Hoops Rumors Glossary: Maximum Salary

There are many NBA players technically on maximum salary contracts, but most of those players aren’t earning identical salaries this season, making the league’s “maximum salary” something of a misnomer. While each NBA player has a maximum salary that he can earn in a given season, that number varies from player to player, with a handful of factors playing a part in determining the exact figure.

The primary factor in determining a player’s maximum salary is his years of service. If a player has been in the NBA for six years or fewer, he can earn up to 25% of the salary cap in the first year of his deal. Players with seven to nine years of experience can earn up to 30%, while veterans with 10 or more years in the NBA are eligible for up to 35% of the cap. In 2017/18, the salary cap is $99,093,000, meaning the maximum salaries are as follows:

Years in NBA Salary
0-6 $24,773,250
7-9 $29,727,900
10+ $34,682,550

The figures above help explain why Otto Porter, who signed a maximum salary offer sheet in July, is earning a salary of $24,773,250 this season. But they don’t explain why his teammate John Wall, who has three more years of NBA experience than Porter and is also on a max contract, is earning just $18,063,850.

The reason Wall’s maximum salary is relatively modest compared to Porter’s is that those league-wide maximum salary figures only apply to the first year of a multiyear contract. When a player signs a maximum contract, he can receive annual raises of up to either 8% or 5%, depending on whether he signs with his previous team or a new team. So by the third or fourth year of his contract, he could be earning significantly more or less than the max for that season.

Because Wall signed his maximum salary contract several years ago and the cap has spiked since then (including a jump of nearly 35% in 2016), his annual raises couldn’t keep up with the cap growth. He’ll start over on a new max deal in 2019/20, at which point his salary will nearly double — he’ll go from $19,169,800 in the last year of his previous max contract to a projected $37,800,000 in the first year of his new pact.

Here are a couple more ways a player’s usual maximum salary can fluctuate:

  • A free agent’s maximum salary is always at least 105% of his previous salary. For example, LeBron James is earning $33,285,709 this season, and can become a free agent in July. His new maximum salary is expected to be $35.35MM, based on a $101MM cap projection. But if the cap didn’t increase, James would still be eligible for a new max salary worth 105% of his 2017/18 figure, which would work out to $34,949,994.
  • In certain situations, players eligible for new contracts can earn the maximum salary for the level above the one they’d typically fall into. For instance, a player receiving a designated rookie extension can earn up to 30% of the cap instead of 25% if he meets certain criteria. A veteran can become eligible to earn up to 35% of the cap instead of 30% if he meets the same criteria, which are related to MVP, Defensive Player, or All-NBA honors. We’ll cover those situations and rules in more detail in an upcoming glossary entry on designated players.

A player who signs a maximum salary contract can receive a trade kicker as part of his deal, but he can’t cash in on that bonus for any amount beyond his maximum salary in a given league year. For instance, Gordon Hayward‘s max salary contract with the Celtics features a 15% trade kicker, but if Hayward were traded this season, he wouldn’t be eligible to receive that bonus, since it would exceed his maximum salary.

Similarly, a maximum salary player whose team finishes the season below the minimum salary floor isn’t eligible to receive a share when the team distributes that money to its players, since his max salary for that year can’t be exceeded.

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 was used in the creation of this post.

Earlier versions of this post were published in 2012 and 2014 by Luke Adams and Chuck Myron.

 

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