Breaking down Rodney Hudson’s contract with Raiders

One of the more interesting things that the Raiders have done this year is to avoid using signing bonuses as incentives for their players.

Historically, teams will use signing bonuses as a way to incentivize prized free agents to sign with them. For example, this year’s top free agent, Ndamukung Suh, was handed a 6 year contract that included $59,955,000 in guaranteed money. Of that guaranteed money, $25,500,000 was a signing bonus that was paid up front.

Signing bonuses are paid…wait for it…upon signing. They impact the cap much differently, however. The signing bonus does not entirely hit the cap in the year it’s paid. Instead, the amount is evenly spread, or prorated, over the entire length of the contract up to five years.

In the case of Suh, that means that his signing bonus will count $5.1 million against the cap in each of the first five years of his six year deal.

Here is a look at his contract details to illustrate this, from Spotrac

 
For Hudson, his base salary in 2015 will be $5.7 million. But he will also get a $6.9M roster bonus that kicks in very soon, and both of those count against the cap for this year. This means that, as of now, Hudson’s 2015 salary cap number is just $400,0000 shy of $13 million. The $400,000 difference is a workout bonus that he is able to earn by attending a specified number or percent of workouts.
In contrast, the Raiders’ biggest free agent signing is using a roster bonus instead of a signing bonus. The difference is that, while the money is still paid to the player up front, the bonus is not prorated over the life of the deal and all hits the salary cap this year.

Hudson also has his 2016 salary fully guaranteed but for injury only. This means that if he has, say, a season or career ending injury in 2015 or 2016, he will be paid for 2016 regardless.

If, however, he would be cut before the 2016 season because he was performing below expectations, his 2016 salary is not guaranteed. If it were, he would have what is called a guarantee for skill and injury and this is reportedly not the case.

Here is a look at Hudson’s contract details, also from Spotrac:

Note that Hudson only has dead money on his contract if he is cut in 2015, which won’t happen.

Why are the Raiders doing this? Well, there are a couple of good reasons.

First, McKenzie likes to structure his agreements in a way that allows him salary cap flexibility in future years and this adheres to that philosophy.

Note the dead cap money for Suh – the only year that there is no dead money is 2020 and that’s because the NFL rules prohibit a signing bonus to be spread over more than 5 contract years. So even though Suh does not have guaranteed money on his contract past the first 3 contract years, he would have dead money count against the cap if he were cut before the 2020 season.

The second reason is that the Raiders must spend to the salary floor by the end of the 2016 season. This means that the team must spend no less than 89% of the salary cap averaged over the 2013-2016 seasons, or face the penalty.

The Raiders, like other lower-spending teams in recent years, will be looking to front load their contracts to make sure they hit the salary floor and therefore are looking to pay more money in 2015 and 2016 to accomplish this.

Hudson’s contract made him the highest paid center in the NFL but that does not make it a bad contract for the team. On the contrary, the team has a lot of flexibility with him and if his play does not merit his salary, they are able to cut him in any future year of his contract with no salary cap consequences.