Details On Nene’s Contract Incentives

As we first relayed on Wednesday, the Rockets‘ new deal with Nene is an unusual one, structured to maximize his trade value. The two-year, $20MM contract has a $10MM cap hit for 2019/20, but only has a base value of approximately $2.56MM, an amount equivalent to the minimum salary for a 10-year veteran. The remaining $7.44MM on the deal is made up of “likely” incentives.

The NBA’s Collective Bargaining Agreement dubs an incentive likely to be earned if the player met the criteria the year before, but that doesn’t necessarily mean the player will actually meet the criteria again in the following season.

In fact, in Nene’s case, the Rockets will probably try to ensure he doesn’t meet that criteria, since the more guaranteed money the veteran center earns, the less trade value his contract has.

ESPN’s Bobby Marks has the full details on Nene’s incentives, which are as follows:

  • Base salary: $2,564,753
  • If Nene appears in at least 10 games and his team wins 52+ games: $2,435,247 bonus (cap hit increases to $5MM).
  • If Nene appears in at least 25 games and his team wins 52+ games: $2,500,000 bonus (cap hit increases to $7.5MM).
  • If Nene appears in at least 40 games and his team wins 52+ games: $2,500,000 bonus (cap hit increases to $10MM).

As Marks points out, all those incentives are considered likely because Nene played in 42 games last season and the Rockets had 53 wins. It seems safe to assume the 37-year-old won’t appear in as many games this season as Houston attempts to limit his earnings.

However, there’s another important detail worth noting here, as Jeff Siegel of Early Bird Rights outlines: If Nene were to be traded to a team that didn’t win 52+ games in 2018/19 (ie. any team besides the Warriors, Nuggets, Trail Blazers, Bucks, or Raptors), his contract incentives would change to “unlikely” and would no longer count against his cap hit.

While it may seem as if that discrepancy would complicate Nene’s trade market, it’s actually a good thing for both the Rockets and their potential trade partners, as Siegel explains. In that trade scenario, the Rockets would still get to count Nene as $10MM in outgoing salary, while the other team would only consider him a $2.56MM incoming piece.

In other words, let’s say the Rockets swapped Nene for another player with a $10MM cap hit. That’d be an even match for Houston, but the team acquiring the big man would technically be sending out a $10MM player for a $2.56MM player and could create a traded player exception worth $7.44MM.

The second year of Nene’s contract is fully non-guaranteed, but would become partially guaranteed if he’s kept under contract beyond February 15, 2020, just over a week after this season’s trade deadline. So, whether or not the Rockets trade him, Nene may hit the buyout market in February.

For more details on how Nene’s contract works, be sure to check out Marks’ report and Siegel’s analysis in full. If you still have questions, leave them in the comment section below.

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9 thoughts on “Details On Nene’s Contract Incentives

  1. brewpackbuckbadg

    seems like a major loop hole that many teams could exploit with one or two players.

    • Down with OBP

      Seems like a loophole that wasn’t exploited until now – either the rockets are brilliant or it’s unlikely to have everything fall similarly into place.

      • harden-westbrook-mvps

        More like both. Having a willing participant like Nene is the key here. He gets an easy $2.5M before retirement.

  2. Reflect

    What incentive is there for Nene to agree to these shenanigans in the first place? Why wouldn’t he just take a normal contract somewhere else?

    • Luke Adams

      He probably wouldn’t have signed for more than the minimum elsewhere, which he’ll get on this deal no matter what happens. I assume the upside of potentially bumping his salary to $5MM for playing in just 10 games was a deciding factor.

      I agree though that it’s a bit weird that he accepted a deal that incentivizes his team not to play him. I guess playing time wasn’t his number one priority.

  3. x%sure

    Nene turned down his $3.8MM option for this, which only looks like 2.6. What’s in it for him? He’s not headed for a team that will win 52.

    • harden-westbrook-mvps

      He’s almost certainly headed for Memphis in a trade some time in the second half of January for Andre Iguodala.

      • x%sure

        Yes, the discounting possibilities for Memphis would make up for them not being offered a 1st, and give Houston an advantage over other teams also not offering a 1st.

        So I can see Houston doing it, but Nene… He won’t be allowed to get near the bonuses.

        I suspect money under the table TBH.

  4. Tazza

    Why would the rockets give him this deal? He’s not worth 2 years at 10 mil a year. I know that it is made up of bonuses but still. The team already has Capela and has Chandler as his back up why would it give him this deal. Even as trade value of bait of whatever, no one is going to want to really even have him on there roster, Kennith Faried on the vets min is better.

    Personally don’t really like the thinking of the Rockets management when giving out contracts. First they overpay for CP3 by a bunch. Then they swap that for Russ who is a better player but isn’t on the best on contracts either. Then they pay Eric Gordon the big bucks to stay, which again kinda seems like an overpay. If you compare to Lou Williams at 8mil, JJ Reddick at 13mil and Danny Green at 14mil.
    And now Nene aswell.

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