Why Did The NFL Introduce A Salary Cap?

The NFL’s salary cap determines whether teams can sign and keep good players.

It’s rarely talked about, but how an NFL team handles the salary cap determines its present and future success.

What Is The NFL Salary Cap?

The NFL salary cap is a rule that was agreed on between management and the players union in 1994.

It’s contained in Articles 12-14 of the NFL Collective Bargaining Agreement.

The cap sets a maximum amount that any team can spend on player salaries in any given year.

This applies only to players. It doesn’t include coaches, trainers, or any other kind of staff.

The amount of the cap is calculated based on total league revenue.

Hard Cap

The NFL has a hard salary cap, not a soft cap.

A soft cap means that if a team exceeds the cap they will be hit with a luxury tax. This tax is then divided among all the other teams. It’s the model the NBA uses.

A hard salary cap cannot be exceeded for any reason.

This means that if a team exceeds the salary cap, they can be hit with:

  • fines of millions of dollars
  • loss of draft picks
  • involuntary cancelation of player contracts and trades.

Hard Minimum

The NFL also has a hard minimum on spending.

This means that a team can’t spend less than a certain amount, calculated as a percentage of league revenue, in any given year.

Avoiding baseball-style problems

There is a common perception that certain teams in Major League Baseball don’t even attempt to put a winning team together.

They take their share of league money, spend as little as possible, and turn a huge profit while the team is hopeless, year after year.

The salary minimum is a way to avoid this. If a team loses every single year, they can’t blame it on poverty.

Are There Ways To Get Around The Cap?

There are very few ways for NFL teams to get around the salary cap.

A few teams have been caught trying to give players cash off the books. But the penalty imposed here was fairly draconian and it’s doubtful any team would risk it now.

Use bonuses

The one thing a team can do is give big signing bonuses with lower starting salaries.

While the bonuses are counted against the cap, they are prorated over five years. So, the damage is at least minimized for any given year.

Tom Brady solution

One way to get around the salary cap is to have a star agree to take less money so that more stars can stay on the team.

The most famous example of this was Tom Brady during his years with the New England Patriots.

Brady volunteered for pay cuts and routinely played for less than he was worth on the open market. This ensured that the team could keep more good players and keep winning.

However, stars willing to do that are few and far between!

Why Did The NFL Introduce A Salary Cap?

Salary caps are instituted for two reasons: controlling team expenses and parity on the field.

Controlling Expenses

In a professional sports league, it only takes one owner to go crazy with spending, then everyone else has to race to keep up if they can.

With a hard cap, this can’t happen.

The salary cap protects team owners as a whole against a rogue owner running up expenses for everyone.

Parity on the field

There was no NFL salary cap before 1994.

In the pre-salary cap era, several dominant dynasties would accumulate stables of high-priced stars and hang on to them for their entire careers.

These included, at various times, the Steelers, Dolphins, Cowboys, and the 49ers, just to name a few.

 During the era of the big dynasties, there was a sense of hopelessness for many fanbases. There was a feeling that the less successful franchises could never catch up with the established powers.

The league felt that they were risking losing a big chunk of their audience because of this.

Example of the All-American Football Conference

The specter of the All-American Football Conference was always present in the owners’ minds. This was a professional football league that existed in the 1940s.

In this league, the Cleveland Browns had so much more money than the other teams that there was no real competition.

The league collapsed after only four years!

During this time, the Browns won every championship and only lost three games.

The idea behind the NFL’s salary cap is that dynasties would have to break up because they would not be able to afford to keep all their stars. Every team would have its time on the top and the bottom.  

Why Did The Players Agree To A Salary Cap?

The answer to this is simple: because most of them make more money with a salary cap than without one!

With a hard salary cap, the top-tier teams may spend less. But the other teams spend more because they know they still have a chance to compete!

Also, with perceived parity, the league grows more and so do league revenues and average salary. This means higher salaries for most players.

With a salary cap, stars make less, but average players do better. And there are more average players than stars when it comes time to vote in a union meeting!

Has The Salary Cap Achieved Its Goals?

The salary cap has certainly achieved its goal of controlling excessive spending.

As to parity, that hasn’t been completely successful, but it’s helped.

Some teams have become masters at handling the salary cap, like the 49ers in the late 1990. The latest masters were the New England Patriots.

A few other teams, like the Detroit Lions, have somehow managed to stay terrible.

Overall though, there has been more movement among the teams for position.

There are still some dynasties, but there are fewer teams that are hopeless every year.

Both teams in the Super Bowl in 2022 are teams that had recently been bad but fixed themselves in fairly short periods.

Will The NFL Ever Get Rid Of The Salary Cap?

It’s very unlikely that the NFL would get rid of the salary cap.

The NFL is at the height of its popularity and has lower payrolls than most major sports.

More teams are competitive than ever before. The cap protects owners from the damage a spending-crazed mogul could do.

The salary cap is here to stay.