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How to Calculate a Buyout

 

Teams are entitled to buy out player contracts for a portion of the remaining value of the contract paid over a period of twice the remaining length of the contract. Following are the buyout amounts:

 

Younger than age 26 at the time of buyout, 1/3 the remaining value

Age 26 or older at the time of the buyout, 2/3 the remaining value

 

When a player is bought out, the team still takes a cap hit for the player over a period of twice the remaining length of the contract. The amount of the cap hit (by year) is determined as follows:

 

Take the actual salary due for each remaining year

Take the Averaged Player Salary (cap hit) for the current contract

Calculate the buyout amount (as described above)

Spread the buy-out amount evenly over twice the remaining years of the contract

 

This calculation is done for each year, meaning the buyout cap hit is not necessarily the same for all years. It can even be negative, meaning a team can receive a credit.

This formula also applies to 35-plus contracts. 

 

While compliance buyouts prohibit a player from rejoining the team that bought him out for one season, there is no rule prohibiting this with ordinary-course buyouts.

 

In order for a team to execute a buyout, the player must first clear unconditional waivers. A waiver claim by another team pre-empts the buyout process. Players with no-move clauses can reject the option of waivers and proceed immediately to a buyout.

 

The buyout period begins the later of June 15 or 48 hours after the Stanley Cup Final ends. It concludes on June 30 at 5 p.m. ET. Teams with salary arbitration filings can additionally execute buyouts during a 48-hour period beginning on the third day following the team’s last award/settlement. The following notes pertain only to the second buyout window following salary arbitration:

a) the second buyout period does not apply in the event a team has only one club-elected salary arbitration case;

b) buyouts during this second window are limited to three per team over the term of the CBA; and

c) players bought out during this window had to be on the team’s reserve list as of the most recent trade deadline and must have a cap hit of $2.75 million or more.

 

Calculating buyout cap hits for contracts that include signing bonuses is largely uncharted territory. However, it is believed signing bonuses would be paid to the player even in the event of a buyout, while the league would exclude those signing bonuses from the standard buyout calculation.

 

info obtained from Capgeek.org

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How do Entry Level Contracts Work?

 

 

 

Players younger than 25 as of Sept. 15 in the calendar year their first NHL contract is signed are subject to the terms of Article 9 of the CBA and must sign an entry-level contract (ELC). This means the amount of salary and team-paid performance bonuses is capped, depending on his draft year or the year he signs. The length of the ELC is also specified based on the player's age.

 

 

AGE LENGTH 

18-21 3 years

22-23 2 years

24 1 year

25+ No Restriction *

 

* A one-year entry-level restriction applies to drafted players from Europe aged 25 to 27.

All ELCs are two-way contracts and can be extended by as many as two seasons (see "How does a contract slide?" in this FAQ). The maximum allowable salaries for players selected in each entry draft are as follows:

 

2001:  $858,800

2002:  $900,600

2003:  $942,400

2004:  $984,200

2005:  $850,000

2006:  $850,000

2007:  $875,000

2008:  $875,000

2009:  $900,000

2010:  $900,000

2011-2022: $925,000

 

ELCs can contain two types of bonuses: signing bonuses and performance bonuses.

Signing bonuses cannot exceed 10 percent of the contract's total compensation. They are typically paid out annually.

 

www.capgeek.com/faq/how-do-entry-level-contracts-work

 

 

HOW DOES AN ENTRY-LEVEL CONTRACT SLIDE?

 

If a player aged 18 or 19 signs an entry-level contract with a club (with his age calculated on Sept. 15 of the year he signed the contract) but does not play in at least 10 NHL games — regular season or playoffs — the contract will "slide" or be extended one year. The extension does not apply if the player turns 20 between Sept. 16 and Dec. 31 in the year he signed the contract.

 

Depending on the contract's structure, the player's cap hit can be affected either by an increase or a decrease. Players who sign at age 18 can have their contract extended (or "slide") two seasons.

 

CBA reference: Section 9.1 (d) (P. 23-24)

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Performance Bonuses

 

Performance bonuses, or Exhibit 5 bonuses, cannot exceed $2,850,000. These bonuses are divided into two categories: Schedule A and Schedule B.

