Trade Kickers

December 1 2013 at 12:58pm CST By Chuck Myron

The collective bargaining agreement limits the flexibility teams have to sweeten their offers to free agents. Trade kickers are one of the few tools that clubs have at their disposal, and they’re often written into contracts. Formally known as trade bonuses, they represent extra cash that players receive in case their teams trade them.

One rule regarding trade kickers changed in the 2011 CBA. For contracts signed since the new CBA took effect, the bonus must be paid by the team that trades the player, rather than the acquiring team. Sometimes the kicker is a fixed amount, but usually it’s based on a percentage of the remaining value of the contract. So, a player who has a 10% trade kicker is given 10% of the amount of money he’s yet to collect on his deal.

The value of a trade kicker declines each passing day during the season, since the amount the player gets for the current year of his deal is prorated. In a hypothetical scenario, let’s say the Cavaliers trade Anderson Varejao today. There are 137 days left in the 170-day season, including today. The commensurate amount left on Varejao’s $9,036,364 salary this year is $7,282,246. Added to the $4MM in guaranteed salary he’s set to make next season, Varejao’s 5% trade kicker would net him an extra $564,112.

Regardless of whether the trade kicker is set at a fixed amount or a percentage, the bonus can’t exceed 15% of the remaining value of the contract. That means that if a set amount of $1MM would equal more than 15% of what the player is owed, the kicker would pay out less than $1MM in the event of a trade.

Trade kickers don’t do much to help the most well-compensated players. The bonus can’t push a player’s salary above the maximum salary, even if the player is already making more than the max. Pau Gasol has a 15% kicker in his deal, but his $19,285,850 salary this season is already more than the $19,181,750 maximum for a player with 10 or more years of experience, as he has. That means the trade kicker is void, and Gasol wouldn’t receive any extra money if the Lakers dealt him away.

Similarly, players on rookie-scale contracts can’t make more than 120% of the scale amount, so if a first-round pick negotiates a trade kicker into his rookie deal, he can’t wind up making more than 120% of the value assigned to his draft slot. This rarely happens, though, since first-round picks generally wind up with contracts worth 120% of the slot value anyway.

The amount of the kicker that’s applied to a team’s cap is spread out equally over the remaining years of the contract. So, if a player with two seasons left on his deal were due a kicker worth $1M, the team obligated to pay it would take a cap hit worth $500K in both of those seasons, regardless of whether the player’s salary is different in each of the two years left on the deal.

However, if a player has years on the deal that are partially guaranteed or non-guaranteed, the cap hit is apportioned based on the guaranteed money in the deal, excluding all option years. So, if a two-year contract is fully guaranteed this year and 50% guaranteed next season, two-thirds of the kicker would apply to this year’s cap and one-third of it would be on next year’s cap. If the contract is non-guaranteed next season, the entire trade kicker would hit this year’s cap.

Other notes on trade kickers:

  • Player and team option years don’t count toward the value of a kicker, unless the option has already been exercised.
  • Years following early-termination options do count toward how much the player receives via the kicker, even though they don’t count toward the team’s cap hit.
  • Incentive clauses don’t figure into the value of a kicker, which is calculated using a player’s base compensation only.
  • Players may waive any amount up to the full value of the trade kicker to facilitate a swap, if they wish. However, players can’t change the amount of their trade kickers to allow a deal that would otherwise put a hard-capped team over the tax apron, even if everyone involved in the deal wants that to happen. Such a trade is simply illegal.
  • For salary-matching purposes in trades, the kicker counts for the team absorbing the player, but not for the team that trades him away.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ and ShamSports were used in the creation of this post.

This post was initially published on December 9th, 2012.

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