Salary Cap Confidential: Managing Contracts
I’ve always called salary cap the perfect blend between redraft and dynasty. Because you choose both salary size and length of contract, you control the type of commitment you’re making to a player. In other words, the expectations of a player on your roster are only short-lived if you want them to be as with a redraft league (one-year contract), and only extended if that’s what you desire as in a dynasty (long-term contract).
Far too often, owners get convinced that the salary offered to a player is the most important part of a contract offer – particularly when bidding in a startup or free agent auction. Depending on the penalty for dropping players or when the penalty is levied against your cap though, the contract length can cause far more complications to a franchise’s salary cap.
There are two different types of leagues when it comes to the timing of when a player’s contract length is decided, during the bidding and after the bidding.
The standard way to hold a salary cap auction is to decide the winning bidder by who bids the highest salary. After which, that owner decides the length of the contract, which gives the owner time to think about the severity of a long commitment and factor in other auction wins.
Often, these types of auctions conclude with a lot of one-year contracts being handed out – especially in harsh cap penalty leagues – because owners want to maintain as much cap flexibility as possible (which is far and away the best strategy in such leagues). This setup is fine but in my experience, isn’t nearly as challenging or fun as the other method.
Other leagues require owners to bid the contract length along with the yearly salary during the auction. There are a few ways to run such auctions but my favorite is to create a value ratio of years to salary. For example, every year is worth $3. So basically, my $13 bid for one year could be outbid with a $10 bid for two. (We’ll cover this bidding system thoroughly later in the series).
In leagues that require contract length and yearly salary during auction bids, owners are pressed to make snap decisions on a player’s short and long-term value. Often they choose short term flexibility over long-term risk, electing to add years to an offer in order to keep the yearly salary as affordable as possible – which can lead to harsh consequences down the road and is something I try hard to stay away from.
No matter when contract lengths are decided during an auction, my goal when making such decisions is to always allow an out in a reasonable amount of time. There are many factors that are considered including age, production, and league rules but in general, I follow a couple of guidelines that have treated me well.
Rule number one (The Golden Rule of Contracts)
What are the chances the player outperforms the salary I’m offering him this year? If the answer isn’t “good” or better, he’s not worth a multi-year contract offer.
If you don’t believe the player has a good chance of being more valuable a year from now, there’s no point in offering him a multi-year deal. Think about it. If a player is going to lose value, you won’t want him at his current salary in 12 months. And if he keeps his current value, you’ll still have the opportunity to get the player back at the same salary in a year which offers flexibility. That leads us to…
Rule number two
There is no such thing as a bad one-year contract.
We’ll cover this rule in detail in an upcoming edition of Salary Cap Confidential but the take away is that there is little to no risk in a one-year contract, so if you need the player to compete (or reach any goal) this year, no salary can make it a bad contract. Sounds wrong, but its right. Again, I’ll explain later.
Rule number three
Calculate the penalty for cutting a player before deciding the contract length offered.
Like much that has been covered in this series, this rule comes down to knowing your league’s rulebook. Figuring the penalty for cutting a player at each point (year) of the contract will often times make the contract length decision for you.
For example, if your penalty for cutting a 27-year old, mid-WR2 (In the mold of Adam Thielen) with a salary of 10% of your cap is 50% of his salary multiplied by the number of years remaining on the contract, your penalty for releasing him, by year, would be as follows…
Personally, I feel like a 10% salary is a bargain for a solid WR2 no matter the age so I would try to get multiple years on a 27-year old. I’m obviously already sure the player is worth 10% of my salary cap in year one so I’m immediately ruling out the one year option and the low risk of the player completely tanking in the first year makes me think I should explore a three-plus year contract.
Some owners would jump at the chance to lock up such a low salary for four-plus years but because of past players like Hakeem Nicks among others, I’m a little more risk-averse. Because I made the bid, I’m nearly 100% sure I won’t cut the player in year one, even if he is a complete failure. But just in case that happens, I want the option of cutting the player in year two without risking a higher percentage of my salary cap in the season I release him, which makes the three-year option a perfect fit for me.
Again, many owners wouldn’t pass on the chance to lock in a quality player at a low salary for as many years as possible but I’d be hesitant. If the same situation arose in a league where contract length would be offered at the same time as the salary like explained earlier, I’d much rather offer the $13/three-year contract than a $10/four-year deal. If I couldn’t afford the $13, I’d rather pass on the player altogether. The salary cap flexibility is worth far more in the long term than the $3 this year, in my opinion.
Using the same example but in a league that guarantees 75% of player salaries, the penalty would be as follows…
In this example, the three-year option would be a tad too risky for my liking. Having to keep an extra 5% in cap space available in case the player needs to be released in year two makes me uneasy about extending him beyond two years, despite the bargain on his salary.
Rule number four
With the exception of elite quarterbacks regardless of age in super-flex leagues, young players with elite upside are the only players worth giving four-plus year contracts.
Rule number five
Because a running back’s shelf life is so short, lean towards the shorter length when deciding between two contract lengths. (So if I’m unsure whether to give Ezekiel Elliott a four or five-year deal, I lean towards the four-year option.)
Rules four and five are more guidelines than rules. They are incredible self-explanatory but have been valuable lessons for me over the years.
Finally, staggering contracts often comes up when the topic of contract management is discussed and once again, my position depends completely on league rules, but instead of the penalty severity for releasing a player being the factor considered like every other situation to this point, the ability to retain players is key here.
In leagues where it’s an option (and affordable) for owners to retain players who have expiring contracts, I’m very much in favor of staggering the contracts of elite players. In many cases, cap leagues allow owners to tag a franchise player each off-season. Usually, the cost is relatively high but such rules can make it advantageous for owners to keep the contracts of their biggest stars from expiring in the same off-season.
Other rules that allow owners to sign players to long-term extensions or put a limited amount of players through a restricted free agent auction which allows the original owner to match the winning bid are more examples of instances when staggering contracts can be beneficial.
In leagues that simply prevent owners from retaining players or make it far too expensive to extend a player’s contract, staggering contracts doesn’t make a lot of sense. Instead, being sure to have enough cap space each year to make allow cap flexibility and roster adjustments is the primary objective at all times.
Check back next week as we tackle free agent auction strategies in Salary Cap Confidential: Free Agency.
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