The Salary Cap
- The salary cap is set at $39 million per team in 2005-06. There is also a floor, with each team required to spend at least $21.5 million on player salaries in 2005-06. The cap figure covers salaries and bonuses.
- The salary cap is defined as the amount of real money a team pays out in a single season.
- Clubs are not permitted to exceed the mamximum or drop below the minimum. But a team can exceed the cap to replace a player with a long-term injury (a minimum of 24 days and 10 games). When the injured player is reactivated, the team must get back under the cap.
- The 2005-06 cap is based on projected NHL revenues of just under $1.8 billion for the season. In future years, the players are guaranteed 54 percent of "hockey-related" revenues, with the salary cap adjusted each year to meet that figure. The players' share increases if revenues rise. They get 55 percent when NHL revenues hit $2.2 billion, 56 percent at $2.4 billion, and 57 percent at $2.7 billion.
- To ensure the correct revenue split, a percentage of player salaries could be placed in escrow. When total league revenues are determined at the end of the season, the escrow account will be divided among players and owners to ensure that the target has been met. Payrolls will be evaluated at several points during the season to determine whether the escrow account is needed.
Cheating on the Salary Cap
- "Hockey-related" revenue is defined in the agreement, and team revenue reports are audited. A team found to be hiding revenue is fined $1 million plus the amount misreported for the first offense, and $5 million plus the double the amount misreported for further offenses.
- Side deals are not allowed. Teams cannot circumvent the salary cap by paying players through other means - such as gifts, reimbursements on expenses, personal deals, money redirected through related corporate entities, seperate contracts for marketing and promotion, etc.
Individual Salary Restrictions
- Performance bonuses can be earned by the following players only:
- players on entry-level contracts
- veteran players (400 or more games) signing one-year contracts. after returning from long-term injuries (100 or more days on injured reserve in their most recent year).
- players who sign a one-year contract after the age of 35.
- No player can earn more than 20 percent of the team salary cap. In 2005-06, that means a maximum individual salary of about $7.4-$7.8 million.
- Contracts can be bought out for two-thirds of the remaining value for players over the age of 26, and one-third of the remaining value for players under 26. Players who are bought out cannot return to the old team for at least one year.
- When a player aged 35 or older signs a multi-year contract, his average salary is counted against the team's salary cap during every year of the contract, even if the player retires before the contract is up.
- The minimum player salary rises from to $450,000, and will continue to rise until reaching $525,000 in 2011-12.The previous minimum salary was $180,000.
"Entry-Level" Salary Restrictions
- Players between the ages of 18 and 21 must sign "entry-level" contracts for their first three NHL seasons. Those aged 22-23 are entry-level players for two years, those aged 24 for a single year.
- An entry-level player can earn a maximum of $850,000 per year. The limit rises throughout the agreement, to $925,000 in 2011. Maximum entry-level salary in 2004 was $1.295 million.
- Signing bonuses are capped at 10 percent of the player's salary. Under the old deal, signing bonuses for entry-level players were capped at 50 percent of base salary.
- Performance bonuses can be earned at two levels. The first level covers individual benchmarks such as goals scored, goaltender wins, and so on. The maximum a player can earn at this level is believed to be around $850,000 per year. The second level is for much rarer achievements, like winning a major NHL award or ranking among the NHL's top players in a statistical catregory. The maximum a player can earn at this level is estimated at $2 million per year. Performance bonuses under the old agreement were subject to few limits.
- With some exceptions, performance bonuses are paid by the league and do not count against a team's salary cap. But they do count in calculating the league-wide share of player revenue.
One-Time Only Provisions in the Summer of 2005
- All player contracts preceding the new agreement were rolled back by 24 percent.
- From July 23-29, 2005, a contract buyout did not count against next season's salary cap. All buyouts in future years count against the cap.