In our last salary cap article, we noted how the Jets will have a few players who earned escalators and the fact that this will use about about $3 million extra in cap space for 2021. Today we turn our attention to another adjustment.
Each year, player contracts will include incentives, which they may or may not earn during the season. So how are these accounted for on the cap?
Basically, they're either treated as likely to be earned (LTBE) or not (NLTBE). If you include LTBE incentives in a contract then, at the start of the season, you account for the cap hit in full as if they will be paid. NLTBE incentives do not count against the cap.
Then, at the end of the season, you have to adjust the following year's cap if there are any LTBE incentives that were not earned or any NLTBE incentives that were earned.
Whether or not an incentive is treated as LTBE depends on whether the player in question achieved that benchmark in the previous season.
For example, let's imagine Player X was due to receive $1m if he played over 60% of the snaps, $1m if he scored 10 touchdowns, $1m if the team made the playoffs and $1m if he made the pro bowl.
You'd need to look back at what he did last year to determine which, if any, of these you'd need to account for against the salary cap. Let's say he played 75% of the snaps and scored 12 touchdowns but his team missed the playoffs and he wasn't a pro bowler.
Clearly the first two conditions were met in the previous year so would be LTBE. The second two were not. So you have to account for $2 million against the cap and then adjust after the year based on what was actually paid.
The season plays out and Player X plays 80% of the snaps, makes the playoffs and is a pro bowler, but only scores nine touchdowns. Three of the incentive benchmarks were met, so he receives $3 million of the possible $4 million. Having only accounted for $2 million against the cap, we now need to account for another $1 million cap hit in the following season.
With these kinds of incentives, teams will often exploit the fact that a player missed significant time due to injury or otherwise had a down year by including easily achievable incentives which will automatically be NLTBE so they won't have to account for the cap hit until the following year.
Further muddying the waters is the recent proliferation of per-game roster bonuses or - as has usually been the case for the Jets - per-game ACTIVE bonuses (PGAB).
These create a situation where the incentive is part-LTBE and part-NLTBE. Essentially, you have to look back at last year to see how many games the player in question was active for and then proportion the maximum (16 games active) incentive based on that number of games to quantify the current year cap hit, again adjusting upwards or downwards after the year based on what actually gets paid.
Another example: If Player Z is due to receive PGAB of $20k and played 10 games last season, then you only need to account for $200k. If Player Z is active every week, he'll earn $320k of PGAB and $120k will be an additional cap hit in the following season. However, if he was only active five times, he'd only earn $100k and, having accounted for $200k, you'd get a credit of $100k to use against the following year's cap space.
The Jets had a lot of injuries in 2020, so you might think they would have had to pay less in PGAB than they had accounted for. While this is the case, as you can see from our data below, there weren't many long-term injuries to players on this list so we calculate the credit arising to be less than half a million dollars:
As for non-PGAB incentives, the Jets did have several of these, including $500k each to Bresham Perriman and Connor McGovern, $1 million to Steve McLendon and $1.5 million in Avery Williamson's restructured deal.
In each case, we assume these were NLTBE and haven't been earned so there would be no effect on the 2021 cap. For example, McGovern's was based on him making the pro bowl. If McLendon and Williamson earned any other incentives, they likely did so after the Jets got rid of them and therefore there's no adjustment required to the Jets' cap.
Ultimately, therefore, these incentives don't make much of a difference to the Jets' 2021 cap situation, but at least it's reassuring to know this isn't something that will eat up any of the cap room the Jets will enter the new league year with. Other teams might have bigger adjustments to make.
We expect the Jets to continue to create deals with incentives such as these and will do our best to keep a track of what's been accounted for.