NHL Contract Talks

Today we talk about how to achieve performance bonuses and their cap implication.

These bonuses are different than signing bonuses. They can only be given to players on entry-level contracts, to players signing contracts after 35 years old or players signing contracts after coming back from long-term injuries.

They are divided into two categories, which are the "A" Bonuses and the "B" Bonuses, respectively associated to individual performances and league-wide performances/awards.

As the contract is signed, a maximum of $3,500,000 per year in performance bonuses can be included to the contract. A maximum of $1,000,000 can be included as "A" Bonuses and $2,500,000 as "B" Bonuses. Each "A" Bonus is worth $250,000 meaning that a player can only get paid for hitting four of them each year, even if he was to hit six of them.

As for "B" Bonuses, if a player finishes top-10 in goals, assists, points or points per game/ a goalie finishes top-5 in G.A.A, %SV or wins, he earns the full $2,500,000. Players finishing in top-3 or top-5 standings for various trophies will also earn the full amount, as well as being on the 1st or 2nd All-Star Team

No what if a player has less than $3,500,000 in potential bonuses? Well.. The first million will be "A" Bonuses and the rest is "B". Furthermore, if the PB's included are less than the $1,000,000 limit for "A" Bonuses, for example $560,000 and a player achieves three categories of "A", then the first two will pay $250,000 each and the third one will pay $60,000.

As mentioned in Slafkovsky's post, all team benefit from a 7.5% cap extension to fit their potential performance bonuses onto their cap. If a bonus is achieved and a team is unable to fit the amount under this year's cap (due to LTIR or being too close to the cap), the amount will be transferred to next year's cap as dead money🤝

Let's analyze why Juraj Slafovsky's contract could become a nightmare for the Canadiens if they have a player on Long-Term Injury List.

He signed an entry-level contract of three years, with an annual cap hit of $950,000. He will earn $95,000 in signing bonuses and $855,000 in base salary annually, since a player under ELC can't earn more than 10% of his annual cap hit in signing bonuses. Signing bonuses are paid on July 1st of every year and the base salary is the salary the player earns during the year.

Slaf is also eligible to earn performance bonuses, due to his ELC. They can go up to $3,500,000 a year, bringing his annual average value at $4,450,000.

Now the complicated part... If he starts the season on the Canadiens' roster with a contract on LTIR, his contract will count on the cap under the amount of his cap hit worth $950,000. If he starts in Laval and he is recalled during the year, the Canadiens will need to have space for his AAV of $4,450,000 to recall him. I hear you all asking where did the performance bonuses disappear?

Well.. Teams are allowed to go 7.5% over the cap ($6,187,500) to include potential performance bonuses during the season. However, at the end of the year, if any bonus has been achieved by the player, the team has to have the cap space to include the bonuses or else they will be included into next year's cap as "carryover bonus overages" and the potential bonuses that weren't earned simply disappear.

So, basing our hypotheses on the Canadiens trading salaries at the deadline, if Slafkovsky was to earn a good chunk of his PB's, the Canadiens would be able to fit them under this year's cap.

On the other side, when a player is sent to LTIR, teams obtain cap relief equivalent to their AAV. Taking Carey Price's contract, MTL would get $10,500,000 in salary relief. However, the 7.5% allowance doesn't exist under LTIR cap. Therefore, the team needs to have cap space equivalent to the player's cap hit + potential achievable performance bonuses to recall him, hence why $4,450,000. Furthermore, teams functioning under LTIR are above the cap limit, meaning that they need the PB's to fit under the cap or else they become carryovers🤝

Let's take a deeper look into the Blackhawks' rebuild.

In less than a week, they traded two young players of their core, left two unrestricted and bought out two other guys. BOOOM THIS JUST HAPPENED.

Kyle Davidson was appointed the general manager position of the Hawks in March and like every new GM, he wanted a team completely in his image. He opted for a full rebuild, since his two leaders (Toews and Kane) are out of contract by next summer. He simply decided not to build his new core around DeBrincat, Dach, Kubalik and Strome.

These four gentlemen are on their way to get paid. Kubalik, Strome and Dach will earn between 3M$ and 4.5M$ each this summer and DeBrincat will ask around 7M$ next summer. Signing them is buying you time to ''escape'' a rebuild, but leads you nowhere. Instead, they drafted Nazar, Korchinski, Rinzel and others, who will develop around a new core composed of Seth Jones (signed long-term already), Reichel (still paid 925K$) and Kurashev (signing a bridge contract this summer).

Some think that they could have signed some of their young guys to one-year contracts and trade them at the deadline while retaining salary, but these guys will want multi-year contract and the Hawks want to leave the dead cap space to retain half of Kane's remaining year in a trade before the season starts or at the deadline. Furthermore, the few guys they will signed as free agents on one-year contract (Domi and Athanasiou) will be assets to acquire draft picks at the deadline as well.

So instead of filling up their salary cap from the start of their rebuild, they will develop their future core at lower salaries, while seeking free agents on a one-year contracts and trading for bad contracts with a year or two left to them from other teams to reach the salary floor and they will ask for a decent compensation to proceed (young prospects or picks). By doing so, they can replenish their prospect pool and surround their prospects with veterans and become a winning-team again🤝

There it is. Jeff Petry has been dealt, alongside Ryan Poehling, to the Pittsburgh Penguins for Michael Matheson and a 4th round pick (2023). Let's agree on one thing, this trade didn't bring much value to the Canadiens, but it brought the most value at the moment.

In all honesty, I overpriced his value myself, but the return and the subsequent moves are not bad either. Starting with the age of both players, Matheson is 6 years younger. Going to statistics, Petry has a slight advantage on Matheson, but an average of 23 points in 6 NHL seasons is still decent. Now contractwise, Matheson's contract has an additional year in comparison to Petry's contract, but at a lower cap hit by 1.375M$, in addition to being more manageable in the eventuality of a buyout, as the money is divided more evenly throughout the deal. Furthermore, getting a 4th round pick for Ryan Poehling and getting an extra 750K$ is decent, as they would've probably lost him on waivers for nothing next year. This created enough space for them to re-sign Rem Pitlick at a decent price, who is clearly an improvement on Ryan Poehling. Lastly, keep in mind that the Canadiens didn't retain any salary on Petry's contract, which was almost impossible to think about not that long ago.

This move obviously hides something more, due to the Canadiens having to sign Kirby Dach and them being short on money. When we look at what the Sharks got for Burns and Vegas for Pacioretty, this situation was managed correctly by Kent Hughes.🤝