In one of the biggest leagues in the world like the NBA, the importance of contracts is fundamental. There can be many types of contracts, from rookie contracts to maximum salary contracts typical of superstars, but let’s go in order.
Each team has around 15 players under contract, the salary cap therefore plays a crucial role; to regulate how much teams can spend on players’ salaries, guidelines have been established, simply a maximum and a minimum ceiling; if the maximum limit is exceeded, a luxury tax will be paid.
Il salary cap it is determined annually by the league and is based on a given percentage of the NBA’s total revenue, this percentage is negotiated between the league and the NBPA union, which protects the players.
The salary cap is expected to increase every year, so as to reflect growing revenues: the salary cap has the task of guarantee competitiveness and balance to the championshipthe salary cap is designed to prevent teams that can afford higher spending from dominating others, giving everyone the opportunity to sign the best players.
If the salary limit is exceeded, you must face the payment of a luxury tax, the cost of this luxury tax has a progressive additional cost that reflects the amount of dollars that the franchises spend over the limit.
The salary cap also impacts the free agent marketplayers who do not have contracts can sign with any franchise as long as they have salary space available. The salary cap also plays a role in the trade market, the teams that are subject to luxury tax the case of exchange must equalize the salary between players, so it is more difficult for these teams to make exchanges; opposite situation for teams below the salary cap as they can offer more onerous contracts to new signings.
Regarding trades, there are time windows in which these can be carried out: during the regular season the window is from 1 July until the trade deadline which is around the second week of February; from this date onwards only free agency players can be signed.
Before talking in detail about the types of contracts we must make another premise: any player under contract from an NBA franchise is subject to federal and state taxationthis means that the choice of a team or a city in which to play varies based on the tax burden suffered.
Federal taxation varies based on income and can reach a maximum of 37% while each state has its own taxation: there are both states without taxation (Taxas, Florida, Washington) and states in which the rates are very high such as California in which can reach 13%.
State taxation influences more than we think the choices of a player who is logically led to sign for franchises in states with lower or no taxation
Going a little more specifically and theoretically, we need to talk about the types of contracts for NBA players:
- Standard player contract: most common contract which can have a duration ranging from one to five years, the salary is established according to the salary cap and the contract is guaranteed, this means that the salary will be received even if the player is cut.
- Rookie scale contract: a rookie who enters the league through the draft receives this contract, with a duration ranging from 2 to 4 years, in which only the first year is guaranteed. The length of the contract varies based on the position in which he was chosen in the draft: the top 30 players get the 4-year contract, while the others only get 2 years. The salary is also determined by the position in which it is chosen.
- 10 day contract e two-way contract: in the first case it is a 10-day contract that the team uses when it has an immediate need for reinforcements; in the second form of contract it allows the player to play partly in the NBA and partly in the affiliated team of the G League
Furthermore, there are clauses that may be present in contracts such as team option through which a team can decide whether to renew a player for another year or the player optionin this case the player can decide whether to extend the contract for another year.
In the event of a suspended or injured player, the team can decide to temporarily replace him with another athlete, but the player continues to receive his salary.
Il rookie market it is generally similar to any other trade, but there are some peculiarities related to contracts and timing. The value of the rookie contract, as previously mentioned, generally varies based on the position in which the player is chosen; other values that are taken into consideration regarding a rookie are the development potential that the player has in the long term and above all the adaptation to the league.
The main limitation of a rookie trade is the waiting period: a rookie cannot be traded immediately after being selected in the draft but there must be a 30-day waiting period.
To conclude we cannot fail to talk about the role of NBPA: The association is responsible for protecting players’ rights, its influence extends to many aspects related to contracts. Through the collective bargaining agreement, the NBPA has the ability to negotiate player salaries, contract length and any options; thus ensuring that players receive a fair share of the revenues and are protected.
The NBPA plays a key role in negotiating the salary cap: while the salary cap serves to ensure competitive balance between teams, the NBPA seeks to obtain the best possible outcome for the players.
