NHL salary cap


The NHL salary cap is the total amount of money that National Hockey League teams are allowed to pay their players. It is a "hard" cap, meaning there are no exemptions.
The actual amount of the cap varies on a year-to-year basis, and is calculated as a percentage of the League's revenue from the previous season; for instance, in 2007–08, the NHL's salary cap was approximately US$50.3 million per team; for the 2008–09 season it was $56.7 million; for the 2009–10 season it was $56.8 million; for the 2010–11 season it was $59.4 million; and for the 2011–12 season it was $64.3 million.
Following the 2012–13 lockout, the 2012–13 salary cap had been set at $60 million, but teams could still spend up to $70.2 million, pro-rated for the shortened season length. Like many professional sports leagues, the NHL has a salary cap to keep teams in larger markets from signing all of the top players and extending their advantage over smaller-market franchises. The biggest instance was when the Detroit Red Wings stockpiled expensive high-end performers for the 2001–02 season that resulted in them winning the Stanley Cup. The New York Rangers used a similar approach, offering massive contracts to marquee, veteran players, but results were invariably dire.
A salary cap existed in the early days of the NHL. During the Great Depression, for example, the league was under financial pressure to lower its salary cap to $62,500 per team, and $7,000 per player, forcing some teams to trade away well paid star players in order to fit the cap.

Pre-salary cap

Prior to the resolution of the 2004–05 lockout, the NHL was the only major North American professional sports league that had no luxury tax, very limited revenue sharing and no salary cap.
During the "Original Six" era through to the early years of the expansion era, the NHL's strict reserve clause negated the need for a salary cap. Player salaries first became an issue in the 1970s, after Alan Eagleson founded the National Hockey League Players' Association and the upstart World Hockey Association began competing with the NHL for players. Not all NHL owners were willing to engage in a bidding war, in particular, Harold Ballard of the Toronto Maple Leafs spent as close league minimum on rosters as he could, making his team the most profitable. There was little financial incentive for Ballard to spend money on star players to improve the quality of the on-ice product and attract fans, as all Maple Leafs games were sold out regardless of how poorly the team played. The Maple Leafs, which had only ten losing seasons in its history before Ballard took control of the team in 1972, had 12 losing seasons up until his death in 1990.
The 1994–95 NHL lockout was fought over the issue of the salary cap. The 1994–95 season was only partially cancelled, with 48 games and the playoffs eventually being played.
Although at the time six NHL franchises were based in Canada, by the turn of the century, nearly all NHL salaries were being paid in United States dollars. This caused hardship among the small-market Canadian teams at the turn of the 21st century due to the weak Canadian dollar, as their revenues were in Canadian dollars. NHL Commissioner Gary Bettman successfully persuaded the American-based teams to donate towards a pool to mitigate the effect of the exchange rate.

