Two weeks ago, we looked at how teams manage their salary cap. Since the Hawks have not yet signed all of their players, let's take a look at how teams generally structure deals for players taken in the second day of the draft. J.I. Halsell, the FO salary cap guru, is about to drop some knowledge all over you. I'll try to encapsulate the general gist of the piece, but do read it through in its entirety; I learned something and you just might too.
In terms of the mechanics of the deal, the first-round contracts are the most complex. Second-round contracts are not as complex as first-rounders; however, second-round contracts are structured differently than those of rounds three through seven. Contracts for third- through seventh-rounders all have pretty much the same structure, with the only difference being the duration of the contract.
Teams either sign their second-day picks to three- or four-year deals. While the shorter deals are cheaper up front, the fourth year provides teams with an extra year of team control over their players. For players that don't pan out, the fourth year is disadvantageous from a team perspective. Staving off free agency for another year is quite valuable if a player does produce, however.
Years one through three of both contracts are for a minimum annual salary; in year four, though, things get interesting. In Year Four of the four-year rookie contract, there is a salary escalator that, in the majority of instances, allows the player's salary of $565,000 in 2012 to adjust to the restricted free agency Original Round Tender (in 2012 this amount is $1,308,000) if they achieve certain performances in the first three years of the contract. Additionally, some clubs allow for escalation to other dollar amounts or other RFA levels such as the First Round Tender (in 2012 this amount is $2,846,000). The performance mechanism to induce the escalation is a combination of the player's participation percentage and the club's improvement in one of three negotiated statistical categories.
Beyond the percentage of plays a draftee plays in, teams generally have to make statistical improvements in some categories for the player to earn more money. If the team stinks and continues to stink, the player's contract won't get escalated. What I find interesting is that the difference in the number of years is not a player-by-player decision or even a year-to-year decision by teams. A handful of teams only negotiate three-year deals with their later picks, and the rest only negotiate four-year deals. The Seahawks are in the four-year group. Isn't learning fun?