Hoops Rumors Glossary: Proration

The concept of proration is one used in variety of fields and professions, and isn’t specific to the NBA. The term, which shows up frequently in the league’s Collective Bargaining Agreement, refers to the practice of calculating a figure proportionately.

In the NBA, the most common examples of proration apply to players on non-guaranteed contracts who are waived before their salaries become guaranteed, or players who sign minimum-salary contracts partway through the season. In each instance, the player would receive a prorated portion of his salary based on the number of days he was under contract during the season.

For example, when DeMarcus Cousins signed with the Nuggets on February 25, he received a minimum-salary contract. For the 2021/22 season, the minimum salary for a player with Cousins’ years of NBA service (10+) is $2,641,691, though such a deal would only count against his team’s cap for $1,669,178, as we explain here. However, since Cousins wasn’t with the Nuggets since the start of the season, he wasn’t entitled to that full minimum salary from the team.

The ’21/22 NBA season is 174 days long and Cousins signed his contract on the 130th day of the season, meaning his “one-year” contract will span 45 days. Due to proration, his minimum salary will be worth 45/174th of a full minimum salary. So instead of earning $2,641,691, he’ll make $683,196. And instead of counting for $1,669,178 on the Nuggets’ books, Cousins’ cap charge is 45/174th of that amount: $431,684.

If the Nuggets had signed Cousins using cap space or a cap exception, his salary wouldn’t necessarily have been prorated, but the minimum salary exception begins to prorate after the first day of the regular season.

The same principle of proration applied to an earlier deal that Cousins signed this season, with the Bucks. Cousins finalized a non-guaranteed minimum-salary contract with Milwaukee on November 30, the 43rd day of the regular season. That deal was initially worth $2,004,041 (132/174ths of $2,641,691), but Cousins was waived on January 6 before it became fully guaranteed.

Cousins was officially under contract with the Bucks for 38 days, and the NBA also pays players for the two days they spend on waivers, so the veteran center was credited with 40 days of service. That means, due to proration, he was entitled to 40/174th of a minimum salary — that amount worked out to $607,285.

Situations like Cousins’ in Denver and Milwaukee are the most frequent examples of proration’s impact on NBA finances, but there are many more instances where it pops up.

Here’s a quick breakdown of several of those other instances of proration:

• Mid-level and bi-annual exceptions: These exceptions begin to prorate on January 10, declining in value by 1/174th each day until the end of the regular season.
• Trade kickers: If a player with a trade kicker in his contract is traded during the season, the kicker only applies to his remaining salary. Let’s say a player has a 15% trade kicker and an $8MM salary in his contract year and is dealt halfway through the season. His 15% trade kicker would only apply to the $4MM left on his deal, giving him a $600K bonus.
• 10-day contracts: A 10-day salary is prorated based on a full-season salary. Most players on 10-day contracts earn 10/174th of their minimum salary.
• Signing bonuses: If a teams gives a player a signing bonus in a free agent contract, that bonus is prorated equally over the guaranteed seasons of the contract for cap purposes. For example, a $4MM signing bonus on a four-year contract would add $1MM to the player’s cap charge for each of the four seasons.
• Salary floor calculations: When calculating a team’s payroll in relation to the league’s minimum salary floor, we count the salary that a team actually pays to a player, rather than the player’s cap hit. For instance, if a team traded for a player on a $12MM contract halfway through the season and kept him the rest of the way, he would count for $6MM toward that team’s salary floor, rather than $12MM.

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.

A previous version of this glossary entry was published in 2018.