There are two types of bonuses in NHL contracts -- signing bonuses and performance bonuses.
What are they, and how do they work? Do they count toward the cap? Let's take a look.
WHAT IS A SIGNING BONUS?
Signing bonuses are the only guaranteed money in a player's contract, and are paid out each July.
Although the name may suggest that the money is given to the player up front after the player signs, these bonuses can be structured in a way that they're given for the duration of a contract. In the event of a lockout, or a buyout, full signing bonuses are still paid out. Buyouts deal only with base salaries.
The maximum amount in an entry-level signing bonus is 10 percent of the contract's value. There is no maximum for other contracts, and high signing bonuses are often used to give players more security in their contracts.
For example: Juuso Riikola's signing bonus in 2018 was $92,500, 10 percent of his $925,000 contract. The Penguins gave him the maximum amount allowed.
For example: Connor McDavid's contract's average annual value is $12.5 million, but his actual base salary is very low, ranging anywhere from $1 million to $3 million per year. The remainder is paid out in signing bonuses, and therefore guaranteed. McDavid's contract is also front-loaded, with $13 million given to him in each of the first two and fourth years of the contract in the form of signing bonuses.
For example: Sidney Crosby's full contract is paid out through the base salary. He's receiving no signing bonuses.
WHAT IS A PERFORMANCE BONUS?
Performance bonuses are awarded based on predetermined statistical requisites in a player's contract, like scoring 20 goals, or average ice time. These are called "Schedule A" bonuses. These types of bonuses cannot exceed $850,000 per player.
The other type of performance bonus is a "Schedule B" bonuses, and those aren't always written into contracts. When a player wins an award, like the Hart Trophy, the league awards a bonus.
A team can also write a Schedule B bonus for an award into the player's contract, like winning the Calder Trophy, or finishing in the top 5 of a scoring race, those have a maximum combined value of $2 million.
For example: Dominik Kahun is eligible for up to $2.85 million in performance bonuses. While we don't know what the conditions are for those bonuses, the math tells us that he's eligible for the maximum $850,000 Schedule A bonus limit and the maximum $2 million Schedule B bonus limit.
CAN ANYONE GET PERFORMANCE BONUSES?
Not everyone is eligible to have performance bonuses written into their contracts.
Performance bonuses are for players on entry-level deals, players older than age 35 on one-year deals, or players who have played 400 or more games in their career and spent 100 or more days on long-term injured reserve the previous year.
For example: Kahun is the only Penguins player under contract for 2019-20 who has performance bonuses written into his contract.
For example: Crosby doesn't meet any of the requirements for performance bonuses. No matter how many goals or point he racks up, the Penguins wouldn't be able to give him a bonus for it.
DO BONUSES COUNT TOWARD THE SALARY CAP?
Signing bonuses do. Those, combined with base salary, are how a player's cap hit is calculated.
Performance bonuses, though? Sort of.
Performance bonuses do count toward the cap. However, there is a cushion of 7.5 percent of the upper cap limit reserved for performance bonuses, which works out to be $5.9625 million in 2018-19. The cushion is why you typically won't hear about it when a player hits a mark that awards them a signing bonus. If the performance bonuses a team awards add up to less than the 7.5 percent cushion, then it doesn't have an effect on actual cap space, so there's no real reason for the public to know about it.
For example: Kahun, as stated above, is eligible for up to $2.85 million in performance bonuses. There is no way that will take away from the Penguins' salary cap space, since it is less than the 7.5 percent cushion amount. He could hit every single mark required and receive the full $2.85 million, and we likely wouldn't hear about it because it can't have an impact on the cap.
If a team does have multiple players receiving performance bonuses, and the total amount adds up to more than that 7.5 percent cushion plus the team's remaining salary cap space, then the excess amount rolls over and counts toward the team's salary cap in the following season.
Some bonuses do not count toward the salary cap. When a player wins an award, like the Hart Trophy, the league awards a Schedule B bonus. Those don't count towards the cap in any way.
However, if a team writes a Schedule B bonus for an award into the player's contract, those do count towards the cap (and can be covered by the cushion), and, as stated above, have a maximum combined value of $2 million.
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