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Chris Jones, Mike Evans, Saquon Barkley, Derrick Henry — the free agent market is full of interesting names that would solve a lot of the Ravens’ problems.
Except this thing called the salary cap exists. And things just got a whole lot tighter for the Ravens when they placed the franchise tag on Justin Madubuike, guaranteeing the defensive lineman $22 million.
As the Ravens look to replace 21 players who will be entering free agency, they will be doing financial gymnastics. Based on conversations with cap experts, here are things you should know to keep up with the onslaught of news about signings and contracts.
How much space do the Ravens have, and how much do they need?
The Ravens need room for Madubuike’s $22.1 million contract, along with Nelson Agholor’s one-year, $3.75 million extension. However, they also need to make space for other free agent signings or re-signings. They need room for all the guys who participate in training camp. They need money to pay their draft class. And then they need money to carry in reserve for late free agent signings and bonuses, among other things.
The NFL announced Feb. 23 that the salary cap for next year will be $255.4 million, the $30 million jump from last year the largest in NFL history. Before tagging Madubuike, the Ravens were projected to have $11.8 million in space, according to Russell Street Report’s calculations. The tag and Agholor’s contract puts them $9,927,299 million in the red by the rule of 51 (see next section). Russell Street Report’s Brian McFarland, who has been tracking the Ravens’ cap for over 20 years, said he estimates they need $12 million to $15 million in reserve for draft picks and future expenses, such as incentives or signings following injuries.
Eric Eager of SumerSports said, with the Ravens’ lower first-round selection and number of draft picks, only about $10 million of that will have to go to the draft class. Then, accounting for Madubuike’s tag, Agholor’s deal and any free agent signings, he said, in theory, the Ravens need to clear up about $30 million.
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How did they tag Madubuike if they’re over the cap now?
Teams don’t have to be cap compliant yet. Once the league year starts March 13, teams need the contracts of their top 51 players to fit under the cap (this is called the rule of 51), but the full 53-man roster and practice squad don’t have to fit until the first game of the year. Because the Ravens have 51 players under contract, any additions won’t count against the cap until the first game. So the Ravens have until March 13 to make their top 51 contracts cap compliant.
What goes into a player’s cap hit?
A player’s cap hit and his salary are not the same thing. For example, you may have heard about Odell Beckham Jr.’s $15 million contract — but his salary last year was just over $1 million. How?
Well, a player’s contract has several components. There’s his Paragraph 5 salary, which is the amount the player’s week-to-week paychecks total. Then there are signing bonuses and performance incentives, among other bonuses. The signing bonuses are paid to the player immediately when he signs. However, for the sake of the cap, those bonuses can be prorated over up to five years (even though the money is already in the player’s wallet). In Beckham’s case, the majority of his contract is in bonuses.
To summarize, a player’s cap hit, heading into the season, includes his base salary and the prorated bonus. By the end of the year, it can also include other bonuses and incentives (which are not as relevant for free agency, but stay tuned).
How can the Ravens create money?
A player can agree to a pay cut. Usually, that would mean his salary goes down but incentives are built in to give players a chance to earn the money back. Contracts can also be restructured, with salaries being turned into bonuses. Teams and players can also agree to an extension, which would allow teams not only to lower the salary hit but to spread the bonus over more years. Teams can also cut players.
What methods do they use?
McFarland said it’s rare to see players take a pay cut.
“Usually when that happens, teams will — and the Ravens have certainly done this — put in incentives that will allow the player to earn the money back,” McFarland said. “But that money [incentives earned] would generally count against the following year’s cap.”
Extensions and releases are common.
However, although the Ravens have restructured contracts in the past, that’s where things are starting to change. Usually, the Ravens wouldn’t get too fancy or complicated, but McFarland said it seems as though they’re starting to do bookkeeping gymnastics to build winning teams around Lamar Jackson before the cap hit of his new contract becomes more restrictive.
How do you determine candidates for release?
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It’s not as simple as saying this player’s good, that player’s bad or this contract is big and that one is small. A player’s age, skill and health play into it, but a lot of this goes back to the difference between salary and guaranteed money.
When you release a player, you still owe him his guaranteed money. It counts against the cap, but the player isn’t on the team, so it’s called dead money.
“To me, the biggest misconception is when everyone is like ‘dead money’ — dead money has already been paid to the player,” Eager said. “You can’t go back and ask for that back. It’s just that money hasn’t been accounted for on the cap.”
And, depending on when you release them, you may have to pay up sooner than expected. If you release a player before June 1, all of that dead money is owed in the 2024 season. If you release him after, it can be spread over 2024 and 2025.
