NFL

How does the salary cap of NBA teams work? Trades, extensions, minimum veteran salary

The NBA salary cap 2021-22: all the information on NBA trades and players' roles, contract extensions and the 11 types of salary cap exceptions.

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How does the salary cap of NBA teams work? Trades, extensions, minimum veteran salary
D. Ross Cameron USA TODAY Sports

The NBA salary cap, which is the ceiling that sets a limit on how much teams can spend on their players during a season, is the only one in the American league that is somewhat workable; the NBA has a “soft cap” that allows teams to exceed the cap limit. Sometimes, teams go over both the cap limit and the luxury-tax line, which is simply paying the penalty for what you exceed. The Warriors and the Nets are good examples of teams that are diving into tax with nine-figure bills this season. 

When a team blows past their cap room, they have a series of exceptions that allow them to exceed that cap, including mid-level, bi-annual and several forms of Bird rights that you will read more of below.

Once a team uses any of these roster scenarios, they become hard-capped, and cannot surpass the given “tax apron” at any point during the rest of the league year; the 21-22 apron was set at $143 million.

Once the league year ends and the new one starts, hard-capped teams become free again to exceed the succeeding year’s tax apron; an apron is essentially a hard cap for any team that acquires a player via sign-and-trade, signs a player using the non-taxpayer mid-level exception, or a bi-annual exception.

NBA Minimum Veteran Salaries

Unless an NBA team is all the way up to its hard cap, they should be able to sign a player to a minimum-salary contract if they are both out of cap space and have used their mid-level or bi-annual exceptions. A minimum salary exception can be utilized several times, and allows teams to add as many players as the roster limits, unlike the mid-level or bi-annual exception.

The players who often receive minimum-salary contracts are undrafted free agents and second-round picks. But there are also several veterans who settle for the minimum.
Since an NBA player’s minimum salary depends on the experience he has, veterans often earn salaries that are twice as much as rookies on minimum-salary contracts.

The NBA league reimburses clubs that sign veterans with three or more years of experience to one-year minimum salary contracts in order to avoid teams from always choosing younger and cheaper players over veterans. These deals also count against a team’s cap and bank balance. The minimum salary for a player with two years of experience in the NBA is $1,669,178.

11 types of Salary Cap exceptions in the NBA

Qualifying Veteran Free Agent Exception (“Bird” Exception): If a free agent has played for a team for some or all of three consecutive seasons, they may re-sign him to a contract with a first-year salary of the maximum player salary.

Early Qualifying Veteran Free Agent Exception (“Early Bird”) : The Early Bird Exception is used to sign a contract for at least two seasons. If a free agent has played for a team for some or all of the two previous seasons, a team is allowed to re-sign him with a first-year salary of up to: 175% of the player’s salary of his previous season’s contract, or 105% of the average salary for the previous season,

Non-Qualifying Veteran Free Agent Exception (“Non-Bird”) : A free agent who’s neither a “Bird” nor an “Early Bird” player, may re-sign a contract with a first-year salary of: 120% of the player’s salary in his previous season’s contract, or 120% of the player’s minimum salary for the given season, or lastly if the player is a Restricted Free Agent, his Qualifying Offer amount.

Bi-annual Exception: Teams who want to sign one or more players to contracts whose first-year salaries are up to $3.382 million can use this exception, as well as teams who want to re-sign their own free agents, and not acquire a player by assignment. Signed contracts however, cannot cover more than two seasons or be used in succeeding years.

Non-Taxpayer Mid-Level Salary Exception: teams who want to sign one or more players to contracts whose first-year salaries provide for up to $8.641 million, as well as re-sign their own free agents, and not acquire a player by assignment. This exception can be used for up to four NBA seasons.

Taxpayer Mid-Level Salary Exception: teams who want to sign one or more players to contracts whose first-year salaries provide for up to $5.337 million, as well as re-sign their own free agents, and not acquire a player by assignment. This exception can be used for up to three NBA seasons.

Mid-Level Salary Exception for Room Teams: this exception applies if teams haven’t used any of the Bi-annual Exception, the Non-Taxpayer Mid-Level Salary or the Taxpayer Mid-Level Salary Exceptions in the same Salary Cap Year. Similarly, teams using this exception can sign one or more players to contracts whose first-year salaries provide for up to $4.449 million, as well as re-sign their own free agents, and not acquire a player by assignment. This exception can be used for up to two NBA seasons.