Salary cap

2004–05 negotiations

The negotiations for 2005–12 NHL Collective Bargaining Agreement revolved primarily around players' salaries. The league contended that its clubs spent about 75% of revenues on salaries; a percentage far higher than existed in other North American sports. NHL Commissioner Gary Bettman demanded "cost certainty" and presented the NHLPA with several concepts that the Players' Association considered nothing more than euphemisms for a salary cap, which it had vowed it would never accept; the previous collective bargaining agreement had expired on September 15, 2004.
A lockout ensued, leading to the cancellation of the entire 2004–05 NHL season, the first time a major sports league in North America had lost an entire season to a labor dispute. The lockout was resolved when the NHLPA agreed to a hard salary cap based on league revenues, although the NHL reciprocated by implementing revenue sharing which would allow for a higher cap figure.
The NHL salary cap was formally titled the "Upper Limit of the Payroll Range" in the new collective bargaining agreement. For the 2005–06 NHL season, the salary cap was set at US$39 million per team, with a maximum of US$7.8 million for a player. The practice of paying all players in U.S. dollars was made mandatory, to preclude the possibility of payrolls being taken over the USD-denominated cap by exchange rate fluctuations.
Revenues for the seven Canadian teams have all increased significantly since the lockout. Their cost structure has changed favourably as well, largely due to the fact the Canadian dollar has risen in value significantly, reaching essential parity with its U.S. counterpart for much of 2010. As a result, league-wide revenues measured in U.S. dollars have been inflated accordingly and all seven Canadian teams pay into the current revenue sharing plan. Some U.S. teams are said to have been less able to cope with the unexpected increase in salaries and are believed to be losing money. League owners have said that the current revenue sharing plan is designed to provide some protection to small market teams on either side of the border from the effects of future changes in the Canadian dollar's value.
As a result of these factors, the cap has been raised each year to the figure of $59.4 million for the 2010–11 season, with a cap of $11.88 million for a player.
The collective bargaining agreement also contains a "Lower Limit of the Payroll Range", which is the minimum that each team must pay in player salaries. The lower limit was originally set at 55% of the cap, but is now defined to be US$16 million below the cap; therefore the 2011–12 minimum is US$48.3 million. The difference between the salary cap and a team's actual payroll is referred to as the team's "payroll room" or "cap room". Each year of an NHL player contract, the salary earned contributes to the team's "cap hit". The basic cap hit of a contract for each year it is effective is the total money a player will earn in regular salary over the life of the contract divided by the number of years it is effective. This prevents a team from paying a player different amounts each year in order to load his cap hit in years in which the team has more cap room. Teams still use this practice, however, for other reasons.
Notwithstanding the cap and the nominal value of the players' contracts, the collective bargaining agreement stipulates that a fixed percentage of total league revenues is to be paid to the players each season. To ensure compliance with this provision a percentage of each player's salary is withheld in escrow until the season is over, at which time the funds are divided between the players and owners so as to balance the aggregate league payrolls to the agreed percentage. In the first season of the current collective bargaining agreement, revenues exceeded expectations to such a margin that players received the entire escrow back plus additional funds from the owners, however in subsequent seasons this has not been the case. For example, in the first quarter of the 2010–11 season, the escrow rate was 17%.
Performance bonuses count towards the cap, although there is a percentage that a team is allowed to go over the cap in order to pay bonuses. A team must still factor in possible bonus payments, however, which could go over that percentage. Salary for players sent to the minors, under most circumstances, do not count towards the cap while they are there. If a player has a legitimate long-term injury, his cap hit is still counted; however, the team is permitted to replace him with one or more players whose combined salary is equal to or less than that of the injured player, even if the additional players would put the team over the salary cap ; however, the injured player may not return to play until the team is again compliant with the original cap. All salaries still count towards the league-wide share of revenue that the players receive.
The NHL became the first of the major North American leagues to implement a hard cap while retaining "guaranteed player contracts". Guaranteed player contracts in the NHL differ from other sports, notably the National Football League, where teams may opt out of a contract by waiving or cutting a player. NHL teams may buy-out player's contracts, but must still pay a portion of the money still owed which is spread out over twice the remaining duration of the contract. Any player can be bought out for one-third of the remaining salary if younger than age 26 at the time of termination, or two-thirds if age 26 or older, over twice the length of the remainder of their contract. Trading cash for players or agreeing to pay a portion of a player's remaining salary after trading him was forbidden in the 2005 collective bargaining agreement in order to prevent wealthier teams from evading the restrictions of the cap. It is also prohibited to renegotiate a player's contract in any way. The only way to end a player's contract early is to buy it out, or have the player retire, and then only if the contract took effect prior to a player turning 35.
The collective bargaining agreement also contains a 35-and-over rule, sometimes referred to as the Mogilny rule. This rule states that if a player signs a multi-year deal when the player is 35 or older, starting in the second year of the contract, that amount will count towards the team's salary cap regardless of whether the player is on the active roster or not ; this provision remains in effect for the 2013 collective bargaining agreement. This is designed to keep teams from signing older players to lucrative front-loaded contracts, thus saving cap room, in which there is no expectation the player will actually play in the latter years.
A player who signs a contract aged 35 or older can be bought out as a compliance buyout, or, as a regular buyout. As a regular buyout, the team does not receive cap relief, instead they free a roster position and decrease the salary owed to the player.
Players, agents or employees found to have violated the cap face fines of US$250,000 – US$1 million and/or suspension. Teams found to have violated the cap face fines of up to US$5 million, cancellation of contracts, loss of draft picks, loss of points and/or forfeiture of game determined to have been affected by the violation of the cap.

