Hoops Rumors Glossary

Bird rights offer teams the chance to sign their own free agents without regard to the salary cap, but they don’t apply to every player. Other salary cap exceptions are available for teams to keep players who don’t qualify for Bird rights. One such exception is the Early Bird, which applies to players formally known as Early Qualifying Veteran Free Agents.

The Bird exception is for players who have spent three seasons with one club without changing teams as a free agent, but Early Bird rights are earned after just two such seasons. Virtually all of the same rules that apply to Bird rights apply to Early Bird rights, with the requirements condensed to two years rather than three. Players still see their Bird clocks restart by changing teams via free agency, being claimed in an expansion draft, or having their rights renounced.

The crucial difference between Bird rights and Early Bird rights involves the limitations on contract offers. Bird players can receive maximum-salary deals for up to five years, while the most a team can offer an Early Bird free agent without using cap space is 175% of his previous salary or 105% of the league-average salary in the previous season, whichever is greater. These offers are also capped at four years rather than five, and the new contracts must run for at least two years (with no second-year options).

Bojan Bogdanovic (Pacers), Rudy Gay (Spurs), and Taj Gibson (Timberwolves) are among the notable free agents who will have Early Bird rights at the end of the 2017/18 season. The Nuggets would have Early Bird rights on Paul Millsap if they decline his $30MM team option, as is expected.

In Millsap’s case, the Nuggets would theoretically be able to offer 175% of his current $29MM+ salary using Early Bird rights, but the team’s offer couldn’t exceed the maximum salary. Millsap’s max salary projects to be just over $38MM, comfortably within the Early Bird limit. However, he would only be able to sign a four-year contract rather than a five-year deal, since he won’t have full Bird rights. Of course, Millsap’s next contract will likely be far more modest, so these numbers are just hypothetical.

In some instances, teams can benefit from having Early Bird rights instead of full Bird rights if they’re trying to preserve cap space. The cap hold for an Early Bird player is 130% of his previous salary, significantly less than most Bird players, whose cap holds range from 150-300% of their previous salaries.

That could help the Pacers, since the cap hold for Bogdanovic, who is earning $10.5MM this season, will only be $13.65MM — given how well he has played since Victor Oladipo went down, he may be in line for a starting salary higher than that. If the Pacers reach an agreement to re-sign Bogdanovic in July, they could hold off on making it official, keeping his cap hold on the books until they use the rest of their cap room. Then they could go over the cap to finalize Bogdanovic’s deal using the Early Bird exception.

Meanwhile, some players with limited NBA experience are subject to a special wrinkle involving Early Bird rights, called the Gilbert Arenas Provision, which applies to players who have only been in the league for one or two years. We cover the Gilbert Arenas Provision in a separate glossary entry, so you can read up on the details there.

Finally, one more distinction between Bird rights and Early Bird rights applies to waivers. Players who are claimed off waivers retain their Early Bird rights, just as they would if they were traded. Those who had Bird rights instead see those reduced to Early Bird rights if they’re claimed off waivers. This rule stems from a 2012 settlement between the league and the union in which J.J. Hickson was given a special exception and retained his full Bird rights for the summer of 2012 even though he had been claimed off waivers that March.

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 and salary information from Basketball Insiders was used in the creation of this post.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

The Bird exception, named after Larry Bird, is a rule included in the NBA’s Collective Bargaining Agreement that allows teams to go over the salary cap to re-sign their own players, as most NBA fans know. A player who qualifies for the Bird exception, formally referred to as a Qualifying Veteran Free Agent, is said to have “Bird rights.”

The most basic way for a player to earn Bird rights is to play for the same team for at least three seasons, either on a multiyear deal or separate one-year contracts. Still, there are other criteria. A player retains his Bird rights in the following scenarios:

