ITP Glossary: Prorated Bonus

Football is littered with specialized terminology. From punt gunner to climbing the pocket, commentators rarely get to explain everything you need to know before the next play. Inside The Pylon’s glossary was developed to give fans a deeper understanding of the game through clear explanations, as well as image and video examples. Please contact us with any terms or phrases you’d like to know more about.

Prorated Bonus

A prorated bonus is the mechanism used to account for a player’s signing bonus against the salary cap for the duration of the contract. While the player receives the bonus at the point when the contract is signed, the actual salary cap ramifications are spread out for the length of the contract.

Prorated bonuses allow for more flexibility when teams sign players. The signing bonus on any contract is divided by the number of years on the contract and counts against the cap evenly for each year. The maximum number of years a bonus can be prorated is five – any contract over that length does not have a prorated bonus counting against the cap for any years after the fifth.

Looking at new Jaguars DL Malik Jackson and his six-year, $85.5 million contract:

We see the prorated bonus of $2 million per year for the first five years of his contract and no bonus for year six. Jackson received all $10 million of his signing bonus on his first day as a Jaguar, but the $2 million per year will count against the cap for the first five years of the contract as fully guaranteed.

If the player is released from his contract, the remaining prorated bonus will count against the cap as dead money in the year he was released. Many contracts are structured in such a way that allows teams to restructure salaries and roster bonuses into prorated signing bonuses. This allows further proration in the later years of the contract to free up immediate cap room.

Contracts can also include voidable years, which allow the team to spread out the impact of a signing bonus with the proration, yet still sign players to smaller a contract. For example, a four-year contract with a signing bonus of $8 million has a prorated bonus structure of $2 million per year. If the final two years are voidable, those two years of bonuses become a dead money charge of $4 million in the third year. This makes the contract essentially a two-year agreement, but allows the team to avoid a larger signing bonus spread out over only two years. Voidable years on a contract are a common tool to keep money accelerated and early cap charges small by taking advantage of the prorated bonus.

Contract information and graphic from overthecap.com

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Ryan Dukarm wrote this entry. Follow Ryan on Twitter @DBRyan_Dukarm.

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