 

Schedule A bonuses cannot exceed $212,500 per individual bonus and $850,000 in aggregate. Following is a run down.

 

SKATERS

Forwards  / Defensemen

 

Ice time (aggregate or per game) Player must be among top six forwards on the club (minimum 42 regular season games played by player and comparison group). An ELC may contain a provision for both aggregate and per-game ice time; however, the maximum a player may earn for ice time bonuses is $212,500. Player must be among top four defensemen on the club (minimum 42 regular season games played by player and comparison group). An ELC may contain a provision for both aggregate and per-game ice time; however, the maximum a player may earn for ice time bonuses is $212,500.

 

Goals 20 10

Assists 35 25

Points 60 40

PPG 0.73 (min 42 gp) 0.49 (min 42 gp)

Plus-Minus Among top three forwards on club (min 42 gp) Among top three defensemen on club (min 42 gp)

Blocked Shots — Among top two defensemen on club (min 42 gp)

All-Rookie Team — —

All-Star Game Selected to play or plays Selected to play or plays

All-Star Game MVP — —

 

GOALIES

Minutes Played 1,800 minimum

Goals-Against Average GAA <= median GAA of all goalies who played 25 or more regular season games; if there is an even number of these goaltenders, the median will be the average of the two middle values. Must play in at least 25 regular season games, with at least 30 minutes in each game (including minutes replaced by an extra attacker).

 

Save Percentage Sv% >= median Sv% of all goalies who played 25 or more regular season games; if there is an even number of these goaltenders, the median will be the average of the two middle values. Must play in at least 25 regular season games, with at least 30 minutes in each game (including minutes replaced by an extra attacker).

Wins 20 (minimum 30 minutes in each game, including minutes replaced by an extra attacker)

Shutouts Shutouts >= media number of shutouts of all goalies who played 25 or more regular season games; if there is an even number of goaltenders, the median will be the average of the two middle values. Must play in at least 30 minutes in each game (including minutes replaced by an extra attacker)

All-Rookie Team —

All-Star Game Selected to play or plays

All-Star Game MVP —

 

Schedule B bonuses, with criteria and amounts outlined in the tables below, are automatically paid by the league and do not need to be written into an entry-level contract. Schedule B bonuses paid by the league do not count against the team's salary cap.

 

However, a player and club may agree to any compensation for the Schedule B categories listed blow, provided the maximum aggregate amount does not exceed $2 million. That means up to $2 million can be earned by achieving just one Schedule B bonus criteria (ie. Calder Trophy win). Schedule B bonuses paid by the team count against the team's salary cap.

Following is a list of Schedule B bonuses that are automatically paid by the league and likewise the categories that can be negotiated between the team and player.

 

LEAGUE-WIDE AWARDS/TROPHIES

 

Hart, Norris, Vezina, Selke, Richard 

Winner: $250,000

Second: $200,000

Third: $150,000

Fourth: $100,000

Fifth: $50,000

 

Lady Byng 

Winner: $150,000

Second: $100,000

Third: $50,000

 

Jennings 

Winner: $50,000 * pro-rated share if co-winner

 

Calder 

Winner: $212,500

Second: $150,000

Third: $100,000

 

All-Star Team 

1st Team: $100,000

2nd Team: $50,000

 

Conn Smythe 

Winner: $250,000

 

LEAGUE PERFORMANCE BONUSES

 

FORWARDS

Rank Goals, Assists, Points PPG (min. 42 games)

Winner $150,000 $100,000

2nd $140,000 $90,000

3rd $130,000 $80,000

4th $120,000 $70,000

5th $110,000 $60,000

6th $100,000 $50,000

7th $90,000 $40,000

8th $80,000 $30,000

9th $70,000 $20,000

10th $60,000 $10,000

 

DEFENSEMEN

Rank Goals, Assists, Points TOI, PPG (min. 42 games)

Winner $150,000 $100,000

2nd $140,000 $90,000

3rd $130,000 $80,000

4th $120,000 $70,000

5th $110,000 $60,000

6th $100,000 $50,000

7th $90,000 $40,000

8th $80,000 $30,000

9th $70,000 $20,000

10th $60,000 $10,000

 

GOALTENDERS

Rank GAA and Sv% (min. 25 GP/min. 30 minutes/GP); wins (30-minute min.)