2012–13 negotiations

A new, lower salary cap limit was negotiated for the collective bargaining agreement starting with the 2012–13 season. To transition to the new cap, each team had two amnesty buyout opportunities: after the 2012–13 season and after the 2013–14 season, to release a player that is bought out in full, counting against the players' overall share in revenues, but not counting towards the team's salary cap. The contract also limits salary variance on contracts from year to year to no more than 35% and no year can be less than 50% of the highest year. This was done due to the increasing frequency of teams signing star NHL players signing front-loaded contracts with the intention of lowering the salary's annual average, and thus, lowering the cap hit. One notable incident of this involved Ilya Kovalchuk, who signed a 17-year deal with the New Jersey Devils in July 2010, prompting the NHL to nullify the contract. Other similar incidents have involved Chris Pronger, Roberto Luongo and Marian Hossa.

Waivers

Waivers are discussed in article 13 of the collective bargaining agreement.
Unlike other professional leagues, waivers in the NHL do not always mean an unconditional release if a player clears waivers and elects free agency, unless the waivers requested were unconditional waivers. Most NHL players will need to clear waivers before they are assigned to a minor league team; exceptions are listed below. Clearing waivers means every other team in the NHL has the option to "claim" that player off of the "waiver wire", thus assuming his contract, and providing only minor monetary compensation to the originating team ; financial compensations are listed below. If a player clears waivers, the team has the right to either loan the player to a minor league affiliate which is generally a team in the American Hockey League, or the team can elect to keep that player with their club. Once a player has cleared waivers, they do not need to again clear them for the shorter of: 30 cumulative days on the NHL roster; or until they have played in ten NHL games. If a player refuses to report to the minors, the team can use that as grounds to suspend the player.

Financial compensation

Note: Compensation is paid internally between clubs and is not applied to the salary cap.
*All prices applicable to Players being Waived shall be in US dollars.

Exemptions

The following players can be assigned to the AHL as many times as a team wishes without needing to clear waivers, until they have reached the number of NHL games played as indicated in the table below.
Also exempt from waivers to demote a player are players who are recalled from the AHL or a Canadian Hockey League team on an emergency basis. These players must be returned to their AHL or CHL team once the injured player returns, or converted to a regular recall, which can then subject the player to waivers if the service time in the table above is met. Starting with the 2013 collective bargaining agreement, for a player on emergency recall from the AHL, playing 10 or more NHL games while on emergency recall automatically converted the recall to a regular recall.

[|Trades] and salary retention

Prior to the reintroduction of the cap, it was fairly common to include cash as part of a trade and/or retain some or most of a player's salary when trading him to another team. This was usually done when the club needed roster space for other player and could afford the extra costs. Under the terms of the 2005 collective bargaining agreement, when a team traded for another player, it assumed the full cap hit and remaining salary obligations of the acquired player. Including cash in a trade was also forbidden. That was partially changed for the 2013 collective bargaining agreement. Including cash in trades is still prohibited, but teams may retain part of a traded player's salary to ease the cap burden on the acquiring team. Provisions on such retention are as follows:
  1. The acquiring team must assume at least 50 percent of the remaining salary and cap charge of the SPC.
  2. Such a contract can only be traded twice using provision 1 during the lifetime of the SPC.
  3. Retained salary by the trading team cannot be more than 15 percent of the upper salary cap limit.
  4. A maximum of 3 such contracts with salary retained in a trade can be on a team's books at any one time.
This provision is included in Article 11 of Summary of Terms the 2013 Collective Bargaining Agreement Memorandum of Understanding.

Free agency

There are several kinds of NHL free agency, but generally the free agent pool in the NHL is split into restricted and unrestricted free agents. All contract signings can be of up to seven years as long as the averaged annual salary will fit under the team's salary cap, and the 50-contract limit is not exceeded.

