Every year around draft time I get a number of questions on rookie salaries, how the rookie salary cap works, and other ins and outs of the rookie contract. So to tackle many of the questions here is a FAQ style overview on rookie contracts that will hopefully answer your questions and clear up any confusion on the way the contracts work. In case you don’t know it we also have a draft resource page which lists all our contract projections for the 2016 rookie class. If you click on your team all their picks will highlight and you can hover over each pick to get a full year by year estimate of the contract.
What is the “Rookie Pool”?
The Rookie Pool is basically a salary cap that is assigned to each team that puts a limit on the amount that teams can spend on draft picks. In the prior CBA this was called the “Entering Player Pool” and was generally considered the “Rookie Pool” or “Rookie Salary Cap”. The league allowed a player’s cap hit to rise by 25% of his first years cap charge which, in theory, would keep rookie salaries in check. However, in practice it was not the case as teams and agents used all types of neat little cap mechanisms to render the 25% rule invalid, especially for highly drafted players. This was a major renegotiating point in the 2011 CBA.
Per the current CBA, each NFL team is allotted a maximum amount of dollars to spend on their draft picks not only in year 1 cap charges, but also in total value. Those loopholes that existed in the prior CBA were all eliminated and thus rookies are limited to increases that equal 25% of their first years cap charge. The new CBA refers to these allocations as the “Total Rookie Allocation” and “Year One Rookie Allocation”. The values for each team are determined by the round and position in which the player is drafted. I just call them “Rookie Pools” because I’m used to using that term.
Each team is assigned both a salary cap limit for the first contract year of every player on the team plus a four year limit. The salary cap limit for the first year is determined by a “secret” formula made by the NFL which is simply the sum of the max value that the NFL assigns to each draft pick. The total four year pool limit is simply the maximum amount allowed when applying the 25% rule to that first year cap number.
While there is no rule that says a team can not exceed or drop below the slotted amount, in practice that will never happen because of the rules that are now in place. In essence this has taken all negotiations out of most contracts for draft picks.
The various rookie pools are supposed to grow (or fall) by about the same percentage as the salary cap. Because of the failures to account for minimum salary growth the NFL and NFLPA actually agreed to freeze salary growth for rookies from 2012 through 2014 so that bonus money would not decline despite a rising cap. There were likely other reasons the two sides did this as well. In 2015 salaries grew accordingly and we expect the same in 2016.
How did the NFL Come up with these Salaries?
While the formula itself is a secret for calculating the charges those of us who track the numbers are able to get a good idea of how the process works. In general it’s an exponential decay where there are rapid drops at the top of the draft in terms of value and minimal drops as you get into the 3rd and 4thround of the draft. This gives us a good idea at forecasting the charges.
In looking through the numbers back when the rookie pool began it also seemed clear that the NFL based a good deal of their salary logic on the Cowboys draft value chart. Way back in the early days of the cap the only guarantee was the signing bonus and the reality is the signing bonus even now defines the max raises a contract can have. When you plot the trade value chart versus the signing bonus you get the following:
While the match isn’t exact I would say with great certainty that the NFL took the trade chart into account when they made their decisions for salary slotting.
How does the “Rookie Pool” Impact the Salary Cap
This is probably the most confusing aspect for most people. Some people think that this is additional money added on top of the salary cap which is not the case at all. The “Rookie Pool” is a cap within the salary cap. It is essentially money that your team needs to place aside for your rookies. It is not added to your salary cap at all and it has to fit in the $155.27 million cap limit that is set for each team. If signing a rookie puts a team over the cap they will not be permitted to sign the player until they have the cap room to do so.
The second thing that confuses people is the amount of cap space required to fit in a rookie class. This is probably the biggest mistake made regarding rookie salaries and their role in cap management. Usually someone will see that rookie salaries are expected to total $6 million and then make the assumption that the team needs $6 million in cap space to sign their rookies. That’s not really correct.
During the offseason NFL rosters expand to 90 players and only the top 51 players count against the salary cap. Every rookie that is signed will either replace a player currently in the top 51 or not count enough against the cap to be in the top 51, in which case only their prorated bonus money will count against the cap. This is why it is important to understand the concept of effective cap space.