1. He changes teams via trade. For instance, the Sixers hold Tobias Harris‘ Bird rights as he approaches 2019 free agency, despite just acquiring him in February. His Bird clock didn’t reset when he was traded from the Clippers to Philadelphia.
2. He finishes a third season with a team after having only signed for a partial season with the club in the first year. Wayne Selden finished the 2016/17 season on a contract with the Grizzlies, then re-signed with Memphis on a two-year deal in the summer of 2017. With that contract about to expire, and Selden – who was recently traded to the Bulls – will have full Bird rights because of those few weeks he spent with the Grizzlies at the end of ’16/17, which started his Bird clock.
3. He signed for a full season in year one or two but the team waived him, he cleared waivers, and didn’t sign with another team before re-signing with the club and remaining under contract through a third season. This one’s a little confusing, but let’s use Ben McLemore as an example. In the second year of a two-year contract, McLemore was waived last month by the Kings and has yet to join a new team. If Sacramento were to re-sign McLemore in July and kept him for the entire 2019/20 season, the team would have his full Bird rights, assuming he doesn’t join another team in the interim.

A player sees the clock on his Bird rights reset to zero in the following scenarios:

1. He changes teams via free agency.
2. He is waived and is not claimed on waivers (except as in scenario No. 3 above).
3. His rights are renounced by his team. However, his Bird rights are restored if he re-signs with that team without having signed with another NBA team. Dirk Nowitzki had his rights renounced by the Mavericks last July, for example, as Dallas attempted to gain cap flexibility. After re-signing with the Mavs, Nowitzki retained his full Bird rights.
4. He is selected in an expansion draft.

If a player who would have been in line for Bird rights at the end of the season is waived and claimed off waivers, he would retain only Early Bird rights. Meanwhile, a player with Bird rights who re-signs with his previous team on a one-year contract (or a one-year deal with a second-year option) would lose his Bird rights if he’s traded. As such, he receives the ability to veto trades so he can avoid that scenario.

[RELATED: Players with the ability to veto trades in 2018/19]

When a player earns Bird rights, he’s eligible to re-sign with his team on a maximum-salary contract for up to five years with 8% annual raises when he becomes a free agent, regardless of how much cap room the team has. The maximum salary will vary for each player depending on how long he has been in the league, but regardless of the amount, a team can exceed the salary cap to complete the deal.

A team with a Bird free agent is assigned a “free agent amount” or cap hold worth either 190% of his previous salary (for a player with a below-average salary) or 150% of his previous salary (for an above-average salary), up to the maximum salary amount. For players coming off rookie scale contracts, the amounts of those cap holds are 300% and 250%, respectively.

The Mavericks, for instance, will have a cap hold worth $17,091,162 for Kristaps Porzingis on their 2019/20 books — 300% of his $5,697,054 salary for 2018/19. Dallas could renounce Porzingis and clear an extra $17MM+ in cap space, but the Mavs would lose his Bird rights if they did that, which would force them to use either cap room or a different cap exception to re-sign him.

Instead, the Mavericks may use Porzingis’ Bird rights and his cap hold strategically, perhaps using their cap space on other free agents and/or trades while Porzingis’ $17MM cap hold remains on the books. The Mavs could then circle back and use Bird rights to sign KP to a contract with a starting salary higher than $17MM.

Ultimately, the Bird exception was designed to allow teams to keep their best players. The CBA ensures that teams are always able to re-sign them to contracts up to the maximum salary, assuming the player is interested in returning and his team is willing to go over the cap.

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 and salary information from Basketball Insiders was used in the creation of this post.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

The Warriors have committed only about $82MM in guaranteed money to player salaries for 2019/20, but that doesn’t mean the team will begin the offseason with $27MM of room under the projected $109MM salary cap. In fact, the Warriors won’t open the new league year with any cap space at all. Each of Golden State’s own free agents will be assigned a free agent amount – or “cap hold” – until the player signs a new contract or the Warriors renounce his rights.

The general purpose of a cap hold is to prevent teams from using room under the cap to sign free agents before using Bird rights to re-sign their own free agents. If a team wants to take advantage of its cap space, it can renounce the rights to its free agents, eliminating those cap holds. However, doing so means the team will no longer hold any form of Bird rights for those players — if the team wants to re-sign those free agents, it would have to use its cap room or another kind of cap exception.

