The NFL salary cap is a number fixed at a certain percentage of league-wide revenues, minus the projected cost of league-wide benefits, divided by each of the league's franchises. In 2015, the figure was around $143 million. Teams may circumvent the cap in a number of ways, most notably awarding "signing bonuses" deferred over a maximum of five years or backloading the contract such that base pay is significantly higher later on.Continue Reading
While many fans assume that signing bonuses are awarded to a player in one lump sum at the time of signing, in reality they are divided into weekly installments just like any other type of pay. For example, if a player receives a $1 million signing bonus on his four year contract, the team takes a cap hit of $250,000 in each of the four years. This allows for much greater flexibility than an immediate $1 million hit. If the player is cut or traded, all of the deferred money immediately hits the current year's cap, potentially crippling a team's chances that season.
Greater freedom is also the idea behind a backloaded contract. For example, a four year deal worth $10 million may be paid out as $2 million for the first two years and $3 million over the final two. This gives the team more freedom now, but problems frequently arise when teams fail to adequately prepare for the increased future cap hit. Players are generally awarded guaranteed signing bonuses or other payments to accept these deals, as an NFL player's base pay is guaranteed only if he plays.
Incentives count toward the cap if they are likely to be earned, or LTBE, based on whether the player would have earned the bonus the previous year. Incentives that are not LTBE do not count against the cap.Learn more about American Football