Rookie Exception: Each season before the start of the Moratorium Period, there is a new Rookie Salary Scale issued reflecting the Salary Cap from the previous year. Teams can sign their heir first-round draft pick for up to 120% of his Rookie Salary Scale amount.

Moratorium Period is a negotiation period from Aug. 2-6 where teams can negotiate deals with free agents, but players aren’t allowed to officially sign until 12:01 p.m. on Aug. 6.

Minimum Salary Exception: This exception can be used to acquire a player who had a signed minimum contract of one or two years by assignment. Teams can sign the player to a one or two-year contract at the minimum player salary.

Disabled Player Exception: When a player suffers an illness or season-ending injury, teams can replace him with one player to a contract’s salary of either 50% of the disabled player’s current salary OR the season’s amount of the Non-Taxpayer Mid-Level Salary Exception.

Traded Player Exception: A year after the trade of a player contract to another team, that player can be replaced with one or more acquired players by assignment. This exception pertains to non-simultaneous and simultaneous trade rules, which are complicated even to NBA experts. Find the full NBA contract Exception rules here

How do NBA trades work?

In the NBA, players are traded for various reasons, with the most common ones being team improvement and money saving. A trade exception allows teams to trade players as long as their incoming salary does not surpass a specific amount; this amount is determined based on the outbound salary and whether the team pays the luxury tax after any trade. Teams that trade players with a higher salary than the one they earned can use the trade exception.

An additional trade rule is a “Sign and Trade” deal. Just like it sounds, this deal allows a team to ‘sign’ its own player to a new contract then include him in a ‘trade’, which gives the acquired team the right to own that player’s Bird right. As you have read above, this type of contract enables teams to re-sign a player as soon as his contract expires, even if they are going over the cap.

Teams can re-sign with their own free agents and then trade them to another club 48 hours later. They can also trade players they acquired immediately in what is known as a one-on-one deal. Moreover, only unrestricted free agents, who are players with expired contracts, are allowed to get involved and sign with any team. Unlike this exception, restricted free agents have permission to explore the market, but their restriction comes with their original teams authorized to match any offer other teams are providing them.

Teams cannot take on an unlimited amount of salary and pull off trades as they like, which is why salary caps exist.

In addition to the complicated set of rules of trades in the NBA, it’s worthy to note that there is no limit to how many times a player can be traded in the NBA.

Do NBA players get a say in trades?

Good news, NBA players have a say in when and where they get traded. Of course there is a difference between superstars and other players when it comes to asking for trades, but still, they all have more control than ever before; players like the Nets’ Kyrie Irving have the luxury to decide where he gets traded to.

This steadiness between players and teams exists now because of the abundance of money and salary cap flexibility.

NBA Contract Extensions

Some of the most profitable contracts signed in the 21-22 league year so far were contract extensions, not free agents.

Contract extensions are exactly how they sound; they enable a team to lock a current player (or players) for a few years. Extensions have a big role in impacting the team’s salary cap situation for various seasons.

The most common contract extension in the NBA is the Rookie scale Extension; in the 2020 season, there were a total of 10 rookie scale extensions. Former first-round picks going into their fourth and final year of their rookie deals have the right to sign those up until October 18. Four to five players are the common ones we see signing up for rookie scale extensions.

Since the CBA, or the Collective Bargaining Agreement, has added incentives and widened eligibility rules for stars to sign deals before reaching free agency, Veteran Extensions have become more common. There’s been a total of 19 veteran extensions in the last two league years.

A player on an expiring deal has the right to sign a new contract under the veteran extension anytime during the season. However, a player who isn’t going into the final year of his current contract has until October 18 to sign for a veteran extension.

Some of the NBA players who have finalized rookie scale contract extensions for the 21-22 season are: Luka Doncic (Mavericks), Trae Young (Hawks) and Robert Williams (Celtics).

While Stephen Curry (Warriors), Kevin Durant (Nets), and Jimmy Butler (Heat) have signed up for Veteran contract extensions.