How Does the NFL Salary Cap Work? NFL Salary Cap Explained (Updated 2024)

The NFL salary cap has been in place for three decades. Let's run through how the cap works and its effects on NFL rosters and contracts league-wide.

While decrying the NFL salary cap as “fake” has become commonplace, the cap sits at the crux of team-building around the league. It’s an accounting mechanism that can be manipulated, but clubs must be aware of where their team sits financially as they formulate their rosters.

Free agent signings, trades, draft picks, and waiver claims all affect the NFL salary cap, acting as a guardrail for front offices league-wide. Here’s how the NFL salary cap affects teams, players, and contracts.

NFL Salary Cap Explained: What Is the NFL Salary Cap?

The NFL salary cap can seem complicated — and in many ways, it is. Let’s boil down to the basics as the 2024 offseason gets underway.

At its core, the NFL salary cap limits how much each team can pay players on its roster in a given season. The league set its 2024 salary cap at $255.4 million, a $30.6 million increase over the NFL’s $224.8 million cap for the 2023 campaign.

The collective bargaining agreement between the NFL and the NFL Players Association mandates that owners and players split revenues. Historically, ownership has received a slightly larger share of the pie — players currently earn 48% of the profits.

NFL revenue comes from three sources: media revenue, NFL ventures/playoff revenue, and local revenue. The players’ total is then divided by the league’s 32 teams to give each club its individual salary cap.

The NFL salary cap has recently increased by roughly 5-8% per season. The only season in recent memory where the salary cap decreased was 2021, when the league lost revenue due to the COVID-19 pandemic.

Can NFL Teams Exceed the Salary Cap?

NFL teams cannot exceed the salary cap. All clubs must be under the cap by the start of each new league year. In 2023, the new league year will begin on March 13.

However, it’s critical to remember that the NFL salary cap is simply a ledger. While it is a hard cap, it’s designed to be exploited. Teams can deploy various mechanisms to push money into the future and create more space in the present.

MORE: What Is an NFL Unrestricted Free Agent, and How Do They Affect NFL Free Agency?

For example, signing bonuses are typically paid to players almost immediately, but their salary cap impact can be protracted.

Signing bonuses are prorated over the life of the contract or five years (whichever is shorter). Although the player receives his cash instantly, his team won’t feel the financial impact immediately.

Similarly, teams can restructure contracts to open up more cap space. By converting base salaries (the money a player receives for playing each week during the season) into proratable signing bonuses, clubs can create additional cap space in the short term.

Most NFL clubs have inserted restructuring clauses into player contracts. As such, front offices don’t even need the player’s permission before altering his deal. The end result — the player receiving more money up front — is often favorable to the player, anyway.

Still, any dollar that a team pays to a player — including those on the practice squad or on injured and reserve lists — must eventually be accounted for on the salary cap.

As such, many teams are often over the cap during the offseason and until the new league year begins. Increasing salaries, prorated signing bonuses, and “dead money” — salary cap space devoted to players no longer on a team’s roster — can add up and force a club over the cap.

To get under the cap by the beginning of the new league year, teams often have to release some players, trade others, or rework contracts to lower the current season’s cap charges.

What Happens to Unused Salary Cap?

NFL teams are allowed to roll over any unused cap space from one season to the next. Clubs must tell the league they plan to roll over cap space by 4 p.m. ET on the day after their regular-season finale.

While the NFL has a salary cap, it also has a salary floor, so teams cannot hold onto money perpetually. Teams must spend at least 89% of the cap over a four-year period, while the NFL as a whole must spend at least 95% of the cap.

If a team fails to reach the 89% threshold, it will be forced to pay the difference to players who were on its roster during those four years. However, no NFL team has been penalized in this manner in recent memory.

Do Coaches Count Toward the Salary Cap?

Coaches, executives, and other staff members do not count against the NFL salary cap. While head coaches like Sean Payton and Jim Harbaugh reportedly earn $15 million or more per year, that money is not factored into the salary cap equation.

When Did the NFL Adopt a Salary Cap?

The NFL’s creation of a salary cap came hand-in-hand with the start of the league’s free agency. For decades, NFL players were tied to their teams via a reserve clause, which limited their ability to change clubs.

When the NFLPA sued the league in 1989, the NFL responded with a “Plan B” free agency system. Teams could choose 37 players to retain on its roster, while the rest became free agents.

Unhappy with that solution, the NFLPA sued again. The Plan B system was subsequently discarded in favor of unrestricted free agency, which remains in effect today.

In exchange, players agreed to a salary cap. Free agency began in 1993, while the salary cap took effect in 1994. The first NFL salary cap was just $34.6 million.

When Does the NFL Announce the Salary Cap?

In December, the NFL typically gives salary cap projections to the NFLPA and teams. The league will then officially set the salary cap for the following season at some point before the new league year.

In 2023, the salary cap was announced at the end of January. In other years, the league has waited until early March to formally set the cap figure.

MORE: What Is the NFL Franchise Tag and How Does It Work?

The NFL has yet to announce the 2024 salary cap, but a figure is expected to be divulged in the near future.

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