Justin Herbert signed a five year, $262.5 million contract today making him the highest paid player in NFL history. The contract is very heavy on up front cash, setting big records in first and second year cash flows, while following the recent pattern with vesting guarantees that are not guaranteed at signing. Here is a breakdown of some of the key points of the contract.
This is one of the first contracts that seems to explicit deal in “new money” guarantees, which is something I’ve been harping on for years. Herbert’s contract has $133.738375 million guaranteed at signing, which ranks third in the NFL behind Deshaun Watson and Lamar Jackson. When pulling out Herbert’s 2023 and 2024 existing compensation the number works out to a clean $100 million in new guarantees. That ranks fifth behind Watson, Jackson, Jalen Hurts, and Aaron Rodgers.
The injury guarantee at signing is $193.738375 million which would be 2nd best in the NFL behind Watson. This works out to $160 million in new guarantees which would be fourth in the NFL. Finally, Herbert can earn another $25 million in guarantees which brings his new money guarantee to exactly $185 million, which ties him with Lamar Jackson who has $185 million in injury protection at signing.
The real strength of the contract for Herbert lies in the big cash flows on the front end of the contract. Herbert will earn $100 million in new money by the end of his 1st new contract year. The prior high for that was $80 million, so this is a massive increase for Herbert and the market. Through year two Herbert will be at $124 million, $11.5 million higher than the next closest player. The numbers come back down to earth in the final three years which show moderate growth over the market.
This is a good example of a contract where the front end cash flow makes a pretty big difference in the way a contract should be valued compared to just using the APY, which is only a minimal bump over Jackson’s $52 million a year.
Per a league source familiar with the negotiations the year by year breakdown is as follows:
In 2023, Herbert will earn a signing bonus of $16.12 million along with the minimum salary of $1.01 million. This represents a raise of $12.9 million from his existing salary. His cap charge will be $8.45 million or exactly what it was before the extension.
In 2024, Herbert will earn a massive $50.6 million option along with a guaranteed $6 million salary. This is a $27.1 million raise from his rookie option salary. His cap will be $19.34 million.
2025 brings another huge option bonus worth $45 million as well as a guaranteed $15 million salary. The new money cash hits $100 million this year. The cap that year will be $37.34 million.
In 2026 Herbert has a $24 million salary that is guaranteed for injury and will be fully guaranteed by the time 2026 rolls around. The cap grows to $46.34 million and his running cash is $124 million.
In 2027 Herbert will earn a $36 million salary (this is already injury guaranteed) for a cap charge of $58.34 million to bring the three year total to a record $160 million, $4 million more than the next closest QB contract.
In 2028 Herbert has a $47 million salary and a $5 million roster bonus. His cap charge that year will be $71.12 million to bring the four year new money to $212 million, also $4 million more than the next closest player.
In 2029, there is a $10 million roster bonus and $40.5 million salary for a cap charge of $59.5 million. The $262.5 million total is tops in the NFL by $2.5 million.
The 2028 salary cap number likely will serve as a measure to potentially facilitate an early contract extension.
While this is a strong deal for Herbert, the one thing that would concern me for the market as a whole is that we are back to playing a game of very small leapfrog on the totals with the last three deals going for $51 million per year, $52 million per year, and now $52.5 million per year. While this does blow away Jackson’s contract in the way that the salary is earned early in the contract it still would have been nice to see this hit the $54 million per year mark.
In fairness, Herbert was at a disadvantage for that kind of movement given that he had two years remaining on his contract, Kyler Murray had only moved the market by $100,000 per year when he signed with two years remaining last season. Patrick Mahomes took a 10 year contract to move the market by a massive number. Other highly drafted players like Josh Allen, Carson Wentz, and Jared Goff failed to reset the market when they signed their contracts with two rookie years remaining. So perhaps I should have given more weight to the remaining years when considering the expectation levels.
Next up will be Joe Burrow, who, if the trend holds, will sign a deal for $53 to $53.5 million a year. His situation is more unique because the Bengals are opposed to any salary guarantees and it is unclear if they will bend on that policy for Burrow. If they do not I would expect Burrow to significantly top Herbert’s payout in the first year of the contract and potentially hit $55 million a year as the Bengals have shown a willingness to bump annual values and increase early cash flows to avoid guaranteed salaries in the future. At this position the guarantees are often less meaningful but it can be difficult with the ways deals are reported this days to be willing to accept that kind of contract. We should have an answer on that shortly.