Winner $150,000

2nd $140,000

3rd $130,000

4th $120,000

5th $110,000

 

CBA Reference: Exhibit 5 (PDF Pages: 346-351; Document Pages: 326-331).

 

HOW DO PERFORMANCE BONUSES COUNT AGAINST THE CAP?

 

Under the collective bargaining agreement struck in 2013, a performance bonus cushion is in place for all years of the deal, including the last one in 2021-22.

 

The performance bonus cushion allows teams to exceed the upper limit with performance bonuses to a maximum of 7.5 percent of the upper limit.

 

For example, if the upper limit is $64,300,000, teams can exceed it by $4,822,500 in performance bonuses. Any performances bonuses in excess of that total do not fall into the cushion and are counted as part of the team's cap payroll.

 

Any performance bonuses actually earned at season's end (ie. for games played, awards, all-star teams, etc.) are then added to the team's final cap payroll. The catch with the cushion is that if the bonuses earned at year's end push the team past the upper limit, the overage is carried over as a penalty the following season.

 

http://capgeek.com/faq/how-do-performance-bonuses-count-against-the-cap

 

 

WHAT'S A BONUS OVERAGE?

 

When the bonus cushion is in affect, teams can exceed the salary cap in performance bonuses by up to 7.5 percent of the salary cap's upper limit. Should performance bonuses actually earned at season's end push them past the salary cap's upper limit, the excess bonuses earned will be carried over as a penalty to the team's cap payroll the following season.

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HOW ARE PLAYER AGES CALCULATED?

 

Age is calculated different ways in the NHL-NHLPA collective bargaining agreement.

 

ENTRY-LEVEL SIGNING AGE

 

A player’s entry-level signing age — used for determining length of the contract and slide eligibility — is calculated on Sept. 15 of the calendar year the contract was signed, per Section 9.2 of the CBA. However, per Section 9.1 (d) (i) of the CBA, players turning 20 between Sept. 16 and Dec. 31 in the calendar year the contract was signed are an exception to the rule. Such players are deemed to be 20 years of age rather than 19.

 

WAIVER SIGNING AGE

 

A player’s waiver signing age — used for determining waiver eligibility — is outlined in Section 13.4 of the CBA and is calculated as follows:

18 — Player must turn 18 between Jan. 1 and Sept. 15 in the entry-draft calendar year preceding the first season of his first contract.

19+ — The age the player reaches in the entry-draft calendar year preceding the first season of his first contract.

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HOW DOES LONG-TERM-INJURED RESERVE (LTIR) WORK?

 

Teams are eligible to receive cap relief when a player is considered to have a "bona-fide long-term injury" — injuries that cause a player to miss at least 10 games and 24 days. In such cases, the team can place the player on long-term injured reserve (LTIR).

 

The placement of a player on LTIR does not remove the player's cap hit from the team's cap payroll — the cap hit continues to count toward the team’s cap payroll as it always did. The placement of a player on LTIR also does not provide the team with any additional cap-space savings that can be “banked” for future use while the team operates below the upper limit.

 

Placing a player on LTIR only provides relief if the team's cap payroll or "Averaged Club Salary" begins to exceed the upper limit. The amount of LTI relief is limited to the amount by which the team has exceeded the upper limit — less the amount of cap space the team had at the time the LTIR transaction took place. That means the amount of LTI relief is not the entire amount of the injured player's salary, although teams often make small transactions to ensure it is close.

 

Eligible long-term injury space is calculated on the day the player is placed on LTIR.

 

 

LTIR AT THE START OF A SEASON

 

At the start of a season, teams facing long-term injury situations essentially have two options if they want to maximize their cap space for the rest of the year.

 

OPTION 1: Build the injured player into their opening-day roster and have that roster fit as close to the upper limit as possible without exceeding it, then place the player on LTIR.

By way of example, the upper limit is $70.0M and a team’s Averaged Club Salary or cap payroll on the final day of training camp is $71.5M, including an injured player with an Averaged Amount or cap hit of $2M. The same day, the team demotes two players each with $750K Averaged Amounts, reducing their Averaged Club Salary to exactly $70.0M. Then it files its opening-day, 23-man roster to the league and places the injured player on LTIR. The team’s new upper limit is $72.0M instead of $70.0M for as long as the player remains on LTIR.

