Realty One

FAMOSO MONDAY NIGHTS

Access

Tuesday, April 10, 2018

ABOU-MECHREK: MAKING "CENTS" OF THE CFL SALARY CAP SYSTEM

Like G.I. Joe says, “Knowing is half the battle,” and that includes every CFL fan about the CFL Salary Cap. Especially Rider Nation, whose team has flourished in the Salary Cap Era.

The Cap is $5.1M, and minimum wage is set at $53,000 for the 2018 season, with no maximum a player can make.

These are the only parameters GMs are bound by to fill their 46 man roster. They need not only be mindful of what each player gets paid, but HOW that wage is reflected on the team's salary cap.

However a player gets their money- whether it be a signing bonus, performance bonus, base salary, fair market value for services rendered (for example if a team pays for a players moving expenses, or most commonly  airline tickets for family to visit) anything that a player negotiates into their contract counts toward the team's salary cap. Everything. Gone are the days of the ‘unmarked envelope’ waiting in player’s lockers … except if you’re referring to the per diem that players (and coaches) get upon arriving at the airport for away games.

This amount doesn’t count toward the cap as it is negotiated by the CFLPA in the CBA and is consistent for all players. It’s a few "20s" put together by the team designed to pay for the player's food and basic expenses for the 2-3 day business trip.

Everyone’s contract is different, but for some reason or another, the few hundred per diem dollars of “Purr-deezey” are more sacred to players than their much-more robust game cheques. Perhaps it is because the per diem (which possibly means “free money” in English) really does come in an unmarked envelope with no paper trail for anyone to trace; not J.T.’s tax henchmen in Ottawa, not anyone…not even the, uhmmm, errr…uhmmm, how do I say….”The Family Budgeter”.

I always managed to leave my purrdeezey in whichever city we were in (and often a little more). How some guys (like Milt Stegall) came home with all of their free dough still perplexes me. I mean, there are only so many free hotel lobby apples, and saltines a man can survive on! But I digress.

Like per diem, playoff monies negotiated in the CBA are the same for everyone on the winning and losing teams and do not count toward the team’s salary cap. Neither does any money allocated to Practice Roster Players.

The CFLPA does not recognize PR players other than to agree that any team may carry a maximum of 7 at any time during the year, but they do not police the amounts paid to these non-roster players.
Now that we know WHAT goes against the cap, let’s move to WHEN.

Players are paid 1/18th of their negotiated base salary not longer than 48 hours after each game, and is tallied against the Cap on a weekly basis as the player gets their game cheque. Players receive no income on bye weeks, or in the off season, unless there are off season bonuses in their contract. It’s easy: No Game = No Cheque.

This is also where it starts to get tricky because of the ambiguity of the definition of the term “year”. For football fans the CFL year runs from June to November. 6 months. But in fact the CFL term “year” is consistent with J.T.’s and runs from January 1 to December 31st. So, just like any other taxpayer in Canada, whenever a player gets paid throughout the calendar year is when it is taxable, and is when the team takes the cap hit.

It is quite common for a player to factor into a team’s salary cap for a season without ever suiting up. Let’s look at an example from recent Rider lore:

We all remember the 2013 Grey Cup and the $tar $tudded Ro$ter. (My apologies, in advance, to those who believed that all those all-star caliber players came to the Canadian prairies only play for the love of the game. They all got paid well, and it all had to be stickhandled to fall within the frame work of the CFL salary cap).

Knowing the team would be making a significant push for the Cup in 2013, the team locked up key players from the 2012 team with larger signing bonuses (in 2012) and smaller base contracts for the 2013 season, making the aggregate of the deals well within each player's fair market value but only a smaller portion of it counting toward the 2013 Cap. From a player's perspective, joining a better team usually means a larger playoff payday - which, as mentioned, is NOT part of any players negotiated contract. It’s what we’d call “gravy,” as more times than not the gravy can make, or break, and otherwise delicious meal.

This “front-end loaded” style of contract is what players and their agents drool over. Football contracts are not guaranteed - which simply means the only money a player is guaranteed is the money that’s already in their bank account. Players can be cut at any time and their team is not obligated to fulfill any part of the previously legally negotiated contracts.

Which brings us to how other player’s contacts were structured for 2013.

Some players get talked into signing larger ‘back-end loaded’ contracts, which come with smaller base salaries (for 2013), and larger bonuses due on January 1 which would count toward 2014’s Cap space.

When players sign these back-ended deals they need to be aware that the team can legally cut them on December 31 and not be on the hook for any of that Jan 1 bonus. This ‘moral re-negging’ on contracts did not happen in 2013-2014, and perhaps I have been tainted by the brutality of “the business”, but it still surprises me when players are “shocked!” to be released the day before their big spring bonus. There’s a reason they say football is the best game but the worst business.

These back-ended contracts helped the Riders stock pile talent in 2013, but the team (knowingly) paid for it in the following few seasons because they were continuously playing ‘catch up’ with the previous season.

The timing of Chris Jones coming to town and releasing half the roster before year's end might start to make a little more sense when this morsel is factored into the equation. He was clearing the slate to build the talent base from the ground up, using his cap management strategies (the ones everyone seemingly questions, but have a proven track record).

But back to 2013. Everyone is paid differently and GMs need to be clever to stickhandle within the rules; whether it be a front ended deal, or a back ended deal, or even offering players comprehensive packages that include front office duties (which are not applied to the Salary Cap - especially not if you wore #81).

