The National Basketball Association has a limit on how much a team can spend on a player. This is called the salary cap, which may seem simple enough to understand but it has exceptions which complicates the concept. Unlike some sports, the NBA utilizes the salary cap in order to level the playing field and allow smaller teams equal opportunity to draft top players. The salary cap maintains the leagues competitiveness and it has worked well for both large and small markets over the years. For those of us who love the game and would like to understand the intricacies of the salary cap, here are some basic information on the subject.
Understand the difference between hard and soft caps.
Under the hard cap, teams cannot exceed the value set for teams to spend on players. The soft cap on the other hand allows the team to exceed or go over the fixed value.
Understand the Collective Bargaining Agreement.
The Collective Bargaining Agreement or CBA binds the NBA Players Association and League in a contract that defines the setting of player's salaries, rules for trading, how players will get drafted, and individual player's contracts to name a few. This sets the rules which determine how the NBA will operate.
Know the exceptions under the salary cap.
Utilizing the soft cap, teams are allowed to exceed the salary cap under certain exceptions. The rookie exception allows teams to employ new players from different countries or straight out of school even if they go over the salary cap. The league sets a rookie salary scale and is determined by their draft position. The Larry Bird exception gives the team the option of re-signing their player if it means they will exceed the salary cap. In the early bird exception teams can re-sign their free agents for more than his previous season's salary or the NBA's average salary, whichever has the higher value. Under the disabled player exception, this allows the team to hire a replacement for the injured player if they have exceeded the cap.
Understand the penalties.
Although teams are allowed to exceed the salary cap under certain exceptions, there are penalties that are applied to teams that exceed by huge amounts. This falls under the luxury tax, where liable teams who have exceeded the tax level have to pay a certain amount as penalty.
These are just a few basic facts on the NBA salary cap. The salary cap sets the balance and control for teams in the NBA to maintain equality.