Salary Cap/Transactions FAQs: Performance Bonuses, Kuznetsov, Offseason Cap, More

The first installment of our Salary Cap/Transactions FAQs covers performance bonuses, buyouts for players involved in retained salary transactions, how teams navigate offseason salary cap rules, and more. If you have a question that isn’t answered here, check our FAQ callout and add yours to the comment section!

Schwa: I would love to learn more about bonuses. I understand rookie and 35+ bonuses. But how about something like Connor Brown last year – injury recovery bonuses? Also how do they affect the cap – if bonuses put you over the cap by end of playoffs, you are penalized the following season? Thanks!

Great opener. Technically, in someone like Brown’s case, they’re not injury recovery bonuses. They’re regular performance bonuses, akin to what you’d find in a 35+ contract. Usually, they’re tied to how many games a player appears in during the season or, in rarer cases, tied to other statistical benchmarks (points, playoff series wins, Cup win, etc.).

The bonuses themselves aren’t what changes, it’s the player’s eligibility that does. Obviously, a “normal” player reaching unrestricted free agency and signing a standard player contract isn’t eligible for them. But players who missed most of the prior season due to injury are eligible for performance bonuses with three key stipulations:

1. They have more than 400 NHL games of experience before signing the contract AND
2. They spent a minimum of 100 days on injured reserve the prior season (standard and/or long-term) AND
3. They’re signing a one-year contract

That is to say – if Brown signed a multi-year deal with the Oilers last summer coming off that injury (ACL tear, I believe?), he wouldn’t have been eligible for any performance bonuses. A deal can’t be structured so that he’d have potential performance bonuses in Year 1 and none in Year 2.

And the second half of your question is correct. If a player earns a performance bonus that’s a higher value than what the team has remaining in cap space at season’s end, it’s a penalty (called a “bonus carryover”) on next season’s cap.

Grocery stick: Hurricanes and Kuznetsov did agree on a mutual termination. What if Carolina had decided to buy him out instead: Would that have any implication on the Capitals? Or would they have continued to pay him the retained money (and using a retention slot on him)?

So, there’s precedent for this – a very recent one, in fact. The Canucks bought out Oliver Ekman-Larsson last summer while he was involved in a retained salary transaction with the Coyotes. Arizona (now Utah) retains the same percentage of the buyout cost that they did on Ekman-Larsson’s initial salary, which does still use up a retention slot.

Buying out the final season of Kuznetsov’s deal would have resulted in a $3.8MM cap charge in 2024-25 and a $2MM cap charge in 2025-26, per PuckPedia’s buyout calculator. Since the Capitals were retaining 50% of Kuznetsov’s salary, they would have split the buyout costs 50/50 with the Hurricanes. Both teams would have had cap charges of $1.9MM in 2024-25 and $1MM in 2025-26.

highflyballintorightfield: How about an explanation of rules for the offseason cap hit limits, that would be sufficient to explain how and why the Capitals can comfortably be well above next season’s cap.

Teams are allowed to exceed the salary cap by 10% during the offseason. This year, with an upper limit of $88MM, that means teams can have cap hits as high as $96.8MM over the summer and still be compliant as long as they get down to $88MM by the time opening night rosters are due.

But you make an astute observation – not only are the Capitals well above next season’s cap, they’re above the 10% threshold as well with a projected cap hit of around $98.25MM, per PuckPedia.

They’ve likely done this by placing Nicklas Backstrom on offseason LTIR, a difficult but necessary move to execute to ensure offseason compliancy. It operates mostly the same as in-season LTIR in that it essentially gives the Capitals an extra $9.2MM in space to work with over the summer. But using offseason LTIR restricts a team’s LTIR pool once the season starts, as it doesn’t allow them to add to it or otherwise optimize it as long as at least one player remains on LTIR. In-season LTIR is much more flexible.

In short, the Caps are sacrificing in-season salary cap flexibility for offseason salary cap flexibility.

Zakis: Read somewhere that signing players early to ELCs helps tamp down the future AAV. How does that work? Also, what’s the difference between ELCs for high school, NCAA, CHL and European players?

It does help decrease the future cap hit/AAV of the deal by a slight amount, but only if the player is subject to an entry-level slide. That’s because signing bonuses don’t slide with the rest of the deal. Let’s look at an example.

When signing 2024 third-overall pick Beckett Sennecke to his entry-level contract last month, the Ducks gave him a $97.5K signing bonus (the maximum allowable) in each season of the deal. Let’s say Sennecke plays fewer than 10 NHL games in 2024-25, sliding the beginning of his ELC to 2025-26. His $97.5K signing bonus for 2024-25 gets paid out anyway, leaving him no signing bonus in 2027-28, which is now the final season of his contract due to the slide. That reduces the AAV of the three-year deal slightly from $975K (including base salary) to $942.5K.

In terms of the difference in how ELCs are structured across players coming from different leagues, there are none. An ELC is an ELC no matter who’s signing it. The key difference lies with who’s still eligible to receive an ELC compared to a standard player contract. If a player is coming out of a North American league, they’re no longer eligible to sign an ELC if their signing age (age on Sep. 15 of the calendar year when the deal is signed) is 25 or older. If they’re above that age threshold, they have to sign a standard player contract.

But for European players, that age limit increases to 28 or older. That’s why Isles international free agent signing Maxim Tsyplakov, whose signing age was 25, was eligible for an ELC this summer. If he was coming from a North American league, he would have needed to sign a standard one-way or two-way deal, removing his $1MM in potential performance bonuses.

Spaced-Cowboy: How often can the NTC be modified or changed in a given year. What is the full process of waiving the NTC. Is it retained after the team acquires them (pre deadline trades that result in a player being traded again; at or before the deadline) Is it always the player or can the organizations stipulate which teams are on the NTC. Does the NHL have specific language for these contracts or is it completely up to the agent/player & organization?

Full NMCs or NTCs can’t be modified, only M-NTCs can (hence the modified qualifier there). Usually, a player’s M-NTC will go into effect on July 1 each year, but sometimes a player/team can agree on a different date. Players and/or their representation need to submit their no-trade list to the team by that date. If they don’t, the M-NTC is voided. That happened with Patrik Berglund back in 2018. He had a 20-team no-trade list, but didn’t submit it to the Blues in time. The Sabres were on his no-trade that, but he was dealt to them anyway in the Ryan O’Reilly blockbuster.

If a player waives an NMC, NTC, or even M-NTC for a trade to go through, or they’re traded before it goes into effect, it remains in effect for its previously dictated duration with the acquiring team. That’s a recent change in the 2020 CBA update – it used to be that if a player was traded before an NMC or NTC went into effect, the clause would be removed unless the acquiring team agreed to keep it.

The only exception to that rule is if a player makes it clear they’re waiving the clause permanently for the trade to go through, which to my knowledge has never happened. Clauses are always waived only for the purposes of a specific transaction, and they then travel with the player after a transaction.

As for the last few parts of that question, it’s up to the player to decide the teams that comprise their M-NTC. Unfortunately, I don’t have a good answer for you on the specific language used to stipulate clauses in contracts.

Image courtesy of USA Today Sports.