CBA - NBA Contract Types
When it comes to NBA contracts, we know that there is much more to them than meets the eye, but what many people do not know is how many types of NBA contracts exist. In the current Collective Bargaining Agreement (CBA) there are roughly 10 distinct forms of contracts, each with its own unique features and types of players that they are built for. Let's gain a little more insight into what defines each type of contract:
Uniform Player Contract (UPC): This is the most basic and thus the most common NBA contract. A UPC is essentially a blank canvas where a team and a player can work from as they add whatever provisions they can agree to. For example, the two parties could agree to add a No-Trade Clause to the UPC meaning that that player cannot be traded during the term of the contract. This also means that there is no designated salary for a UPC, there is only a minimum and a maximum. The minimum player salary in the NBA is scaled based on years in the league. For example, the minimum for a player with 5 years of experience in 2020/21 about $1.8M. A UPC establishes certain compensation protections to protect a player’s earnings when things like a basketball-related injury, lack of skill, or even death lead to a player’s contract being terminated by the team. A UPC may only cover 4 seasons from the date of its signing.
Max: In the NBA players with longer careers become eligible to sign a Max contract which is a type of UPC that allows for higher salaries. The Max is broken down into 3 categories each of which corresponds to a different maximum salary. For players with 0-6 years of NBA experience, the Max contract is 25% of the annual salary cap. For players with 7-9 years of playing experience, the Max is 30% of the annual salary cap. And finally, for players with 10+ years of experience, the Max is 35% of the cap. This means that for a player with 10+ years experience the max salary for the year 2020/21 would be $38,150,000.
Supermax: The Supermax is offered to players who have played at least 7 seasons and are resigning contracts with the team they played for on their rookie deal. The initial percentage for the Supermax is 35% of the annual salary cap, but that salary increases by 8% each year.
Players who have played seven or eight seasons with two years left on contract can earn a four-year supermax
Players who have played seven or eight seasons with one year left on contract can earn a five-year supermax
A free agent who has completed eight or nine years in the NBA can sign a five-year supermax
This means that a free agent who signs the Supermax in 2020 would make $38M in their first season, but could make closer to $50M 5 years down the road.
Rookie Scale Contract: This is the initial agreement between a team and their first-round draft pick. These contracts always feature 2 guaranteed seasons with a team option for the 3rd and 4th years. Compensation on a Rookie deal is scaled based on draft placement meaning that players picked earlier in the draft receive higher compensation. The first overall pick in 2021 should make $8,131,200 in their first season, increasing each year over the length of the contract.
Designated Veteran Player Contract: This type of contract becomes available for any player in free agency with 8-9 years of NBA experience. The contract must be a minimum of 5 seasons but it guarantees that that player will remain with the team for at least one season before they can be traded. One important stipulation is that to be eligible, the player must have played for only one team during his career, or changed teams only through a trade during his first 4 seasons in the league. The player’s compensation must fall between 30-35% of the salary cap for that year. Meaning the minimum first-year salary would be $32,700,000. A team can only sign two players to this type of contract simultaneously.
Two-Way Contract: A two-way contract exists between an NBA team and a player who plays for that team while also participating in games with an NBA G-League team. A two-way deal can only last 2 seasons and can only be signed for a player in their first 4 seasons in the NBA. Importantly, the salary for two-way deals does not count against a team’s salary cap, allowing them to work to develop young players while saving money against the cap. While playing for the G-League affiliate the player makes somewhere between $75,000 and $92,000 each season. While playing in the NBA they receive the minimum for 0 years of experience which is $898,000. This type of contract must include conversion options to allow successful players to be signed onto a UPC by the NBA team.
Summer Contract: Once again a summer contract does not count against a team’s guaranteed total salary. They can be signed anytime between July 1 and the last day before the regular season, meaning that they allow undrafted prospects to participate in a team’s summer activities and be evaluated before agreeing to a larger commitment. Summer contracts feature a salary of $2,000 per week with no compensation protections. They must end the day before the regular season when teams can choose to sign the player onto a UPC or to let them walk.
Non-Guaranteed Training Camp Contract: Like a Summer contract, this form of contract pays $2,000 per week. Unlike a Summer contract, here player contracts can be terminated on the first day of the regular season and the player has compensation protections up to $6,000. If the contract is not terminated the player is guaranteed 1 season receiving a two-way salary without protections.
Exhibit 10 Contract: This is a specific type of UPC. It allows a player to be waived by the team, with a bonus of $5,000-$50,000 to be awarded to the player if they sign with the team’s G-League affiliate. It also contains a conversion option to turn into a Two-Way deal when the season starts. They pay the minimum player salary without any protection, meaning a player with 1 year of NBA experience on an Exhibit 10 would make about $1.4M. They are commonly used as a way to encourage young talent to develop within a franchise’s ranks rather than sign elsewhere or abroad.
10-Day Contract: The key part of this contract is that it only lasts 10 days or 3 games, whatever comes first. The salary cannot be less than the minimum player salary for a player of that standing. This is frequently used to add players to a roster to see if they work in the system, without much of a commitment to that player.
Rest-of-Season Contract: Anytime after the first day of the season a player can sign this type of contract. Their pay is determined by the amount of time remaining in the season when they sign but must be above the minimum player salary for that period.
Over 38 Contract: This contract is at least 4 seasons long and is for any player over 38 or who will be over 38 during the term of the contract. The is essentially a UPC so salary can vary greatly, but the unique feature of an Over 38 Contract is that the salary of the last year of the contract is allocated over the previous seasons. These contracts are designed to prevent a team from pushing salary into the later years when a player may be considering retirement, to make it fit within their cap space.
There are a wide variety of types of contracts defined in the CBA each of which is unique and might be appropriate for a different group of players. Understanding NBA contracts is no simple task but it is important because it gives fans an insight into what is going on behind the seasons and explains the constant fluctuations of NBA rosters.
Until next time...