We hear it every year, “X player restructures his deal to save his team money”. But what does it really mean? Does it mean the player is really taking a pay cut? Does it mean that the team really does save in the long run? When you hear the term “restructuring” just know that neither the team nor the player would be doing it if both aren’t benefiting somehow.
Here is what it actually means when a player restructures their NFL contract.
Recently, we heard that Arizona Cardinals WR Larry Fitzgerald restructured his $120 million contract he signed in 2011. The reports were that by restructuring, he saved the team over $10 million in cap space for 2014. How does that work? Well, there are 2 components to a player’s salary that counts against the teams’ salary cap.
The first one is the base salary and the second is the signing bonus that both combine to equal the players’ salary cap “hit” for the year. Fitzgerald’s original deal would have had him with a cap hit of around $18 million for 2014. His restructure included converting $1 million off of his base salary into an $11.75 million signing bonus. His cap hit shrunk to $8.6 million for 2014 but he will cost an extra $2.35 million each year with the proration of the signing bonus.
Did Fitzgerald give up any money to save the team salary cap room? Nope. The team saved the space under their 2014 salary cap by converting the bulk of Fitzgerald’s hit into a signing bonus, which under the CBA, is prorated over the course of the contract and doesn’t count in full against the salary cap for one season. This gives the team room under the current salary cap to sign other free agents but also benefits Fitzgerald by turning his money into essentially guaranteed money by making it the signing bonus.
That’s the biggest advantage players will have these days with their contracts. With NFL contracts being mostly “not guaranteed” the best way for a player to get that guaranteed money is in the form of a signing bonus.
The team almost always will end up pushing the bigger cap hits to later on in the life of the contract, partly because NFL teams salary caps are supposed to experience a huge increase in the next few years when the television contracts come into effect as well as the idea that they can still always be restructured again before those huge cap hits come into play. The team gets to save money in the meantime by adding to their salary cap room, but is pushing that money into later years’ caps in the form of the prorated bonus money.
This doesn’t mean the player doesn’t get that money until later in the contract, it just means that’s when it’s scheduled to count against the salary cap.
So whenever you hear that a player “restructured” don’t automatically assume they took any less money than they originally signed for. They are most likely getting every last penny they were originally scheduled to make, and most of the time now it’s in the form of guaranteed money. Don’t think the teams are in trouble either, even with huge cap hits on their horizon, their financial wizards will always have a plan to work those out.