Unrestricted free agency

On July 1 of a given year, the following players become unrestricted free agents, free to sign with any team without compensation to the former team.
  1. Group 3 free agents: Players who have reached age 27, or have 7 accrued seasons of NHL experience, whose contracts have expired
  2. Group 6 free agents : Players who have reached age 25, who have 3 accrued years of professional experience, and whose contracts have expired, but have played less than:
  3. #80 NHL games played for forwards and defensemen.
  4. #28 NHL games played for goaltenders.
  5. Players whose contracts have been bought out by their former team.
  6. Players who do not meet either Group 3 or Group 6 requirements, but who have not been tendered a contract offer by the Monday after the NHL Entry Draft or June 25. All other players are Group 2 restricted free agents.
For purposes of the above, an accrued season is defined as a player having been on the team's active roster for 40 NHL games, including games missed where the player was injured.
The current NHL collective bargaining agreement also had a Group 5 unrestricted free agency category, but when the age for unrestricted free agents dropped to age 28 after the 2006–07 season, it became moot, as such players would become Group 3 free agents.
Under the 2013 Collective Bargaining Agreement Memorandum of Understanding, teams are allowed to interview players from other teams, but cannot discuss contract terms, following the NHL Entry Draft until July 1.

Restricted free agency

All players whose contracts have expired, but who do not qualify as Group 3 or Group 6 free agents become restricted free agents on July 1 of a calendar year, provided that a team has tendered a qualifying offer by June 25 or the first Monday after the NHL Entry Draft, whichever is later. A qualifying offer is a single year contract offer that is either the same amount as the previous year, or a slight raise, according to the previous year's amount, and must be for the following amount as listed in the table below. For purposes of the table, a one-way qualifying offer is an offer that pays the player the same salary if assigned to the NHL or to the AHL, as opposed to a two-way contract, which has a higher NHL salary than an AHL salary.
Previous year's salary was:Qualifying offer must be at least:And must be a one-way qualifying offer if:
$659,999.99 or less10 percent increase in salaryA player has played at least:
  1. 180 NHL games, AND
  2. 60 NHL games in the previous season, AND
  3. Not cleared waivers during the previous season.
$660,000.00 to $999,999.995 percent increase in salary, but notmore than $1 millionA player has played at least:
  1. 180 NHL games, AND
  2. 60 NHL games in the previous season, AND
  3. Not cleared waivers during the previous season.
$1 million or moreZero percent increase in salaryA player has played at least:
  • 180 NHL games, AND
  • 60 NHL games in the previous season, AND
  • Not cleared waivers during the previous season.
    • Group 2 free agents that have received a qualifying offer can also be traded, even if contract terms have not been agreed upon. All qualifying offers expire on July 15.

    Offer sheets

    The "restricted" part of Group 2 free agency comes into play with the concept of an offer sheet. An offer sheet is a contract that a new team can offer a restricted free agent. If an offer sheet is signed by the player, the originating team has the option of matching that offer, or receiving compensation from the team in the form of draft picks. For the current collective bargaining agreement, the draft picks owed for signing a restricted free agent is as follows. A team must actually have those draft picks to be able to sign the player to an offer sheet, and cannot use draft picks acquired in trades to sign a restricted free agent :
    If a player signs an offer sheet, the player cannot be traded for one calendar year from the date the new contract is finalized. Additionally, starting with the 2013 collective bargaining agreement, the average annual value for purposes of draft pick compensation is determined by the lesser of the number of years of the deal or five. This provision was inserted into the collective bargaining agreement after defenceman Shea Weber signed a 14-year offer sheet after the season.

