Hoops Rumors Glossary: Trade Rules For Non-Guaranteed Salaries

Under the NBA’s old Collective Bargaining Agreement, which was in effect through the 2016/17 season, a player’s full cap hit was used for salary-matching purposes in trades, whether or not his salary was guaranteed. If a player had an $10MM salary with a partial guarantee of $1MM, his outgoing salary in a trade was the same as it would have been for a player who had a fully guaranteed $10MM contract.

That’s no longer the case, however. Now, only the guaranteed portion of a player’s contract counts for outgoing salary purposes in a trade, limiting the appeal of non-guaranteed salaries as trade chips.

This detail is crucial for determining how much salary a team can acquire in a trade — unless a team is under the cap, the amount of salary it sends out in a trade dictates how much salary it can take back. The amount of salary an over-the-cap team can acquire in a trade ranges from 125% to 175% of its outgoing salary, depending on exactly how much salary the team is sending out and whether or not the team is a taxpayer.

Under the old system, it might make sense for a cap-strapped club to trade a player with a guaranteed salary for a player earning an equivalent non-guaranteed salary — the cap-strapped club could then waive that newly-acquired player to cut costs. That’s no longer a viable strategy.

Complicating matters further is the fact that a team can’t simply circumvent the new rules by trading a player before a league year ends on June 30, then having his new team waive him once his new non-guaranteed cap hit goes into effect on July 1. After the end of the regular season, a player’s outgoing salary for trade purposes is the lesser of his current-year salary and the guaranteed portion of his salary for the following season.

Here’s a practical example: Chris Paul‘s deal with the Suns featured a fully guaranteed salary of $28.4MM in 2022/23, with only $15.8MM of $30.8MM guaranteed for ’23/24. Between the end of the Suns’ season and June 28 – which is when Paul’s full ’23/24 salary will become guaranteed – his outgoing salary for matching purposes is just $15.8MM, but his incoming salary for his new team would be $30.8MM.

Paul is far from the only player who could be affected by these trade rules this summer. Nets forward Royce O’Neale, Jazz big man Kelly Olynyk, Clippers guard Eric Gordon, Lakers center Mohamed Bamba, and Magic wing Gary Harris are among the many players who have partially guaranteed or non-guaranteed salaries for 2023/24 and won’t make great trade candidates unless those guarantees are increased.

Last offseason, when the Hawks agreed to send Danilo Gallinari to the Spurs in their trade for Dejounte Murray, Gallinari’s cap charges were $20.5MM for 2021/22 and $21.5MM for ’22/23, which should have been more than enough to account for Murray’s incoming salary ($15.4MM for ’21/22; $16.6MM in ’22/23). But Gallinari’s 2022/23 salary was only partially guaranteed for $5MM, which wouldn’t have been satisfactory to match Murray’s full cap hit, so Atlanta and San Antonio had to increase that partial guarantee in order to make the deal legal.

To paint a complete picture of exactly how these new rules work, let’s assume that a free agent signs a two-year, $24MM contract during the summer of 2023. His cap hit in each year is $12MM, but the first season of the contract is partially guaranteed for $3MM, while the second year is fully non-guaranteed. Here’s how it would count, for trade purposes, as outgoing salary:

  1. From the date of the signing until the one-quarter mark of the 2023/24 season:
    • $3MM
    • Note: Due to other CBA rules, the player wouldn’t become trade-eligible until at least December 15, 2023 anyway.
  2. From the one-quarter mark of the 2023/24 regular season until salaries become guaranteed on January 10, 2023:
    • A prorated amount of the salary based on the player’s earnings to date.
    • Note: The player would earn 1/174th of his $12MM salary per day; so 60 days into the season, his outgoing salary in a trade would be $4,137,931 (60/174ths of $12MM).
  3. From January 10, 2024 until the 2024 trade deadline:
    • $12MM
  4. From the day after the team’s 2023/24 season ends until the start of the 2024/25 regular season:
    • $0
  5. From the start of the 2024/25 regular season until salaries become guaranteed on January 10, 2025:
    • A prorated amount of salary based on earnings to date.
    • Note: The player would once again earn 1/174th of his $12MM salary per day; so 10 days into the season, his outgoing salary in a trade would be $689,655 (10/174ths of $12MM).
  6. From January 10, 2025 until the 2025 trade deadline:
    • $12MM

This change to the NBA’s trade rules hasn’t stopped teams from tacking on non-guaranteed years to the end of certain players’ contracts, since those non-guaranteed salaries still provide flexibility. However, we’re not seeing teams construct contracts with non-guaranteed cap hits solely for trade purposes like we sometimes used to.

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.

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