NBA contracts: Guide to understand how it works

How do NBA contracts work? Guide for you to understand everything

NBA contracts. One of the most complicated things to understand within the League. In this article that we publish in number 1513 of our magazine we tell you curiosities, news and information that you have to take into account.

He's been one of the names this summer: Luka Doncic has signed a five-year, $ 207 million deal with Dallas. Its renewal is just one chapter of the many that the NBA offers when it comes to signing agreements and ties with players. We help you understand what types of contracts are in the league and how franchises sign, renew or dispose of their pieces.

Basic Considerations About NBA Contracts

In the NBA, broadly speaking, there are three types of agreements in terms of their economic format: guaranteed, partially guaranteed and not guaranteed. In the first one, all the money that is reflected must be paid to the player, whatever happens and wherever he goes. In the second type, a part of the money is insured and the rest is subject to clauses or decisions of the franchises. Finally, an unsecured contract does not guarantee the amount of money subscribed and the player lives a day, in the sense that each day that passes makes a little more cash, waiting for the beginning of January of each course, when any unsecured contract is guaranteed for that campaign. Hence, it is very common for franchises to start the calendar year by cutting players with whom they do not have much before they are forced to assure them the entire check until the end of the season.

Free agents and restricted free agents

It's the situation a player without a contract finds himself in when free agency opens in the summer. An unrestricted free agent is one who has concluded his agreement with the franchise and is completely free to negotiate his future in the NBA. You can enroll directly with a new franchise, renew with the old one or use the Sign and Trade: agree to the renewal with your last team to be automatically transferred to another destination already agreed, which will carry with the signed and will compensate the franchise of origin with something back (generally future rounds of Draft). It is a mechanism for the franchise of origin to obtain something in exchange for a token that it was going to lose anyway.

A restricted free agent also has the power to mark his future, but with nuances: he leaves his rookie contract and the home team has made him a qualified offer. With this, the franchise in question reserves the right to match any proposal from another team that reaches the player and thus retain it. Likewise, the player can sign the qualified offer and stay one more year with his entity and the following summer be a free agent without restrictions, something that will also happen if the franchise does not launch the relevant qualified offer.

Contract types

Standard Contract : Guaranteed or not, this is the most common agreement out there. You must subscribe for at least one season or until the end of it if you have signed with the current campaign and the amounts paid are always charged to the salary mass of the squad. It is the base model on which all types of agreements are built: multi-year, for the maximum, for the minimum veteran. It is the roadmap for any contract that is not temporary, neither for the preseason nor Two-Way.

Exhibit 10 : Introduced in 2017, it is a preseason deal. It has the peculiarity that if the player is fired but remains 60 days in the G League link of the franchise that cuts him, he can pocket up to $ 50,000 extra. The team makes sure to keep a token under its radar that may be of interest in the future. Exhibit 10 expires at the end of the training camp and if the player is not cut this agreement can become a dual contract or a standard non-guaranteed contract.

Along with Exhibit 10, there are also other types of pre-season contract formulas, such as the Summer Contract, which expires the day before the start of the season, which does not count towards the wage bill and which grants $ 2,000 per week to the player. Or Exhibit 9, another summer contract, and that serves so that the franchises can cut an injured player during the preseason by paying him only $ 6,000 and without any future responsibility towards him.

10-day contract: It can only be signed from January of the current season. The maximum number of contracts of this type that a player can sign per campaign with the same franchise is two, after which he either renews until the end of the Regular Season or becomes a free agent. Of course, a player can agree each campaign as many 10-day contracts as he wishes with the different destinations as long as he does not exceed the limit of two per franchise and season. The salary is fully guaranteed, even if the player is cut before the termination of the agreement. It is usually a pro-rata of the annual minimum that corresponds to him based on his years of experience in the NBA. The 10-day contract guarantees a minimum of three matches.

Two-Way : Dual contract. The player alternates between the NBA and the tie of the franchise in the G League. His presence on the roster does not count toward the cap of players on the NBA roster, which is 15 standard and 2 dual contracts. The salary for these contracts is also not loaded into the salary cap and its amount is $ 462,629, half the annual minimum for rookie. They are for a season and the player can play a maximum of 50 of the 82 games of the NBA Regular Season. Of course, he is not eligible to play in the playoffs. To do this, your Two-Way should be turned into a standard agreement.

Rookie Scale : When a rookie player is chosen in the first round of the Draft, their payroll is determined by the rookie pay scale. This formula, established in the mid-90s in the NBA, seeks to limit both the duration and the file of the agreements signed by the rookies. The case of Glenn Robinson, number 1 in the 1994 Draft and who signed with the Bucks for 10 years and $ 68 million, put the NBA on alert to regulate this type of practice.