The following criteria are used for determining the amount of a free agent’s cap hold:

• First-round pick coming off rookie contract: 300% of previous salary if prior salary was below league average; 250% of previous salary if prior salary was above league average.
• Bird player: 190% of previous salary (if below average) or 150% (if above average).
• Early Bird player: 130% of previous salary.
• Non-Bird player: 120% of previous salary.
• Minimum-salary player: Two-year veteran’s minimum salary, unless the free agent only has one year of experience, in which case it’s the one-year veteran’s minimum.
• Two-way player: One-year veteran’s minimum salary.

A cap hold for a restricted free agent can vary based on his contract status. A restricted free agent’s cap hold is either his free agent amount as determined by the criteria mentioned above, or the amount of his qualifying offer, whichever is greater.

No cap hold can exceed the maximum salary for which a player can sign. For instance, the cap hold for a Bird player with a salary above the league average is generally 150% of his previous salary, as noted above. But for someone like Kevin Durant, who is earning $30MM this season, 150% of his previous salary would go far beyond the maximum salary threshold.

Durant’s cap hold – assuming he turns down his 2019/20 player option, as expected – will be equivalent to the maximum salary for a player with 10+ years of NBA experience. That figure currently projects to be $38.15MM, based on a $109MM salary cap.

One unusual case involves players on rookie contracts whose third- or fourth-year options are declined, such as Dragan Bender, who had his fourth-year option turned down by the Suns. Because they declined that option, the Suns wouldn’t be able to pay Bender more than what he would have earned in the option year ($5,896,519).

That rule is in place so a team can’t circumvent the rookie scale and decline its option in an effort to give the player a higher salary — the rule applies even if the player is traded, so if a team had acquired Bender before this year’s deadline, that team would have faced the same limit. Rather than coming in at 300% of this year’s salary, as would be the case with most players coming off rookie scale contracts, Bender’s 2018 cap hold will equal the amount of his option: $5,896,519.

If a team holds the rights to fewer than 12 players, cap holds worth the rookie minimum salary are assigned to fill out the roster. So, even if a front office chooses to renounce its rights to all of its free agents and doesn’t have any players under contract, the team wouldn’t be able to fully clear its cap. In 2019/20, incomplete roster charges project to be worth $897,158, meaning a team with 12 of those charges would have nearly $11MM on its cap even before adding any players.

Cap holds aren’t removed from a team’s books until the player signs a new contract or has his rights renounced by the club. For example, the Warriors are still carrying cap holds on their books for David West and Matt Barnes, who haven’t signed new contracts since playing for Golden State. Keeping those cap holds allows teams some degree of cushion to help them remain above the cap and take advantage of the mid-level exception and trade exceptions, among other advantages afforded capped-out teams.

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 and the Basketball Insiders salary pages were used in the creation of this post.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron.

The NBA’s draft lottery, which takes place every spring between the end of the regular season and the draft, is the league’s way of determining the draft order and disincentivizing second-half tanking. The lottery gives each of the 14 non-playoff teams – or whichever clubs hold their first-round picks – a chance to land one of the top four picks in the draft.

Although the top four picks of each draft are up for grabs via the lottery, the remaining order is determined by record, worst to best. The league’s worst team isn’t guaranteed a top-four spot in the draft, but is tied for the best chance to land the first overall pick and will receive the fifth overall selection at worst.

The first four picks are determined by a draw of ping-pong balls numbered 1 through 14. Four balls are drawn, resulting in a total of 1,001 possible outcomes. 1,000 of those outcomes are assigned to the 14-non playoff teams — for instance, if balls numbered 4, 7, 8, and 13 were chosen, that combination would belong to one of the 14 lottery teams. The 1,001st combination remains unassigned, and a re-draw would occur if it were ever selected.

The team whose combination is drawn first receives the number one overall pick, and the process is repeated to determine picks two, three, and four. The 14 teams involved in the draft lottery are all assigned a specific number of combinations, as follows (worst to best):

1. 140 combinations, 14.0% chance of receiving the first overall pick
2. 140 combinations, 14.0%
3. 140 combinations, 14.0%
4. 125 combinations, 12.5%
5. 105 combinations, 10.5%
6. 90 combinations, 9.0%
7. 75 combinations, 7.5%
8. 60 combinations, 6.0%
9. 45 combinations, 4.5%
10. 30 combinations, 3.0%
11. 20 combinations, 2.0%
12. 15 combinations, 1.5%
13. 10 combinations, 1.0%
14. 5 combinations, 0.5%

If two lottery teams finish the season with identical records, each team receives an equal chance at a top-four pick by averaging the total amount of outcomes for their two positions. For instance, if two teams tie for the league’s fourth-worst record, each club would receive 115 combinations and an 11.5% chance at the first overall pick — an average of the 125 and 105 combinations that the fourth- and fifth-worst teams receive.

