NFL Contracts: The Incentive vs The Escalator

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With NFL player releases in full swing as teams look to be well under the cap for the start of free agency I thought it might be a good time to discuss the incentive versus the escalator and the importance that the distinction, however small, should be to the agent negotiating the contract.

Typically both the escalator and incentive are earned in a similar manner. In general these are some type of performance threshold that a player must pass in order to earn a financial reward. For example a team might give the player extra money for playing in a certain percentage of plays or throwing for a certain amount of yards. The big difference comes in the form of actually earning the money.

If the performance threshold is tied into an incentive then the player is actually paid when he exceeds the minimum performance level. If I have a $1 million dollar incentive for running for 1000 yards I am going to get a check for meeting that goal. In most cases a team will have their salary cap adjusted for that payment at the end of the year. That will lead to less carryover money or in some cases losses on the following seasons cap. These uncertainties against the salary cap make some teams want to shy away from these incentives because they lose control over the financial planning. Coaches let the players play and (for the most part) they are not going to be stopped because of a cap guy telling them not to play somebody.

With an escalator the team does not lose their financial control. An escalator, if earned, simply becomes a raise for the following year. In most cases it is not guaranteed. So from a players perspective they work hard in a prior year to meet a goal but there may be no payoff. In this case most teams will say “there is no chance they can do that again” and because the escalator is not guaranteed will either cut the player or force a paycut. So many releases are due to players seeing their 2013 salaries rise from their play in 2012.

This is tough for the player. You can put yourself in their shoes in this case. Imagine if your boss told you that if you sold 100 cars he would give you a raise next year. Then when you do it he tells you he changed his mind and you can either work for your salary from the last year or go find a new job. I’d be pretty frustrated with that and that is what many players, especially mid tier player, experience during the course of their contracts.

It seems like a minor detail but I think its one where having strong representation really benefits a player. An agent needs to push as hard as they can to have incentives placed into a contract and if the team will only agree to escalators than those escalators should be guaranteed if earned.   If not expect to see more releases of players who exceed expectations for one year only to see their salaries to rise beyond a level that a team sees them being worth.

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NFL.Com Reports Cowboys Barry Church Receives $3.9 million Guaranteed

Ian Rapoport of NFL.com has some more details on the contract extension signed by S Barry Church with the Dallas Cowboys:

The Dallas Cowboys signed safety Barry Church to a four-year contract extension worth $12.4 million with $3.9 million guaranteed, a source who has been briefed on the deal said Friday.

The contract would seem to be an example of why players enjoy playing for Jerry Jones and why the Cowboys often find themselves in tight cap positions most seasons. Church is currently on IR with an Achilles injury and has started a total of 4 games in his 3 year career.  Set to be a restricted free agent the Cowboys would have essentially controlled Church’s right for the next season at a price tag no higher than about $2.5 million, none of which would have been guaranteed.The Pittsburgh Steelers for instance refused to give their star wideout Mike Wallace, a far superior talent, an extension this year instead forcing him to play on the RFA tag for $2.742 million.

While the full details are not known of the base value of the contract or structure of the guarantees, an annual value of about $3.1 million would seem to be a big win for an injured player that had no leverage in his negotiation. S Eric Smith of the NY Jets received a $2.18 million per year extension with $1.5 million in full guarantees in 2011, starting 10 games for the club in the prior two years. Smith is older than Church, but that would seem to be closer to the market than what the Cowboys decided to do here.