A player chosen in the first round of the Draft – among the first 30 picks – has his salary fixed, with annual increases. The higher you go in the ceremony, the more you will perceive. The Rookie Scale structures contracts for four years, but only the first two are fully guaranteed. The third and fourth are at the discretion of the franchise, which has to exercise these clauses in successive years and not at the same time.

Luka Doncic, No. 3 in the 2018 Draft, signed a deal with Dallas under the rookie pay scale. According to the position in which he was drafted, he had 6.5 million dollars for 2018-19 and 7.6 million dollars for 2019-20, within those first two courses always guaranteed. The options for the third season (2020-21 and 8 million) and for the fourth (2021-22 and 10.1 million) were validated by the Mavericks in October 2019 and December 2020, respectively.

If a player has not been chosen in the first round of the Draft, his future does not abide by these rules and he can freely negotiate his salary and years. There are times when it is preferable to jump to the second round and not have financial chains to come out in the last positions of the first round, with a guaranteed salary, yes, but perhaps less than that which can be obtained if it is freely negotiated.

'Designated Rookie Extension'

A player who is in the last course of his contract signed under the rookie pay scale aspires to a great new deal with the same franchise. We are talking about the Designated Rookie Extension, a mega renewal that must be executed within that fourth and final year of the rookie contract.

The aforementioned renewal of Luka Doncic has been produced under the rules of the Designated Rookie Extension. The Slovenian, within that necessary last year of his contract, signed in August with the Texans an extension for 5 years and 207 million dollars, the maximum to which he could aspire both in time and money. A firm of this type allows the player to absorb up to 30% of the total salary mass of the franchise in his first season of contract. A money that Doncic will begin to enjoy in 2022-2023, when a renewal enters the fray that makes him the highest paid ever in the Mavericks.

A roster can have up to two players under the Designated Rookie Extension but can only acquire one of them via transfer. Do you remember that in 2019 the Celtics could not choose to receive Anthony Davis traded? The Boston team had already acquired a Designated Rookie via trade – Kyrie Irving, from Cleveland in 2017 – and could not take on La Ceja, who in 2015 had signed a rookie maximum extension with the Pelicans.


The minimum and maximum that can be cashed in an NBA contract

While for the minimum salary there are amounts set each year by the NBA and which are marked by the player's years of experience, the maximum amount of money that can be received by an agreement is not something specific, but rather it is variable and highly linked to the salary limit.

Regarding the minimum salary, the case of the Lakers of this 2021-2022 is very illustrative, since it has made part of the roster using this tool, which allows franchises to sign as many players as they want regardless of the salary cap. With this mechanism of the exception for the minimum wage, the wage border can be exceeded to add names to the workforce, with the consequent charge to the Luxury Tax. Carmelo Anthony, Trevor Ariza or DeAndre Jordan are good examples of this. The NBA awards franchises that sign agreements for the minimum veteran to players with more than two courses of experience, since it reimburses them for part of that payroll. Likewise, an entity that does not have salary ceiling problems can sign players for the minimum.

The NBA super contracts for the maximum

It is a formula initially devised by the NBA in its idea that the stars remain in their teams and try to maintain balance in the league. Regardless of whether it is effective or not, with the super contracts for the maximum the player who signs them earns more money than if he decided to go to another destination.

Stephen Curry or Giannis Antetokounmpo – $ 228 million and five years, the highest contract in NBA history – are two names that have come up in recent months. They have done it for the large amounts of money that are going to be pocketed or are already being pocketed. Those bank income will come thanks to the Designated Veteran Extension or what is the same, the super contract for the maximum.

The money cap that a player can aspire to is not something fixed. What is structured in a common way is the duration of the extensions, which must be a maximum of four years if the player has two remaining at the time of signing and five years if the player has a campaign remaining. In both cases, the course limit of an NBA contract in force, which is six seasons, is never exceeded.

Not all players can aspire to the contract for the maximum. To do this, they must have been in the NBA for at least 7 or 8 years and / or have received an individual award in two or three previous seasons, such as MVP or Defensive Player of the Year, and / or have been present in any of the three ideal teams in the last three courses.

How is the money for a super contract fixed? The maximum that a player can earn with this type of contract is marked by the salary cap. Thus, they can receive up to 35% of the salary cap of the franchise in the first year of the agreement. This contract for the maximum marks an increase of 8% in the successive courses and may include an option for the player to withdraw from it before the last season in force. If the player who aspires to a contract for the maximum decides to sign for another franchise, he can only do so for a total of four courses and that annual salary increase of 8% will become 5%. In general, between staying and renewing under these conditions or packing our bags we are sometimes talking about a total difference of up to 80 million dollars. To think about it.

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