If the average amount of combinations for two positions isn’t a whole number, a coin flip determines which team receives the extra combination. For example, if two clubs tied for the league’s third-worst record, the team that wins the coin flip would receive 133 of 1,000 chances at the first overall pick, while the loser would receive 132. The coin flip also determines which team will draft higher in the event that neither club earns a top-four pick.

The table below displays the odds for each lottery team, rounded to one decimal place. Seeds are listed in the left column, while the picks are noted along the top row. For our purposes, the first seed is the NBA’s worst team.

It’s worth noting that the NBA’s lottery format was recently changed, with 2019’s draft representing the first one that will use the new system. Previously, only the top three spots were determined via the lottery, and the odds were weighted more in favor of the league’s worst teams.

For instance, in 2018, when the league-worst Suns landed the first overall pick, they had a 25.0% chance to receive that No. 1 selection heading into the lottery, and couldn’t have dropped further than No. 4 (35.8%). In 2019, the NBA’s worst team will only have a 14.0% chance at the top pick and will have a 47.9% chance of falling all the way to No. 5.

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. Information from Tankathon.com and Wikipedia was used in the creation of this post.

Earlier versions of this post were published in 2012 and 2013.

The NBA’s rookie scale, which determines how much first round picks earn during their first four NBA seasons, also dictates how much the qualifying offers will be worth for those players once they’re eligible for restricted free agency after year four. However, the value of those qualifying offers can fluctuate depending on whether or not a player has met the “starter criteria.”

Here’s how the starter criteria works:

A player who is eligible for restricted free agency is considered to have met the starter criteria if he plays at least 2,000 minutes or starts 41 games in the season before he reaches free agency.

A player can also meet the criteria if he averages either of those marks in the two seasons prior to his restricted free agency. For instance, if a player started 50 games in 2017/18 and 32 in 2018/19, he’d meet the starter criteria, since his average number of starts over the last two seasons is 41.

A player’s ability or inability to meet the starter criteria impacts the value of the qualifying offer he receives as a restricted free agent, as follows:

• A top-14 pick who does not meet the starter criteria will receive a qualifying offer equal to the amount the 15th overall pick would receive if he signed for 120% of the rookie scale.
  • Note: For the summer of 2019, the value of this QO will be $4,485,665. Kristaps Porzingis and Frank Kaminsky are examples of players who fall into this group.
• A player picked between 10th and 30th who meets the criteria will receive a qualifying offer equal to the amount the ninth overall pick would receive if he signed for 120% of the rookie scale.
  • Note: For the summer of 2019, the value of this QO will be $4,915,726. Kelly Oubre and Rondae Hollis-Jefferson are examples of players who may fall into this group — Oubre needs to play 229 more minutes this season, while Hollis-Jefferson must make two more starts.
• A second-round pick or undrafted player who meets the criteria will receive a qualifying offer equal to the amount the 21st overall pick would receive if he signed for 100% of the rookie scale.
  • Note: For the summer of 2019, the value of this QO will be $3,021,354. Thomas Bryant and Rodney McGruder are examples of players who fall into this group.
• For all other RFAs, the standard criteria determine the amounts of their qualifying offers.

Extending a qualifying offer to a player who is eligible for restricted free agency officially makes that player an RFA, ensuring that his team has the right of first refusal if he signs an offer sheet with another club. It also gives the player the option of signing that one-year QO.

Generally, the value of a restricted free agent’s qualifying offer isn’t hugely important, since very few RFAs accept those offers outright. There are exceptions though.

Last offseason, for instance, Rodney Hood was the only player to accept his qualifying offer, which was worth $3,472,888. Hood was nagged by injuries during the two seasons prior to his restricted free agency and was limited to just 119 total games, including 78 starts. If he had started four more games during that two-year stretch, he would have met the starter criteria and bumped the value of his QO up to $4,749,591, which could have changed the way his free agency played out.

