Proration And Partially Guaranteed Contracts

The Pelicans officially released Lance Thomas and Arinze Onuaku yesterday in order to create room on their roster to add veteran forwards Louis Amundson and Josh Childress. The decision to cut both Thomas and Onuaku was fairly simple, since they were the only two players on New Orleans’ roster without fully guaranteed contracts. Thomas’ minimum salary deal included a partial guarantee worth $15K, while Onuaku’s minimum salary contract was fully non-guaranteed.

Had the Pelicans signed just one of Childress or Amundson, rather than both players, you might assume that Thomas’ partial guarantee would have played a role in the team’s decision on which player to waive — since New Orleans already owed Thomas that money, the team might be more inclined to keep him around rather than Onuaku. In actuality, however, that $15K guarantee become irrelevant extremely early on this season.

NBA players on non-guaranteed deals aren’t assured of their full-season salaries unless they remain under contract beyond January 7th, but any time spent on a roster during the regular season assures a player of at least a pro-rated portion of his salary. NBA seasons are typically composed of 170 days, meaning a player on a non-guaranteed contract earns 1/170th of his salary for each day spent on a roster.

In Thomas’ case, he would have earned a full-season salary of $884,293 had he not been cut by the Pelicans. However, since he only spent 15 days on the roster, he’ll instead earn between 8-9% of that amount, which works out to about $78K. Despite his relatively short stint on the roster, Thomas still earned significantly more than his $15K guarantee. In fact, taking into account what a small percentage of his total salary $15K represents, Thomas would have only had to remain on New Orleans’ roster for three days to exceed that amount, with or without a guarantee.

Of course, Thomas’ $15K represented the smallest partial guarantee in the NBA, so not all of them will be as inconsequential as his was. For instance, Hedo Turkoglu is earning a partial guarantee of $6MM on a $12MM salary this season. The halfway point of the season doesn’t come until after January’s guarantee date, so proration won’t affect Turkoglu. Regardless of whether the Magic waive him today or on January 7th, Turkoglu would earn that $6MM partial guarantee. If, for some reason, Orlando kept him on the roster beyond the guarantee date, he’d earn $12MM this season.

Partial guarantees can inform a team’s preseason decisions — if one player has a contract that’s guaranteed for $300K while another player is on a fully non-guaranteed deal, the club may be more likely to retain the first player, who will get paid either way. However, once the season gets underway, those partial guarantees become less of a factor, especially ones worth less than $100K. Ryan Gomes ($75K), Hollis Thompson ($35K), and Kent Bazemore ($25K) are among the players whose partial guarantees have already been eclipsed by the players’ actual pro-rated earnings.

For a more complete round-up of this season’s non-guaranteed and partially guaranteed contract, check out our full list.

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