Structure of player contracts - question

[taxbuster]

I know that NHL contracts typically reward performance by way of bonuses at the end of the year (points, goals, games played, whatever..).

Why are contracts not structured so that a player that a team identifies as a "keeper", but who may have difficult specs to determine, has performance-based raises built in?

So (using Johnny G. as an example), after 3 years of pay at a given amount - let's use $7M for a number, he shows that he has averaged more than x points, with y% in "away games". That entitles him to a 20% pay bump for the next 3 years, so his next portion is at $8.4M per year.

This would give the player the time to prove himself, the team the time to understand that he has, and other annual performance bonuses could be used to enhance the contracts if desired. If the player doesn't measure up, the team is protected. If he does, the player is protected.

Is this not permitted or am I missing something (possibly something obvious )?

[Weitz]

Bonuses only available to ELCs and over 35 contracts. Also something about injured seasons.

Bonuses on other contracts are just "signing bonuses"

[gvitaly]

Not all players are eligible for Performance Bonuses, and to receive a bonus within their contract, a player must meet one of the following criteria:

1. The player is on an entry-level contract.
2. The player has signed a one-year contract and is over 35 years old.
3. The player has signed a one-year contract after returning from a long-term injury (has played 400 or more games, and spent 100 or more days on the Injured Reserve in the last year of their most recent contract).

Also because the cap hit of a contract is an average value it would give teams a way to circumvent the cap, which is already done to an extant.

Performance bonuses count against the salary cap; however, a team can exceed the salary cap due to performance bonuses by the maximum performance bonus cushion amount of 7.5% of the upper limit.

EDIT: ^ What he said.

[taxbuster]

I understand that with respect to "bonuses". But an escalation to base salary (for want of a better term) isn't a bonus. It's an escalator and applies to all future years. This is, in my mind, different from a bonus which a player either gets in a year, or doesn't. In this case he proves himself after several years, and then the base income is adjusted upwards - not just in the current year but all future years.

I guess this could be viewed as a "bonus" that, once earned, applies in each year thereafter, even if not "earned" in that year?

I s'pose the CBA could specify that any bump is deemed to be a Performance Bonus and therefore has to follow those rules, regardless of how it is structured.

[gvitaly]

Originally Posted by taxbuster

I understand that with respect to "bonuses". But an escalation to base salary (for want of a better term) isn't a bonus. It's an escalator and applies to all future years. This is, in my mind, different from a bonus which a player either gets in a year, or doesn't. In this case he proves himself after several years, and then the base income is adjusted upwards - not just in the current year but all future years.

I guess this could be viewed as a "bonus" that, once earned, applies in each year thereafter, even if not "earned" in that year?

I s'pose the CBA could specify that any bump is deemed to be a Performance Bonus and therefore has to follow those rules, regardless of how it is structured.

It would work if the yearly salary of a player was also his cap hit. Right now the cap hit is an average of the salary through the entire contract. You can structure bumps in salary which ever way you want(within a certain percentage I believe). Otherwise it leaves a huge loophole in the cap system.

[Oling_Roachinen]

Outside of the bonuses for ELC's, 35+ contracts and injured players, the contracts are guaranteed and predetermined. There's no potential for an 'escalator.' Players and teams agree to a yearly salary and yearly signing bonus. This can change from season to season, but it is known and unchangeable once the contract is signed. That's what they get unless they are bought out or the Kings need cap space.

[Finger Cookin]

Originally Posted by taxbuster

I understand that with respect to "bonuses". But an escalation to base salary (for want of a better term) isn't a bonus. It's an escalator and applies to all future years. This is, in my mind, different from a bonus which a player either gets in a year, or doesn't. In this case he proves himself after several years, and then the base income is adjusted upwards - not just in the current year but all future years.

I guess this could be viewed as a "bonus" that, once earned, applies in each year thereafter, even if not "earned" in that year?

I s'pose the CBA could specify that any bump is deemed to be a Performance Bonus and therefore has to follow those rules, regardless of how it is structured.

Salaries can't be changed once the contract is signed. The CBA explicitly disallows this. So any bonuses earned could not act as an escalator in the way you're describing. Bonuses can only be earned in the circumstances that were detailed in the second reply.

[Vulcan]

Players can sign signing bonuses as part of their salary. Monahan has a $3.5M signing bonus for the 2020/21 season for when the NHL players contract ends. This guarantees he gets $3.5M whether there is a lockout or not.

I imagine Gaudreau will get something the same.

http://www.generalfanager.com/players/382

[Beatle17]

Originally Posted by taxbuster

I know that NHL contracts typically reward performance by way of bonuses at the end of the year (points, goals, games played, whatever..).

Why are contracts not structured so that a player that a team identifies as a "keeper", but who may have difficult specs to determine, has performance-based raises built in?

So (using Johnny G. as an example), after 3 years of pay at a given amount - let's use $7M for a number, he shows that he has averaged more than x points, with y% in "away games". That entitles him to a 20% pay bump for the next 3 years, so his next portion is at $8.4M per year.

This would give the player the time to prove himself, the team the time to understand that he has, and other annual performance bonuses could be used to enhance the contracts if desired. If the player doesn't measure up, the team is protected. If he does, the player is protected.

Is this not permitted or am I missing something (possibly something obvious )?

Good question, but playing the devils advocate, what if Johnny doesn't perform to X and Y level, does he then reduce his salary for the next 3 years to say $5.5 M? Or does the bonus amount only benefit the player?

[taxbuster]

Originally Posted by Beatle17

Good question, but playing the devils advocate, what if Johnny doesn't perform to X and Y level, does he then reduce his salary for the next 3 years to say $5.5 M? Or does the bonus amount only benefit the player?

No, I'd see the salary as just staying the same. (Kind of like most of us working schlubs --- we may not get a raise, but we don't give back money either.)

[taxbuster]

Interesting - I guess one of these days I'll download and read the entire CBA (I assume it's publicly available). I guess in the era of "cost certainty", one of the pieces of that pie is setting explicit contract amounts - other than bonuses - per year so that AAV and other salary cap numbers can be calculated and timed forward from year to year.

As a numbers guy, personally I think that would be a fun job. Sort of.

Anyway - thanks all for the comments - helps me to understand why some negotiations are more difficult than others.

[Finger Cookin]

Originally Posted by taxbuster

Interesting - I guess one of these days I'll download and read the entire CBA (I assume it's publicly available).

http://www.nhl.com/nhl/en/v3/ext/CBA...A_2013_CBA.pdf