An Explanation of how the Rookie Salary Cap Really Works

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Sometime during the weeks follow this year’s NFL draft, the league will announce each team’s “Year One Rookie Allocation” (formerly known as the “Rookie Pool” or “Rookie Salary Cap”).  This is an oft misunderstood number, because while it is part of the team’s Salary Cap, it does not have a dollar-for-dollar impact on the team’s overall Salary Cap.        

The Rookie Salary Cap is often referred to as “a cap within a cap” because it limits the amount that teams can allocate to their rookies in the year they were drafted.  But, beyond that, there is a lot of confusion about the Rookie Salary Cap and exactly how it works. 

Even some in the media do not fully understand the mechanics of it.  Some have been heard to say that it’s a totally separate pool of money that is not included in the team’s overall Cap.  Others think the entire amount of the rookie Cap is included in the team’s overall Cap, meaning that teams will need that much overall Cap space to sign their rookies.

Both of those characterizations are incorrect.

The rookie Cap IS NOT a separate, distinct pool, but rather, a separate calculation and there is not a dollar-for-dollar correlation between the rookie Cap and the overall Cap.  So, while all of the Salary Cap numbers of a team’s draft picks (and prorated bonus money paid to undrafted rookies) must fit under their Rookie Salary Cap, not all of that amount will impact the team’s overall Cap.

The reason for these misconceptions revolves around the Rule of 51, which dictates that, from the beginning of the league year in early March until the beginning of the season, only the top 51 “salaries” (including base salaries, roster bonuses, likely to be earned incentive, etc) and all pro-rata shares of bonus money of all players – including those outside of the top 51 – count toward the team’s overall Cap.  All “dead money”, i.e. amounts that count against the Salary Cap for players who are no longer on the roster, counts as well. 

This rule is necessary because, during the offseason, team rosters can number up to 90 players.  As such, it would be impossible for teams to fit all of those players under the Cap.  So, to counter this problem, the NFL has instituted the Rule of 51. 

So, how then does the Rookie Cap actually work?

First, as way of explanation, under the CBA of 2011, all rookies receive 4-year contracts, generally with a signing bonus and often with minimum base salaries set for each year of the deal.  While 1st and 2nd round picks may have base salaries of more than the minimum in years 2 through 4 of their deals, even those players will almost always receive the rookie minimum base salary during their first year.  For 2012, the minimum base salary for a rookie is $390K.  For Salary Cap purposes, the bonus received by the player is prorated over the 4 years of the deal and that prorated amount is added to the base salary to create the player’s Cap number. 

By way of example, in 2011, the Baltimore Ravens had a rookie pool of $4.578M for their 8 draft picks.  That is the team’s “rookie salary pool” and is based on the number of the team’s draft picks and where those picks were drafted.

That is the number that Ravens needed to fit the 2011 Cap numbers of all of their rookies under, but, again, that doesn’t mean that the Ravens needed $4.578M in Cap space in order to fit their rookies under the overall Salary Cap.

This, again, is where the Rookie Cap and the Rule of 51 become intertwined – and where most of the misunderstanding regarding the Rookie Cap comes from.  Since each of the 2011 draft picks had a base salary of only the 2011 rookie minimum of $375K (which is the lowest possible base salary for any player), none of the draft picks’ base salaries will actually count against the team’s overall Salary Cap under the Rule of 51 guidelines.

As such, it is only the amortized portions of the draft picks’ signing bonuses that counted against the team’s overall Salary Cap.   

So, to calculate the actual impact of the Ravens’ 2011 draft picks on the team’s overall Salary Cap, the Rookie Cap of $4.578M is reduced by $3M ($375K x 8), leaving an amount of only $1.578M in overall Cap space needed to accommodate the signing of rookies within the Rule of 51.

So, that is how the Year One Rookie Allocation, a.k.a Rookie Salary Cap – the “cap within a cap” – actually works and demonstrates the actual impact of the Rookie Cap on the team’s overall Salary Cap.

Once the season starts, however, the entire Cap Numbers of the rookies who make the team must be fit under the team’s overall Cap.  The impact of that, though, actually operates to save the team a little bit of Salary Cap space, since the rookies are making the rookie minimum base salary and replacing players on the roster who were making more in base salary.  

This entry was posted in Salary Cap Analysis by Brian McFarland. Bookmark the permalink.

About Brian McFarland

Brian McFarland
Known on Ravens Message Boards as "B-more Ravor", Brian is a life-long Baltimorean and an avid fan of the Ravens and all Baltimore sports.  A PSL holder since 1998, Brian has garnered a reputation as a cap-guru because of his strange (actually warped) desire to wade through the intricacies of the...more

2 Raves on “An Explanation of how the Rookie Salary Cap Really Works

  1. Thomas on said:

    Brian,

    I read every post you make and I have to say again that I am impressed by your thorough and detailed understanding of these matters and your way of explaining them to others. Thanks a lot!

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