Had the club demoted $2.0M in Averaged Amounts instead of the $1.5M in the example above, their Averaged Club Salary would have been reduced to $69.5M from $70.0M, and their new upper limit would be just $71.5M as opposed to $72.0M. This highlights the importance of having the roster fit as close to the upper limit as possible before making the LTIR designation.

 

OPTION 2: Put the injured player on LTIR on the final day of training camp and, including the injured player’s annual average salary or cap hit, build a roster that exceeds the upper limit by an amount that is as close as possible to the injured player's annual average salary.

By way of example, the upper limit is $70.0M and a team’s Averaged Club Salary or cap payroll on the final day of training camp is $71.5M, including an injured player with an Averaged Amount or cap hit of $2M. The team places the player on LTIR on the final day of training camp and is deemed to have already fully replaced the injured player, meaning the team’s new upper limit is $71.5M instead of $70.0M.

Had the team recalled a player with a $500K cap hit prior to making the LTIR designation, its Averaged Club Salary would have increased to $72.0M from $71.5M, and likewise its new upper limit would have increased to $72.0M from $71.5M. This highlights the importance of a team having its Averaged Club Salary exceed the upper limit by an amount as close as possible to the injured player’s Annual Average before making the LTIR placement in order to maximize cap space.

 

 

Once the injured player is healthy, the team must reduce its cap payroll or Averaged Club Salary below the upper limit before the player can be removed from LTIR.

CapGeek.com's off-season estimates do not take into account the possibility of LTIR due to the obvious unpredictable variables and the complexity of calculations. During the season, CapGeek.com's cap space figures estimate maximum potential LTI relief, essentially assuming the team's cap payroll or Averaged Club Salary was equivalent to the upper limit at the time of the LTIR designation.

 

There is no formal designation of "replacement players." The league can challenge the determination of a club physician that a player is unfit to play for purposes of LTIR.

If fewer than 10 games remain in the regular season, a team can still place a player on LTIR, but the player is not eligible to return until the following season. Typically, a team would only exercise this option if the player is expected to miss the entire playoffs. If 10 or more games remain in the regular season but not 24 days, a team can still place a player on LTIR because the days requirement can extend into the playoffs. 

 

 

CBA Reference: Section 50.10 (d) (PDF Pages: 310-314; Document Pages: 290-294)

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WHAT'S THE DIFFERENCE BETWEEN A NTC AND A NMC?

 

A no-trade clause means a player cannot be traded without his consent. Consent is not required for waivers for assignment to the minors. CapGeek uses the terms “NTC” and “full NTC” interchangeably.

A no-move clause means a player cannot be traded, waived for a claim by another team, or assigned to the minors without his consent. This does not protect the player from a buyout. CapGeek uses the terms “NMC” and “full NMC” interchangeably.

 

Limited and modified NTCs and NMCs simply mean the player's contract includes specific terms for the clauses, usually stipulating windows and/or specific seasons and/or allowing the player to specify a no-trade list of undesirable teams or a trade list of desirable teams. 

 

If a player has a full NMC, it travels with him even if he waives it to be traded. However, if the player is traded before his NMC takes effect, it automatically vaporizes unless — in rare circumstances — the acquiring club agrees in writing to be bound by it.

 

An NTC does not travel with a player if a) the player waives a full NTC or b) the player is traded within the terms of a limited or modified NTC. In addition, if the player is traded before his NTC takes effect, it vaporizes unless — in rare circumstances — the acquiring club agrees in writing to be bound by it.

 

It should also be noted that clauses can only cover what would have otherwise been Group 3 unrestricted free agency years.

 

The CBA struck in 2013 added a provision that, should the player and team agree, a NTC or NMC negotiated as part of a contract extension can take effect immediately on the player’s existing contract, providing the player was eligible for a NTC or NMC for that season (ie. it is a year that would have otherwise been a Group 3 unrestricted free agency year).

 

CBA reference: Section 11.8 (a & b) (P. 48)