NHL Contract Buyouts: How They Work
The National Hockey League (NHL) has a salary cap in place to ensure that no team spends more than a set amount on player salaries. However, sometimes teams sign players to contracts that end up being too expensive, too long, or just not working out as expected. In those cases, teams may explore the option of buying out a player’s contract.
A buyout is essentially a termination of a player’s contract, with the team paying them a portion of the remaining salary over a set period of time. The amount and length of the buyout depend on the player’s age and the remaining years on their contract. The buyout amount is also subject to the NHL’s Collective Bargaining Agreement (CBA), which sets the rules and guidelines for all NHL teams.
So, how do NHL contract buyouts work in practice? Let’s take a closer look.
The Basics of NHL Contract Buyouts
The NHL allows each team to buy out a maximum of two contracts per year, either during the offseason or within 48 hours of the end of the team’s final game of the regular season. The buyout window typically lasts for two weeks and is determined by the NHL after each season.
A buyout is a two-step process. First, the team must place the player on waivers, which means they are available to be claimed by any other NHL team for a period of 24 hours. If the player is not claimed, they become an unrestricted free agent and can sign with any team, while the original team is responsible for paying the buyout amount.
The second step is the buyout itself. The team must pay a percentage of the remaining salary to the player, with the amount varying based on the player’s age and the years remaining on their contract.
For players 26 years old or younger, the buyout amount is one-third of the remaining salary, spread out over twice the remaining length of the contract. For players over 26, the buyout amount is two-thirds of the remaining salary, spread out over twice the remaining length of the contract.
For example, let’s say a player has three years remaining on their contract with a salary of $6 million per year. If the player is under 26, the team would owe them $2 million ($6 million divided by three, times two) over six years. If the player is over 26, the team would owe them $8 million ($6 million times two-thirds, times two) over six years.
Benefits and Risks of NHL Contract Buyouts
The primary benefit of an NHL contract buyout for a team is that it allows them to clear salary cap space and potentially sign new players to improve their roster. It can also help to alleviate a strained relationship between a player and the team, which could have a negative impact on the team’s overall performance.
However, there are also risks involved. If a team buys out a player’s contract, they are still responsible for paying a portion of the remaining salary over a number of years. This can be a significant financial burden, especially if the team has multiple buyouts on their books.
Additionally, buying out a player’s contract does not always guarantee that the team will be able to sign a better player in their place. It’s important to carefully consider all options and weigh the potential benefits and risks before making a decision.
NHL contract buyouts are a tool that teams can use to manage their roster and salary cap space. However, they are not without risks and should be carefully considered before executing. By understanding the basics of how NHL contract buyouts work, teams can make informed decisions that best support their goals and objectives.