How Does Guaranteed Money Work In The NFL?

A look at how the NFL’s guaranteed money system works, and how it affects a team’s salary cap.

Introduction

The National Football League is the only major professional sport in which not all of a player’s contract is guaranteed. In baseball, basketball and hockey, nearly all contracts are fully guaranteed, meaning that if a player is released, he is still owed the remainder of his salary. In the NFL, however, only a small percentage of each player’s contract is typically guaranteed. For example, ESPN’s Adam Schefter reported in 2013 that the Miami Dolphins had $46 million in “dead money” on their salary cap — meaning $46 million in salary that would count against the team’s salary cap even though those players no longer played for the team.

What is the NFL’s “guaranteed money” policy?

The NFL’s “guaranteed money” policy is a provision in the league’s collective bargaining agreement that protects a certain percentage of a player’s signing bonus and base salary from being forfeited if the player is cut.

The percentage of signing bonus and base salary that is considered “guaranteed” varies from player to player, depending on when they signed their contract and how long it runs. For example, a first-round draft pick who signs a four-year contract will have 100% of their signing bonus and base salary for their first two years considered “guaranteed”.

Similarly, a veteran free agent who signs a five-year deal will have a higher percentage of their signing bonus and base salary guaranteed than a rookie free agent who signs the same length contract.

The guaranteed money policy is one of the many ways that NFL players are protected from being arbitrarily released by their teams. It gives players some financial stability and peace of mind, knowing that they will at least receive a certain amount of money even if they are cut before their contract expires.

How does this policy affect player contracts?

The new policy will affect both veteran and rookie contracts, but it will have a greater impact on rookies. In the past, rookies were often signed to “split” contracts, which gave them lower salaries in their first two seasons with smaller signing bonuses. Under the new policy, all rookies will receive larger signing bonuses, which will be fully guaranteed. In addition, their salaries in their first two seasons will now be fully guaranteed as well. This means that if a rookie is released during his first or second season, he will still receive the remainder of his signing bonus and salary that was guaranteed in his contract.

What are the pros and cons of the policy?

One way that organizations such as the NFL and major corporations protect themselves from outrageous financial demands by their star employees is by signing them to contracts that include what is known as “guaranteed money.” In short, this means that a certain amount of the athlete or businessman’s salary is paid out to them regardless of whether they are still with the team or company, or if they are released/let go.

The advantage of this for the organization is obvious – they are not on the hook for paying an employee who is no longer with them, or who has been fired. The downside is that it can limit their ability to get rid of under-performing or disruptive employees, as they will still be on the hook for paying them a significant amount of money.

For the employee, the benefit is obviously receiving a large sum of money even if they are no longer with the team. The downside is that it can incentivize employees to be less motivated, as they know they will still be paid even if they don’t perform up to par.

All in all, guaranteed money can be a good thing or a bad thing depending on how it is used by both the organization and the employee.

Conclusion

In the NFL, guaranteed money is paid out to a player regardless of whether they are cut from the team or not. This means that if a player is released by their team, they will still receive the money that was guaranteed to them in their contract. Guaranteed money is typically paid out in signing bonuses and base salary, and it is often used as a way to entice free agents to sign with a certain team.