The NHL Salary Cap & Contracts: An Overview

Every offseason there is naturally a lot of discussion about player contracts and the NHL salary cap. This year is no different. In fact, with all of the Sidney Crosby and Jordan Staal rumors flying around right now, there are even more discussions about contracts than usual.

NHL contracts work differently than contracts in other sports. They're not like NFL contracts or NBA contracts or any other contracts.

Here is a good overview of NHL contracts and the salary cap. Of course, these rules could all change with a new CBA, but that link explains how things currently work.

There are a few points that are especially relevant right now that you may want to consider when thinking about the Pens' cap situation:

The "cap hit" is how much an individual player counts against his team's salary cap in one season. On a multi-year deal, the cap hit is based on average annual value of the contract, not the actual salary paid each season.

Counted against the cap: All players on the active roster, injured reserve or the long-term injured list. Players who have left the team on a contract buyout, according to a formula that charges a percentage of the buyout against the cap.

Terms and salaries remain in place for the life of the contract. The salary does not decrease if the cap drops, nor can a contract trigger a salary increase if the cap goes up.

When a player aged 35 or older signs a multi-year contract, his average salary is counted against the team's salary cap during every year of the contract, even if the player retires before the contract is up.

A player expected to miss at least 10 games and 24 days due to injury can be listed as a long-term injury (LTI). An LTI can be covered by replacement players, as long as the replacement salaries do not exceed the salary of the injured player. If the replacement salaries would push a team over the salary cap, the team is allowed cap relief, but only for the portion of the salary that exceeds the cap. When the injured player returns, the team must immediately comply with the normal terms of the salary cap.

A team can exceed the cap by 7.5% to pay bonuses, but its salary cap for the following season will be reduced by the excessive amount.

A contract cannot be renegotiated at any point during the life of the contract.

There are a lot of details involved in NHL contracts and the whole thing can get pretty complicated when you think about it, especially when it comes to LTI relief. This is why educated and experienced general managers are so important.