We’ll revisit the starter criteria at season’s end to see which potential restricted free agents will have their qualifying offers impacted by meeting – or failing to meet – the starter criteria.

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.

Photo courtesy of USA Today Sports Images.

While the NBA’s Collective Bargaining Agreement limits the flexibility teams have to sweeten their offers to free agents, one tool clubs have at their disposal is a trade kicker. Also known as trade bonuses, trade kickers represent extra cash a player can receive if his team trades him, and are often written into contracts for major free agent signings or extensions.

Trade kickers can be represented in a fixed dollar amount or a percentage, or a combination of the two. For example, Kelly Olynyk‘s current contract with the Heat calls for a trade kicker worth the lesser amount of $2MM or 5% of his remaining salary.

Trade bonuses can’t exceed 15% of the player’s remaining salary. However, many of them are worth that maximum allowable amount. Currently, 18 of the 23 players with trade kickers have ones worth 15%.

[RELATED: NBA Players With Trade Kickers In 2018/19]

If a player with a 15% trade kicker has $10MM left on his contract and is traded, his bonus would be worth $1.5MM — 15% of $10MM. But the value of a trade kicker declines each passing day during the regular season, since the amount the player receives for the current year of his deal is prorated.

Here’s an example: Milos Teodosic is in the final year of his contract with the Clippers, earning a $6,300,000 salary with a 15% trade kicker. Technically, 15% of $6.3MM is $945K. However, 72 days of the 177-day regular season have already passed, so if Teodosic were traded today, his trade kicker would only apply to the 105 days remaining on his contract. He’ll make $3,737,288 during that stretch, so his 15% trade kicker would result in a bonus worth approximately $561K.

A trade kicker is paid by the team trading the player, and can only be paid out once during the player’s contract. For instance, Jeremy Lin had a trade bonus worth 10%, which he received when the Nets sent him to Atlanta during the 2018 offseason. If Lin is traded again by the Hawks, he wouldn’t get another trade bonus.

A pair of rules related to trade kickers have created some confusion about how the NBA would handle John Wall‘s 15% trade kicker if he’s traded this season. Those two rules are as follows:

• A player can’t receive his full trade bonus if it would take him over his maximum allowable salary. Stephen Curry, Gordon Hayward, and LeBron James are among the players currently earning max salaries who have 15% trade kickers — those bonuses would be voided if any of those players were traded this season.
  • Note: A player can receive a portion of his trade bonus if his salary is worth less than the max and his bonus would take him over his max. This happened last season with Blake Griffin, whose partial bonus increased his salary to his max.
    
• For cap purposes, a trade bonus is spread out over the remaining non-option years on a player’s contract. The exact dispersion depends on what percentage of each season’s salary is fully guaranteed. In basic terms though, if a player with a $3MM trade kicker has two guaranteed years left on his deal, $1.5MM would be applied to each season’s cap hit.
  • Note: In that same scenario, if a player’s second season was only 50% guaranteed, $2MM of his trade kicker would be applied to the first year and $1MM to the second year, to reflect the guarantee proportions. If the player’s second season was non-guaranteed, the full $3MM bonus would hit the cap in year one.
    

In Wall’s case, because he signed a super-max extension that goes into effect in 2019/20, he still has more than $180MM left on his contract, meaning a 15% trade bonus would be worth nearly $30MM. His salary for the 2018/19 season ($19,169,800) is well below his allowable maximum, so he should be eligible to receive that bonus. However, spreading the cap hits across five seasons would push his future salaries well above the max for those seasons, which isn’t allowed. It’s not clear how the NBA would handle that bonus if Wall is traded this season, since that specific situation has never arisen before.

A trade kicker can sometimes complicate salary matching in trades. Although the team trading away the player with the kicker pays the bonus money, that team still only counts the players’ original salary for matching purposes. However, the team acquiring the player must count his new cap figure for matching purposes.

For example, let’s say a player with three years and $30MM left on his contract ($10MM annual cap hits) has a 15% trade kicker. His bonus would work out to $4.5MM, which would be spread out across three seasons, adding $1.5MM to his current-year cap hit. The team acquiring him would view him as an $11.5MM player, while the team trading him would consider him a $10MM player. In some cases, that discrepancy can prevent a deal from working for one side from a salary-matching perspective.

