NHL Contracts Are Becoming ‘Lock-In Proof’ – Hockey Writers – The Business of Hockey

NHL players have been preparing for the next NHL lockout. In recent years, there has been a significant increase in the number of NHL contracts with a significant portion of compensation paid in the form of signing bonuses rather than base salary alone. This increase in the number of heavy contracts seems to point to widespread concern among NHL players about the possibility of another season being lost due to capping. Ever since the current NHL Collective Bargaining Agreement (CBA) was signed in 2013, speculation has been rife that another major deal could be halted. Now it seems that the players have started to plan for what is happening.

How Do NHL Signing Bonuses Work?

In order to see how signing bonuses can play a role in future CBA negotiations and impact a potential lockout, it’s important to understand what these signing bonuses are.

In most traditional businesses, signing bonuses are paid when an employee signs a contract with the company. These bonuses are often paid to entice the employee to take a reduced salary, or a reduced benefits package. Although each contract is different and may have other specific requirements, signing bonuses are generally paid regardless of contract performance.

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NHL signing bonuses are similar, but there is one very important difference. Traditional signing bonuses usually take the form of a lump sum payment. NHL signing bonuses are typically paid in multiple installments of varying amounts over multiple contract years, usually when the new league year begins on July 1. Although these bonuses may vary by season, they must be included when calculating average annual value (AAV). ) of the contract for salary cap purposes.

For example, the first year of Artemi Panarin’s contract with the New York Rangers had a base salary of $1 million and a signing bonus of $13 million, for a total annual salary of $14 million. His seven-year, $81.5 million contract includes $74.5 million in signing bonuses and just $7 million in base salary, amounting to an $11.6 million cap hit.

The most important thing to remember about these signing bonuses is that although they may vary in size and structure from contract to contract, in general, the payments are guaranteed whether the player plays a single game for the team or not. Payment is guaranteed even if there is a delayed, shortened, or canceled season.

The payment of these bonuses was prominently featured in 2018 during Ryan O’Reilly’s trade talks. The trade rumors surrounding him focused on his high signing bonus, and whether the Buffalo Sabers or other buyout teams would be responsible for paying it. Buffalo and St. Louis were able to complete the trade of the skilled center on July 1, 2018, which allows the responsibility of paying the bonus to transfer to St.

Players Prepare for Lockout

John Tavares signing with the Toronto Maple Leafs in the summer of 2018 was a perfect, classic example of a contract full of signing bonuses. His seven-year, $77 million contract contains $70.89 million in signing bonuses and just $6.11 million in base salary. In 2018-19, he was paid a total of $15.9 million, which includes only $650,000 in base salary — the league minimum — and a $15.25 million signing bonus. The remaining $55.64 million in signing bonuses will be paid over the remaining six years of the contract, regardless of whether he plays a single game.

Tavares isn’t the only high-profile player to agree to a contract with significant signing bonuses. Jakub Voracek, Jamie Benn, Carey Price, Steven Stamkos, and Connor McDavid are just a few of the star players with these types of deals. Although all of these contracts contain large bonuses, they are all structured very differently. Some of them have annual signing bonuses, which provide guaranteed income for the life of the deal, while others are designed to be “lock-in proof.”

Leon Draisaitl and his agents have negotiated what could be a lockout-guaranteed contract. His compensation is paid only at the base salary in most years of the contract. He had a base salary of $9 million in 2018-19, $9 million in 2019-20, $8 million in 2021-22, $8 million in 2023-24, and $8 million in 2024-25. No bonuses are paid during these seasons.

However, there were built-in safeguards for two potential closing seasons, 2020-21 and 2022-23. In those seasons, his base salary dropped to $2 million and $1 million, with signing bonuses of $7 million. The structure of his contract indicates that he is guaranteed to be paid that $7 million, regardless of whether it was closed or not.

Victor Hedman and his agents are taking a slightly different approach to ensuring his safety, regardless of the details of any new CBA. In addition to signing bonuses in 2020-21 and 2022-23, Hedman’s contract has signing bonuses in 2023-24 and 2024-25. Since it is almost impossible to predict what the new CBA might include and how it might change player compensation, this structure added more security and ensured that Hedman would be paid well regardless of the outcome of those negotiations.

NHL Showdown Averted But Still Coming

The current CBA was supposed to expire on September 15, 2022, but the terms of the current agreement were extended through the 2025-26 season as part of negotiations to return to the game after July 2020. The reason for this extension was simple: The COVID-19 Pandemic had changed everything in the world, so- so for the NHL to continue in any position, they had to agree that there is a way forward in these uncertain times. All parties are betting that by 2026 things will be back to normal and the next round of negotiations can begin.

As NHL Commissioner Gary Bettman said at the time of the expansion:

It was the understanding of both parties that we will face a difficult situation in a strange and novel way, which has not been seen before and we will go through it for the benefit of our participants and for the good game and for the benefit of our fans, we needed to work. together to solve the multitude of problems that may be in front of us…

As part of this extension, players will be able to participate in the Olympics again, something they have been fighting to bring back for years, and the salary cap has been frozen until revenues return to pre-pandemic levels. No changes have been made to the way signing bonuses work, meaning players will be able to continue using this strategy to secure their futures for years to come.

Although the NHL and NHLPA have been able to get the CBA negotiations back on track, they still have a lot of work to do in the coming years. This extension is just a temporary fix to help all organizations work through the unprecedented global event, but September 15, 2026, will loom large in the minds of hockey fans around the world.

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The NHLPA remembers how previous lockouts affected their bargaining power. Most of their membership wanted to get back on the ice, and the players no doubt haven’t forgotten how light their pockets are. During the 2005-06 lockout and the shortened 2012-13 season, only a few players were fortunate enough to have the kind of security offered by signing bonuses. Today many players are doing everything they can to make sure that never happens again.

At the same time, the negotiations that followed the cancellation of the 2004-05 season were a great success for Commissioner Gary Bettman. He was able to shepherd the current CBA, which not only established the hard salary owners were complaining about but also reduced the players’ salaries by more than 20%. Both were huge wins for NHL team owners.

This major victory was a direct result of Bettman’s aggressive negotiating tactics and his willingness to cancel an entire season to get what the owners wanted. Bettman remained strong and unwavering while hundreds of players were out of action and looking to make a comeback. The pressure on the NHLPA to get the players back on the ice gave Bettman and the league the leverage they needed to ask for and get what they wanted.

As more players continue to sign contracts with significant signing bonuses, the power that made the NHL so successful in past negotiations may be waning. If teams continue to hand out large amounts of signing bonuses, especially in years when a career can’t be stopped, Bettman will struggle to maintain the power he once had. These contracts and the bonuses they carry could dramatically change the balance of power at the negotiating table and could affect the NHL for years to come.