The NFL Is Changing Its Salary Distribution Schedule
The NFL will now pay players their base salary over 36 weeks, rather than the traditional 17 weeks, but is that a big deal?
|Joseph Pompliano||Apr 6||10|
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When the NFL Players Association voted to ratify the new Collective Bargaining Agreement (CBA) last year, there were several noteworthy changes, including minimum salary increases and the ability to extend the regular season to 17 games in the future.
The one change that went unnoticed?
Starting this season, NFL players will now be paid over 36 weeks for the 17-game schedule — rather than the typical 17-week payment schedule in the past (Source).
Before we get into why changing the distribution of salary payments matters, we must first understand how it all works.
NFL players are paid in 4 main ways:
Bonuses (Signing, Roster, Workout & Options)
Guarantees (Skill, Injury & Cap)
In years past, every NFL player on a team’s roster during the regular season would earn a base salary divided into 17 installments. Checks were paid out starting in week 1 of the regular season and ended after week 17, covering all 16 games and the bye-week.
Now, every NFL player will still receive the same amount designated by their base salary, but payments will be spread out over 36 weeks — rather than the traditional 17 weeks.
So why does it matter?
Here’s how I think about it…
Most NFL rookies enter the league at around 21 years of age and receive base salaries that range from $600,000 to several million dollars. They are put through a rookie symposium, which offers tips on things like how to pick an investment advisor, and then they are essentially told good luck.
Handing a 21-year-old millions of dollars and asking them to budget, save, and invest, all while playing a professional sport at a high level, is hard enough. Making them do it while receiving 100% of their salary in less than 1/3 of the calendar year? That makes it even more difficult.
With that in mind, I’m inclined to think spreading base salary payments over 36 weeks might be a good thing for NFL rookies and those that are less financially prepared.
The only problem?
It punishes NFL players that are financially savvy.
The time value of money is a simple concept that money you have now is worth more than the identical sum in the future due to its potential earning capacity. By spreading payments out over 36 weeks, not only are multi-billion-dollar NFL franchises awarding themselves interest-free loans, but NFL players that intelligently invest their capital are severely punished.
With 45% of Americans holding no investible assets, financial education has become a national emergency. Rather than punish players that put in the work, educate themselves, and have a plan in place to build future wealth for their family, the NFL would be better off providing options.
For example, if a rookie wants to spread his payments out over 36 weeks to help with budgeting, he should be allowed to do that. But why should an NFL veteran that has historically been able to take advantage of upfront cash have to do the same? It doesn’t make any sense.
To be fair, player reps for the NFLPA reportedly tried to make the first-year mandatory enrollment, with the ability for players to opt-out after that. Unfortunately, NFL owners said all or nothing.
Regardless, there is one caveat that no one is discussing…
The change in salary payment distribution reverts back to a 17-week schedule in 2030, which was demanded by NFL owners and just so happens to be the last year before the CBA expires.
Why would they do that?
It’s impossible to be certain, but as Brandon McManus of the Denver Broncos put it, that might mean “players bank accounts [will] be lighter and not ready for a lockout.”
NFL owners are already creating financial leverage for future negotiations.
Have a great day, and we’ll talk tomorrow.
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