In that scenario, the player is permitted to waive his trade bonus, clearing the way for a deal to work, but he’s under no obligation to do so. A player can waive his trade bonus for any other reason too, if he so chooses.

Here are several other rules related to trade kickers:

• Player and team options aren’t taken into account when calculating trade bonuses, but early termination options are.
• Only the base value of a contract is taken into account when calculating trade bonuses. Incentives aren’t considered.
• Trade kickers can technically be included in rookie contracts, but a player on a rookie deal can’t exceed 120% of his rookie scale amount via a trade bonus, so this is extremely rare.
• A minimum salary contract can include a trade bonus. If the bonus vests, the contract is no longer considered to be a minimum salary deal.
• If a player signs an extension, a trade bonus can be added to or removed from his contract.

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.

An earlier versions of this post was published in 2013 by Chuck Myron.

Photo courtesy of USA Today Sports Images.

When a team releases a player, he doesn’t immediately become a free agent. Instead, the player is placed on waivers, which serves as a sort of temporary holding ground as the other 29 NBA teams decide if they want to try to add him to their roster.

A player remains on waivers for two full days after he is formally cut by his team. During that time, a team can place a waiver claim in an attempt to acquire the player. If two or more clubs place a claim, the team with the worst record takes priority (before December 1, records from the previous season determine waiver order).

If a team claims a player off waivers, it assumes his current contract and is on the hook for the remainder of his salary. The claiming team also pays a $1,000 fee to the NBA office. If no claims are placed on the player, he clears waivers at 4:00pm CT two days after his release and becomes an unrestricted free agent.

While the waiver format is simple enough, not every team will have the salary cap flexibility to make a claim for any waived player it wants. There are only a handful of instances in which a club is able to claim a player off waivers:

• The team is far enough under the salary cap to fit the player’s entire salary.
• The team has a traded player exception worth at least the player’s salary.
• The team has a disabled player exception worth at least the player’s salary, and he’s in the last year of his contract.
• The player’s contract is for one or two seasons and he’s paid the minimum salary.

For instance, if a player with a $7MM salary is waived tomorrow, only five teams would be eligible to place a waiver claim — the Kings have the cap room available to do so, and the Hornets, Nuggets, Pistons, and Thunder each have traded player exceptions worth at least $7MM.

On the other hand, if the Rockets were to release Carmelo Anthony, almost any team would be eligible to place a claim using the minimum salary exception, since he’s on a one-year, minimum-salary contract.

More often than not, waived players go unclaimed. In that case, the player’s original team remains on the hook for the rest of his salary. Unless the player is in the final year of his contract and is waived after August 31, his club has the option of “stretching” his remaining cap hit(s) over multiple years using the stretch provision, which we explain in a separate glossary entry. A team that waives a player and uses the stretch provision on him cannot re-acquire that player until after his contract would have originally expired.

In the case of any player without a fully guaranteed contract, the non-guaranteed portion of a player’s salary is removed from a club’s cap immediately once the player is waived.

When a player is “bought out” by his club, he’s placed on waivers as part of the agreement. He and his team agree to adjust the guaranteed portion of his contract, reducing the amount owed to the player by the team, assuming he clears waivers.

Here are several more notes related to waiver rules:

• Players can be waived and claimed off waivers during the July moratorium.
• A player waived after March 1 is ineligible for the postseason if he signs with a new team.
• A player claimed off waivers can’t be traded for 30 days. If he’s claimed during the offseason, he can’t be traded until the 30th day of the regular season.
• If a player is traded and then is waived by his new team, he cannot re-sign with his old club until one year after the trade or until the July 1 after his original contract would have expired, whichever is earlier.
• A player who has Early Bird or full Bird rights retains Early Bird rights if he’s claimed off waivers.
• If a team makes a successful waiver claim, it doesn’t lose its spot in the waiver order — the 30th-ranked team at the end of a season remains atop the waiver priority list until December 1 of that year, even if that team makes multiple offseason claims.
• A team with a full roster can submit a waiver claim and wouldn’t have to clear a spot on its roster for a claimed player until it is determined that the claim is successful.