Where things get cloudy again is when it comes to the Injured Reserve.

Teams used to hide players on the IR who weren’t really injured but who the team wanted to keep around ‘just in case’ but didn’t want them to count against the cap. So, a couple years back the league implemented a 9-, and then 6-game IR. Players on the “one game” still count toward the salary cap and are permitted to participate in practice and team meetings as they heal, but now players put on the longer term IR do not count toward the cap, nor are they allowed to participate in team meetings or practice (thereby the team losing its incentive to uninjured players around as they can not integrate or be part of the team).

To cloud things up a little more, if a player is healthy to play before his stint on the long term IR is over the team can decide to pull him off early, but if they do his salary will count toward their salary cap in its entirety for the entire stint on the IR as if he was repeatedly on the one game.

I think that covers it all. Let’s look at a case study to try to make sense of all this financialese.

If a player signs a $90,000 base salary contract on February 16th and receives a $20,000 signing bonus. Let's say he also negotiated into his contract a $1000 bonus for each TD scored that season, $10,000 for a First Team CFL All Star selection, $2500 for being the top Canadian in the Grey Cup and $20,000 for reaching 1000 yards. In his contract he also receives a $5000 bonus on February 1st of the following year, another $90,000 base salary for the following season, and a $10,000 bonus due in December following the second season.

If this player starts the season on the Practice Roster and is activated in Game 2 before going on the one game injured list and coming back to play for 2 more games before going on the 6 game IR and finishing up the last 6 games of the seaons on the active roster and finished the regular season as a second team West division all star with 7 TDs and 996 yards, and was named the Grey Cup MVP as he lead his team to victory with another 600 yards and 3TDs in the playoffs.

The next season a key free agent in this player's position fell into the GMs lap during Free Agency of the second year and Player X was expendable and released on February 19th.

How much did Player X count toward each years cap?

ANSWER:

The initial signing bonus of $20,000- PLUS-$0 for being on the Practice Roster for game 1 (regardless of what this player got paid for his week of service it will not count toward the Salary Cap), $55,000 ($5000 x 11 the number of games played or on the “one game”…the $30,000 earned while on the 6 game would not count toward the cap) -PLUS- $7000 for the 7 TD’s at $1000 a pop -PLUS- $0 for the 996 yards (probably because the coach is also the GM and knew if the player got 4 more yards it would cost the team $10,000 so he didn’t give the player the ball in the 4th quarter of the final game…but again, I may be tainted by the business).

$0 for anything that happened in the playoffs (if he had won the top Canadian instead of the MOP in the Grey cup the cap would have taken a $2500 hit)

For a total of a $82,000 cap hit in year one.

For Year 2 the team would have to claim the bonus paid to the player on February 1st even though Player X was not a factor for that team or that season.

Any Questions?

(Mike played 10 seasons in the CFL winning the Grey Cup in 2007 with the Saskatchewan Roughriders. An Economist, Certified Financial Planner and Charter Life Underwriter, Mike runs his practice through IG Wealth Management with offices in Moose Jaw and Regina and values your feedback at Mike.Abou-Mechrek@igprivatewealth.com)

9 comments:

Anonymous said...

Good article. However, "flourished" is probably overstating the Rider record during the salary CAP era 2006-2017. During that period the Riders have a record of 110-115-1, very pedestrian. They have won 2 Cups, same as Mtl, BC, Calgary & Toronto. Prior to the Argos win last year there were 7 different Grey Cup winners in the 7 years previous. So in fact there has been a great deal of parity in the league. Only Hamilton & Wpg have failed to win a Cup in this time. The Rider regular season record indicates they have not been a dominant team. In fact that team of all- stars in 2013 finished 3rd & were it not for Durant taking matters into his own hands in the 4th Qtr, would have lost to BC in the West semi. The Riders have never been THAT dominant type team that wins 14 or 15 games. Only once in their history have they won 14 & twice won as many as 13. They had a very nice run from 2007-2013 when they were a very good team, one to be reckoned with, but dominant? No.

Anonymous said...

The Riders went over the cap in 2013. How is that good management?

Anonymous said...

The CFL salary cap for 2018 is $5.2M and the minimum salary is $54,000

Scott Thompson said...

Great article Mike, now I think I need to take a nap, my head hurts.

Anonymous said...

So the brainwashing starts up again.

Anonymous said...

I know my friend who is an accountant is going to love reading this article, but this blue collar guy .. not so much. I'll be at the game munching my hot dog and leaving the crunching to the numbers guys.

Anonymous said...

It's simply an article on payroll why would anyone get confused. The take away is salaries are negotiated and agreed upon. Depending on how others negotiate their salary when crunch time comes you better be producing because to make that number someone is going to be out the door or told to renegotiate in order to stay in the room albeit at a smaller salary.

This is simply household budgeting. You decide in 2018 do you want to buy a new TV, new furniture set, or take a trip.

It's very fair as value is assigned accordingly.

Anonymous said...

great info mike,thanks from the ordinary fan.

Bloodshed said...

Thanks for this article, it sure was an eye-opening one on the nature of the business. Now with all that in mind, what do you, as a former player would suggest to make it more advantageous for current and future players? (A solution that wouldn't take too much out of a team's budget but make it interesting enough for it to be a ''win-win'' situation)