Teams have to determine if the amount they’ll save in salary outweighs what they have to pay the player in dead money.
Here are two examples.
Patrick Ricard has a $5.155 million cap hit. His salary is $4 million. The Ravens owe him only $1.155 million in bonuses. If they cut him, that $1.155 million becomes dead money, but they save $4 million of the $5.155 million cap hit.
Marlon Humphrey’s salary in 2024 is $11.75 million. His cap hit is $22.878 million, which means he’s owed $11.128 million in bonuses. Overall, the Ravens still owe him $23.817 million even if he’s cut. If they release him, they lose $939,000 in cap space. While they save $11.75 million in salary, they accelerate the remaining $12.689 million onto the 2024 cap instead of spreading it over the remaining years of his contract.
But here’s where the June 1 deadline comes in. If they release him after June 1, they can spread that $23.817 million over 2024 and 2025. So, in 2024, they would still be paying him $11.128 million in dead money but they would be saving $11.75 million in salary.
What goes into restructuring?
McFarland calls this an “insane accounting mechanism.” In a simple restructure, the amount of money the player receives doesn’t change. However, the player’s salary is reduced and the rest is turned into a bonus. That bonus can be prorated over the remaining years of the player’s deal.
However, this comes with a catch. The player’s cap hit might be reduced now, but it snowballs at the end of the deal. The team might have to agree to an extension to continue pushing that cap hit into the future — or it will just have to take the hit at some point.
How does Ronnie Stanley fit into these categories?
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Stanley has the second-highest cap hit ($26.168 million) on the team next year. $15 million of that is salary; $11.168 million is guaranteed money. Stanley has $17.836 million still owed to him ($11.168 million of that is currently going to be paid this year, and $6.668 million will be paid next year).
McFarland said Stanley could be a candidate for restructure — or for a pay cut if the Ravens threaten to release him and his camp doesn’t think he could make as much or more on the free agency market. A restructure might be complicated because there’s only one more year on his contract after the 2024 season, so they would push his cap hit higher in the same year Jackson’s goes up. And an extension would be a gamble because of Stanley’s age and injury history.
And then there’s the possibility of a release. Keep in mind, there’s a lot more that goes into it than numbers, such as Stanley’s age, experience, injury history, chemistry with Jackson and skill — but they could save serious money if they release him.
If the Ravens release Stanley before June 1, they would have to pay him the $17.836 million that he’s owed, which would count against the cap next season. However, they were going to pay $11.168 million of it this season anyway. So, if you balance out the $6.668 million added to the 2024 cap with the $15 million salary they don’t have to pay, the Ravens could save $8.332 million.
If the Ravens release Stanley after June 1, they can keep that dead money spread out over 2024 and 2025, as it would have been anyway, and save $15 million in salary.
But there’s a catch. Of that $15 million salary, $4 million comes from a roster bonus, awarded to Stanley if he’s on the Ravens’ roster by the fifth day of the league year. You can save that money only if you cut him before then; otherwise, it drops to $11 million in savings for a post-June 1 release or $4.332 million if he’s a pre-June 1 release. One way to avoid this is to cut Stanley before March 18 but designate him as a post-June 1 release. Why does that work? Because the NFL says it does.
What does it mean if a player has void years?
Void years prorate the bonus’ cap hit beyond the length of the contract. Those dummy years are called void years. They provide temporary relief, but if the player is not re-signed beyond the contract, the bonus accelerates onto the upcoming year.
What are the important dates?
The Ravens need to be cap compliant, under the rule of 51, by March 13. Free agency and the trading period begin at 4 p.m. that day.
The deadline for restricted free agents to sign offer sheets is April 19.
The draft is April 25-27.
May 2 is the deadline to exercise fifth-year options on players such as Odafe Oweh and Rashod Bateman.
What happens now that Madubuike has been franchise tagged?
Madubuike is guaranteed $22.1 million. But that doesn’t mean negotiating is over. The franchise tag is for one year, and that $22.1 million is a guaranteed salary.
“The hard thing about the tag is you have to pay it all in one year,” Eager said.
But the Ravens and Madubuike can agree to a longer contract, which would allow the Ravens to turn some of that salary into a signing bonus and prorate it over the length of the contract. The two parties have until July 15 to agree to a deal. Otherwise, they will have to revisit it again next year.
“I guarantee you, if Madubuike signs a long-term extension, his salary cap will actually go down,” Eager said.
The article was updated with the details of Nelson Agholor’s contract.
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Giana Han is a Ravens beat reporter from Howard County.
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