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NFL: What are contract restructures?

The 2020-21 NFL season concluded with Super Bowl LV
The 2020-21 NFL season concluded with Super Bowl LV
Hanen Musa
ANALYST
Modified 25 Mar 2021
Feature

NFL teams have always used contract restructures to lower the cap. However, the 2021 salary took a hit due to the COVID-19 pandemic, and has sunk the salary cap to $182.5 million due to lost revenue.

The clubs across the league continue to restructure their contracts to create more salary-cap space for the new NFL year, which began on March 17.

What are contract restructures in the NFL?

Contract restructures are a simple conversion of a base salary or a roster bonus into a signing bonus. The tool allows the organization to spread the hit over a maximum of five years.

Whenever a team finds itself short on cap flexibility and needs some space, the most effective short-term fix is to restructure its long-term contract. Some teams can cut or trade players, but contract restructures allow a franchise to keep its roster intact and simultaneously provide instant cap relief.

The base salaries of NFL contracts typically aren't guaranteed, but players can receive guaranteed money in the form of signing bonuses. The bonuses are considered up-front payments and can be spread out over up to five years of the contract for cap purposes.

For instance, when the Kansas City Chiefs signed quarterback Patrick Mahomes to a ten-year, $450 million contract, the underlying motive behind that decision was to offer the franchise flexibility to maneuver money. That's exactly what Kansas City will do this season with the cap struggles.

Kansas City could choose free agents and trade their players, but the franchise was a 2020 Superbowl contender, and they would like to keep their team intact and have a few player contracts that they will reconstruct.

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Along with Mahomes, the Chiefs are restructuring tight end Travis Kelce and defensive tackle Chris Jones, according to NFL Network's James Palmer report.

The trio of moves will free up enough salary cap space for Kansas City to start the new league year with around $20 million in cap room.

The restructured contracts will convert salary or bonuses into a signing bonus. With regard to Patrick Mahomes, the Kansas City star is scheduled to total $24.8 million against the cap in 2021.

In most cases, like the Kansas City Chiefs, a restructured contract that sees base salary converted into bonus money is the most straightforward short-term fix for a franchise. The funds will come due eventually, but restructuring a deal allows the team to put off a more vital decision for at least one more year.

Published 25 Mar 2021, 12:47 IST
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