The economics of CFL contracts and the salary cap can make things a bit complicated.
Welcome to Canadian Football Economics 101.
Or to put it in simple terms: explaining how teams manage the salary cap.
Almost a month after the flurry of signings by teams during the CFL free agency, the second wave of moves is taking place
In many cases, teams are restructuring deals by adding a year to a player's contract with a signing bonus, which is actually a misnomer. Unlike many professional sports leagues which offer a signing bonus in addition to the contract, the CFL signing bonus is actually part of the contract. So if a player receives a $30,000 signing bonus, it is actually included in the overall pay structure.
And unlike other leagues, which amortize the bonus over the length of the contract, the CFL signing bonus is a one-time thing. There may be other bonuses attached to the contract -- either during the year or after the season -- but it still will count in the cap if the team pays the amount. Because football contracts are not guaranteed, a team can simply cut the player in advance of the scheduled payment.
It's a game of give-and-take, in which the player may have the upper hand as a free agent, but loses the leverage henceforth, particularly in the year after the free-agent signing.
"It's always the team going to the player. The player never wants to make less money," said a source familiar with the process.
Many noteworthy players -- including the likes of Hamilton's Arland Bruce, Quinton Porter and Kevin Glenn, B.C.'s Geroy Simon and Brent Johnson, Saskatchewan's Dan Goodspeed, Montreal's Adrian McPherson, Calgary's Jabari Arthur and Romby Bryant, among others -- have either agreed to extend, or are in the process of extending, their deal. In most, if not all, the deals the player is not getting a raise.
"If you're a player in the option year, (teams) don't want you going to free agency anyways, so this is a way to kill two birds with one stone -- get a rebate and extend that rebate for a longer period of time," said one source. "It's been going on forever."
In fact, one team executive said legendary CFL GM/head coach Cal Murphy perfected it to a science.
"He extended guys almost every off-season, giving them a little money up front and what was supposed to be a two-year deal ended up being a 10-year contract," said the executive.
Players are willing to give up salaries on the back end, knowing they will receive bonus money at a time of the season when they aren't collecting paycheques. For American players, the bonus money is noteworthy because they are only taxed at 15 per cent under the U.S. taxation laws.
"Guys always need money in the off-season," said the executive. "It doesn't mean they all do. But a number of them need it in March, April, May and that's when it becomes interesting."
And analyzing it from another tax perspective, if an American player gets a significant portion of the salary in a bonus, it lowers the overall base salary, which is taxed at a higher level.
"What they're putting in their pocket could be worth more even if the contract is less because their tax bracket is a little different," said one team executive.
Then there is the example of the player who signed as a free agent and gets a whopping signing bonus up front. It creates a slew of other moves because of the cap implications.
"What do you do?" asked one team executive rhetorically. "You've got to cut people, you've got to readjust contracts, you've got to get people to take paycuts, you've got to draft a few that are actually going to go against your roster. The draft itself is a balancing act. It always has been."
And the same player who is given a significant signing bonus as a free agent one year, may be asked by the team to restructure the deal the following season if he didn't play as well as expected. One agent called it "fictitious free agency."
It happens all the time -- and again the player is vulnerable because the contract isn't guaranteed. On Monday, the Edmonton Eskimos announced the release of veteran linebacker Maurice Lloyd, who was given a huge contract the year before under a different regime and didn't play up to that ability.
Or sometimes a player does well and the team bumps up his salary in the same season because of available cap space. In this particular example, it benefits the player and the team.
"It's a constant moving target," said one team executive of the cap. "It's multi-layered."
And it's far more structured now since the CFL introduced a strict salary-cap management system a few years ago that includes an annual hard salary cap of which there are significant penalties for going over the limit.
This year the cap for all teams is $4.2 million. If a team goes over the cap, it faces a dollar-for-dollar fine for the first $100,000 over the cap. There are more significant penalties for exceeding $100,000.
"Everybody pays different amounts of money to different people in the way they go about doing it, but at the end of the day we all make very difficult decisions to have people on your football team," said one team executive. "You may adjust to what you need them to or you have to cut them or they'll ask for their release or you don't re-sign them as a free agent."
"It increases the importance of making good decisions. If you don't have cap space you have problems," said another team executive. "If you spend too much money up front, the coaches really have very limited options. It's a balancing act trying to figure out where that line goes. If you get too many players with money up front, then you don't have any flexibility. If you trade them or they get injured the money you gave them in the off-season counts against the cap."
Although the CFL has a rule that allows teams to place a player on a nine-game injured list without the salary counting against the cap, a player signed as a replacement factors into the budget.
"Say you have a quarterback and he makes $250,000 and gets $75,000 to sign, if he tears up a knee in training camp or early in the season, you get (cap) relief for the balance of the salary, but any money you paid up front you eat," said a team executive.
"It's a high-risk proposition," said another team executive. "That's the huge risk you run giving all that money up front. We all do it."
And now you have an idea of the economics of the CFL.
