How Does the NFL Salary Cap Work? NFL Salary Cap Explained

    The NFL salary cap has been in place for nearly 30 years. Let's run through how the cap works and its effects on NFL rosters and contracts league-wide.

    How Does the NFL Salary Cap Work? NFL Salary Cap Explained

    The NFL salary cap sits at the crux of team-building. As clubs formulate their rosters, consider free agent signings and trades, and make draft picks, they must be aware of where their team sits financially. 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 NFL offseason gets underway.

    The NFL salary cap places a limit on how much teams can pay players on their roster in a given season. For the 2023 campaign, that figure is set at $224.8 million.

    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.

    In recent years, the NFL salary cap has increased by roughly five to eight percent per season. The only season in recent memory in which the salary cap decreased was 2021, when the league lost revenue due to COVID.

    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 17.

    However, it’s important to remember that the salary cap is simply an accounting system. While it is a hard cap, it’s designed to be manipulated. Teams can use various mechanisms to push money into the future and create more space in the present.

    For example, signing bonuses are typically paid to players almost immediately, but their salary cap impact can be drawn out. Signing bonuses are prorated over the life of the contract or five years (whichever is shorter). The player receives his cash instantly, but the team doesn’t feel the financial impact all at once.

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

    MORE: 2023 NFL Salary Cap Space by Team

    Still, any dollar that a team pays to a player — including those on the practice squad or on injured/reserve lists — will 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.

    In order to get under the cap by the beginning of the new league year, teams often have to release or trade players or rework contracts to lower the current season’s cap chargers.

    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 in perpetuity. 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.

    Do Coaches Count Towards the Salary Cap?

    Coaches, executives, and other staff members do not count against the NFL salary cap. While head coaches like Bill Belichick and Sean Payton reportedly earn $20 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 adoption of a salary cap went hand-in-hand with the beginning of NFL free agency. For years, players were tied to their teams via a reserve clause, which limited players’ ability to change clubs.

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

    The NFLPA sued again, and the Plan B system was discarded in favor of unrestricted free agency, which remains in effect to this day. 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?

    The NFL typically gives salary cap projections to the NFLPA and teams in December. 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.

    Dallas Robinson is an NFL analyst for Pro Football Network. You can read all of Dallas’ work here and follow him on Twitter: @dallasdrobinson.