To illustrate let’s look at the Cowboys. I project that the Cowboys will have a rookie pool number of $9,420,455 to spend on 9 draft picks. That is a lot of required cap space for a team to account for, but when we look at effective cap space it will paint an entirely different picture.
The number 4 pick is projected to count $4,516,638 against the cap. But once he is signed he will bump out the number 51 player on the roster. I currently estimate that player to be Mark Nzeocha who has a base salary of $525,000, which will drop from the books when Dallas actually signs the rookie. That makes the effective cost of pick 4 to be just $3,991,638. When we do that for every pick in the Cowboys draft we get the following:
|Pick||Cap Cost||Replacement||Effective Cap Cost|
So really what the Cowboys will need is around $4.9 million in cap space to sign their rookies despite the total cap charge being over $9.4 million.
You simply do this for your team to determine the charge. The quickest way to do it is to simply take the rookie pool we have listed and subtract from it $450,000 multiplied by the number of draft picks you have. This will represent the maximum possible amount the rookies will take up and is much faster than what I did above. Here are the current estimates I would make using that process for each team:
|Team||Total Rookie Pool||Picks||Effective Cap Cost|
Do Rookies Immediately Count Against the Cap
99.9% of the time a drafted rookie will not count against the salary cap when drafted. The only time a drafted rookie will count against the cap is if a team has less than 51 players. Technically when a rookie is drafted they are tendered a minimum contract so if a team has less than 51 players the rookie would count for $450,000 against the salary cap, but not for the full cap charge. This is why on draft day or slightly thereafter you will see every draft pick listed on the site with a contract charge of $450,000. A team does not need to account for the full cap charge until the player is actually signed to a contract, which for most players will not happen until the summer, giving the team ample time to make any moves they need to be able to sign their rookie class.
So What Teams Need To Create Space for Rookies?
Per my cap space estimates no team should be unable to sign their rookies immediately following the draft. The team that will be the tightest is the Saints but they will also gain some added cap relief on June 2 when their June 1 designation of Brandon Browner takes effect. The Jets and Steelers will also be pretty tight following the draft.
When can teams sign Rookies?
Pretty much as soon as they are drafted. Last year the first overall pick was signed within a day of the draft. Because salaries are slotted and negotiations minimal it is not uncommon for teams to finish their signings within two weeks of the draft. If I had to venture a guess I would say the Bears are the quickest to generally get all contracts finished. The Rams have a tendency to sign all their players on the same day after doing a seminar for all of them so they end up being done later. The Titans are the team that seems to drag on signing their first rounder the longest.
If you have players who are not signed right away its usually not an indication of a problem. In a few weeks that is when the NFL front office people finally get a well deserved vacation for about a month. Since they are not working in June (or at least or just working remotely) sometimes the rookie signings are put on the backburner until July.
Why do players sign with agents now if this seems so easy?
My guess is you will see more and more players opting to do the research themselves into this process and avoid signing with an agent, though that doesn’t make it necessarily the right decision. Prior to the draft agents can help with prep work for the combine, workouts, and interviews, getting some media attention, and making certain to at least keep you in the center of team discussions. Agents can also help on draft day when things don’t go as planned to at least be a calming voice in the process since they have been here before.
There are also little things in negotiations such as salary splits, offsets, guarantee language, workout bonuses, and timing of payments that they will have a better understanding of. And if you are released they are there to try to find you a new job and make the arrangements for a tryout. They can also help you understand the little things that need to be done to stand out in training camp to maintain a spot.
Also while teams thus far have done everything by the book when it comes to draft salaries there is some leeway for teams to pay lesser amounts. Agents won’t let that happen.
Any questions feel free to ask and make sure to check out our draft page which we will update soon for the new draft order. We’ll have some draft articles up over the course of the next few weeks as well and for fun head over to Fanspeak and use their really cool draft sims to run your own draft.
Jason is the founder of OTC and has been studying NFL contracts and the salary cap for over 15 years. Jason has co-authored two books about the NFL, Crunching Numbers and the Drafting Stage, which are widely circulated in the industry and hosts the OTC Podcast. Jason’s work has been featured in various publications including the Sporting News, Sports Illustrated, NFL Network and more. OTC is widely considered the leading authority on contract matters in the NFL.