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.

An earlier version of this post was published in 2012.

The NBA’s salary cap primarily serves as a way to restrict the amount a team can invest in player salaries in a given year. However, because the league has a soft cap rather than a hard cap, there’s technically no specific figure that clubs are prohibited from exceeding once they go over the cap to re-sign players.

There is, however, a specific threshold on the lower end that teams must meet in each NBA season. The league’s minimum salary floor requires a club to spend at least 90% of the salary cap on player salaries. For instance, with the 2018/19 cap set at $101,869,000, the salary floor for this season is $91,682,100.

If a team finishes the regular season below the NBA’s salary floor for that league year, the penalties levied against that team aren’t exactly harsh — the franchise is simply required to make up the shortfall by paying the difference to its players. For example, if a team finished this season with a team salary of $88,682,100, that team would be required to distribute that $3MM shortfall among its players.

The players’ union determines how exactly the money is divvied up — most recently, players who spent at least 41 games on a team’s roster have received a full share, while players with between 20-40 games on the roster receive a half share. A player can’t exceed his maximum salary as a result of a shortfall payment.

For the purposes of calculating whether a team has reached the minimum salary threshold, cap holds and international buyouts aren’t considered, but players who suffered career-ending injuries or illnesses are included in the count, even if they’ve since been removed from the club’s cap.

Additionally, the NBA made a change in its most recent Collective Bargaining Agreement to prevent teams from circumventing certain rules to reach the salary floor. Under the old CBA, a team that was $8MM below the salary floor could trade a player earning $4MM for a player earning $12MM halfway through the season and be in accordance with minimum team salary rules.

Under the current CBA, only the salary the team actually pays the player counts for minimum team salary purposes. For instance, in the example above, the team would be credited with having paid its original player $2MM for the first half of the season and its new player $6MM for the second half. In that scenario, the club would still be $4MM shy of the salary floor.

For the 2018/19 season, only one team is currently below the salary floor, as the Kings have a team salary of $90,844,422, per Basketball Insiders. If Sacramento’s team salary remains unchanged until the end of the season, the result would be a very modest shortfall of $837,678. That’s an unlikely outcome though — the club is a good bet to reach the floor at some point later in the season via free agent signings and/or trades.

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.

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 Tyson Chandler signed with the Lakers on November 6, he received a minimum salary contract. For the 2018/19 season, the minimum salary for a player with Chandler’s experience is $2,393,887, though it would only count against his team’s cap for $1,512,601, as we explain here. However, since Chandler wasn’t with the Lakers since the start of the season, he wouldn’t be entitled to that full minimum salary from the team.

The NBA season is 177 days long and Chandler signed his contract on the 22nd day of the season, meaning his one-year contract will span 156 days. Due to proration, his minimum salary will be worth 156/177th of a full minimum salary. So instead of earning $2,393,887, he’ll make $2,109,867. And instead of counting for $1,512,601 on the Lakers’ books, the cap charge will be 156/177th of that amount: $1,333,140.

If the Lakers had signed Chandler using cap space or a cap exception like the disabled player exception, his salary wouldn’t have been prorated, but the minimum salary exception begins to prorate after the first day of the regular season.

The same principle of proration applies to a player like Ben Moore, who was on a non-guaranteed contract with the Pacers before being waived on November 3. Moore was released on the 19th day of the 2018/19 season, but the NBA also pays players for the two days they spend on waivers, so the young forward was credited with 21 days of service. That means, due to proration, he was entitled to 21/177th of his $1,349,383 salary — that amount worked out to $160,096.

While situations like Chandler’s and Moore’s are the most frequent examples of proration’s impact on NBA finances, 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 1/177th 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 would earn 10/177th of their minimum salary.
• Two-way contracts: Players on two-way contracts earn a prorated portion of their NBA and two-way salaries depending on how many days they spend in each league. Additionally, if a two-way player is signed during the season, he’ll only be eligible to be with the NBA team for a prorated portion of the typical 45-day limit. For instance, a player who signs a two-way contract at the season’s midway point would be entitled to 23 days at the NBA level.
• 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 the 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.