current
CBA (99-00 through 04-05), it simply goes up by 5%
each year (a simple 5% of the 98-99 figure, not a compounded
percentage). For example, the following chart lists the salary
figure for the #1 overall draft pick in each season from 98-99 through
04-05, along with the raise allowed in the 4th (option) year.
| Season | 1st year salary |
2nd year salary |
3rd year salary |
4th year option (% raise over 3rd year salary) |
| 98-99 | $2,679,300 | $2,880,200 | $3,081,200 | 26.1% |
| 99-00 | $2,813,300 | $3,024,300 | $3,235,300 | 26.1% |
| 00-01 | $2,947,200 | $3,168,300 | $3,389,300 | 26.1% |
| 01-02 | $3,081,200 | $3,312,300 | $3,543,400 | 26.1% |
| 02-03 | $3,215,200 | $3,456,300 | $3,697,400 | 26.1% |
| 03-04 | $3,349,100 | $3,600,300 | $3,851,500 | 26.1% |
| 04-05 | $3,483,100 | $3,744,300 | $4,005,600 | 26.1% |
By comparison, the 29th and last pick in the draft has a first-year salary figure of $535,600 in 98-99 and $696,300 in 04-05. A listing of the salary figures for all draft picks and all years can be found by clicking here .
A team may actually sign a player for as little as 80% or as much as 120% of the scale salary figure. For example, the 1st year salary for the #1 overall pick drafted in 99-00 can be as little as $2,250,640 or as much as $3,375,960. In most cases, the contract that is actually signed is for the maximum 120% figure. Annual raises are limited to 10%, and also can't exceed 120% of the scale amount for that season.
The exact percentage increase for the fourth (option) year varies by the player's draft position. It is 26.1% for the first pick, scaling up (almost evenly) to 80.5% for the 29th pick.
There are also restrictions to the contract length. Under the previous CBA, these contracts must be for three years, after which the player was a free agent. With the current CBA, contracts were changed from three years to three with a team option for a fourth year (this option must be exercised by October 31 after the player's second season). After the fourth year, players become restricted free agents rather than unrestricted (provided the team picked up the fourth-year option). These contracts can also be extended between August 1 and October 31 after the player's third season.
Since the rule for first round picks was implemented, there has never been a holdout. There has also been less grumbling from veterans about rookies who make more than they do. So in that respect, the rookie salary scale has worked great.
The player's options are limited. What happens depends on a number of factors:
In any of the above cases, if the team does not sign the player in
the allotted time, the player can enter the next draft. If the
team that selects the player in the next draft doesn't
sign him either, he beomes a rookie free agent.
When a team signs a first round draft pick in a year other than the year in which he was drafted, the player is signed using the salary scale for the year in which he is signed, not the year he was drafted.
Unsigned first round picks are included in team salary immediately upon their selection in the draft. They count as 100% of the scale salary for that pick, unless there is a verbal agreement for a higher salary. An incident occurred prior to the 97-98 season when Vancouver's first round pick, Antonio Daniels, revealed in an interview that he and the team had verbally agreed to a contract starting at the maximum salary. The league, which maintains that verbal agreements apply to the salary cap, then changed the team's cap figure from the scale amount to the maximum for Daniels.
Once a first round pick signs a contract, his actual salary is included in the team salary, of course.
Unsigned second round picks are not included in team salary.
This is a loophole that Houston once tried to use by trading a first
round pick for a second round pick in order to clear cap room.
As described in question number 70 , the trade
value of unsigned first or second round draft picks is always $0.
They're stuck. In essence, this makes late first round picks less valuable, because it forces teams to make long-term commitments to marginal players. In 1996, rather than give their first round pick Travis Knight (29th overall) a three-year deal, the Bulls renounced him, making him a free agent.
No. The salary scale only applies to the team that drafts the player
or the team to which the player's draft rights are traded. When
Chicago renounced first round pick Travis Knight in 1996, he then
signed with the Lakers for one year at the league minimum salary.
Note that this might actually work to the player's advantage. If
he becomes an outstanding NBA player, then he would be
eligible for a non-scale contract (and potentially a big payday),
much sooner than if he had played under a scale contract. The
same is true for second round draft picks, whose first contracts are
usually for two seasons (with the second season at the team's option).
Yes. When the Larry Bird exception is used, a player can sign for a maximum of seven years with a maximum increase or decrease of 12.5% per year. For contracts signed using the Early Bird exception, it's a maximum of six years with 12.5% increases or decreases. For most other contracts, the limit is six years with a maximum 10% increase or decrease each year. A few exceptions have a shorter maximum length. See question number 17 for more information.
Also, if the same contract covers the 2000-01 season and any later season, then the salary in any season after 2000-01 can't be less than the 2000-01 salary.
Incidentally, raises take effect July 1 of each year.
No. The raise is always a percentage of the first year salary. So if
a team signs another team's player (10% maximum raise) to a six year
contract starting at $10 million, the maximum raise is $1 million each
year. So this player's six-year salary would be:
| Year 1 | $10 million |
| Year 2 | $11 million |
| Year 3 | $12 million |
| Year 4 | $13 million |
| Year 5 | $14 million |
| Year 6 | $15 million |
| Season |
Four-year |
Five-year |