    Salary arbitration

    Some restricted free agents are eligible for salary arbitration, if the following conditions are met
    1. For players signing their entry-level contract at age 18 or 19, a season of professional experience is at least 10 NHL games played, and at least four such seasons must be accrued for arbitration eligibility.
    2. For players signing their entry-level contract at age 20, a season of professional experience is at least 10 professional games played, and at least four such seasons must be accrued for arbitration eligibility.
    3. For players signing their entry-level contract at age 21 or older, arbitration eligibility comes at the expiration of a player's first contract.
    A player can only be subjected to a team-elected arbitration one time in his career, while a player may elect arbitration as many times as possible, provided that a qualifying offer has been made. After a qualifying offer is made, an eligible player can elect to go through the arbitration process, where the team and the player each make an argument for a certain contract size. An independent arbiter hears the arguments and decides on a fair contract amount. If the player has elected arbitration, and the award is more than a specified threshold a team has 48 hours to "walk away" from the arbitration award, making the player an unrestricted free agent. As of 2017, the threshold is set at $4,084,219. If the team has elected arbitration, the arbitrator's award is binding regardless of the amount.
    Starting with the 2013 collective bargaining agreement, if a player is subjected to team-elected arbitration, that player may still receive an offer sheet from another team until the close of business on July 5. Additionally, any team-elected salary arbitration must be filed for within 48 hours of the conclusion of the Stanley Cup Finals.

    Contracts and contract limits

    There are several parameters that each NHL team must consider when comprising a roster. A maximum of 20 players can dress for a game. Additional restrictions are as follows.
    Guaranteed player contracts in the NHL differ from other leagues, notably the National Football League, where teams may opt out of the salary obligations of a contract by waiving or cutting a player. NHL teams may buy-out player's contracts, but must still pay a portion of the base salary still owed which along with the associated cap hit is spread out over twice the remaining duration of the contract. As further discussed below, buy-outs do not provide a club with either financial or cap relief from any signing bonuses still outstanding, if any. Any player can be bought out for one-third of the remaining base salary if younger than age 26 at the time of termination, or two-thirds if age 26 or older, over twice the length of the remainder of their contract.
    A major part of the benefit derived from the buy-out comes from the fact it is paid out over twice the number of years remaining on the contract. Since NHL revenues and the salary cap have both steadily increased since 2005, bought-out contracts typically consume both a smaller portion of a team's revenues and a smaller portion of the cap compared to what would be the case if they were paid out over the original length of the contract.
    Also, as is the case with "non-guaranteed" contracts in the NFL, NHL contracts can contain signing bonuses and like in the NFL, signing bonuses must be paid except if the player retires or in other exceptional circumstances. Currently, the only limitation to the proportion of compensation that can be paid as a signing bonus is that the base salary of all NHL contracts must be at least the league minimum. Otherwise, signing bonuses can be payable in any year of a contract's duration. Also, notably, because they are due on July 1 prior to the start of each season they must be paid even in the event of a lockout. Signing bonuses may also provide tax advantages to players, depending on the jurisdiction of their team and/or the jurisdiction of their off-season residence.
    If a contract with signing bonus is bought out, the remaining signing bonus is/are still paid in full as they are due and their full cap hits are charged in the year they are paid, with only the base salary being paid and charged against the cap at the reduced rate over an extended period of time. If a player retires, any remaining signing bonus is/are no longer payable, although if the contract took effect after the player turned 35 the full cap hit of the contract will still be charged to the team.
    Unless a team terminates a contract by mutual consent or attempts to terminate a contract for an alleged violation of the SPC then the only way to end a player's contract early is to buy it out, or have the player retire, and even then there will only be salary cap relief if the contract took effect prior to a player turning 35.
    At the commencement of the two most recent CBA's, teams were also provided with a limited number of compliance buy-outs. Like regular buy-outs, this mechanism allowed clubs to pay up to two-thirds of remaining salary owed to a player, but unlike regular buy-outs contracts ended by a compliance buy-out did not count towards the cap. They were implemented to allow teams to be in compliance with the cap for the 2005-06 season, and again to allow teams to come under the reduced cap for the 2012-13 season.

    NHL salary cap history

    Since the NHL salary cap was reintroduced following the ratification of the current collective bargaining agreement, it has risen every year since being instituted. The lower limit is set at 85% of the midpoint, while the upper limit is accordingly set at 115% of the midpoint. The lower limit for the 2018–2019 season was set at US$58.8 million.
    Salary Cap


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