Incentive Compensation and Salary

All types of Incentive Compensation are counted toward Salary other than Unlikely Bonuses.

Limitations for All Incentive Compensation

Below are limitations applied to all Incentive Compensation types. Note there are additional limitations depending on the type of Incentive Compensation (see below).

Amount

Incentive Compensation cannot exceed 20% of a Player’s Regular Salary each Season.

Percentage Increase/Decrease

The maximum percentage increase or decrease is always either 5% or 8%, and it depends on the type of Contract signed by the player.

The maximum percentage permitted will mirror that of his annual Salary (visit the Contract Limitations page for more detail).

When calculating the percentage increase/decrease, Incentive Compensation is calculated separately from the Player’s Salary.

Criteria Unchanged

The criteria of each bonus must remain unchanged year to year through a Contract.

Amendments

Original Term of Contract

A contract cannot be amended to modify the terms of Incentive Compensation absent a Renegotiation or Extension.

Renegotiations

If there is a Renegotiation, the new Contract may include Performance Bonuses even if they were not included in the Original Contract.

Extensions

Veteran Extensions cannot add Incentive Compensation if not included in the Original Contract.

A Rookie Scale Extension can include Incentive Compensation not contained in the Original Contract, but it can only be earned during the Extended term (see Jalen McDaniels example below).

In-Season Tournament / Play-In Games

Any statistics accrued from the In-Season Tournament Finals Game or the Play-In Games are not factored into whether benchmarks are achieved, nor can Performance Bonuses be related to such games.

Prohibited Contracts

Incentive Compensation is not permitted in Two-Way Contracts or Minimum Contracts.

Performance Bonuses

Performance Bonuses – Generally

Performance Bonuses are a subcategory of Incentive Compensation, so the limitations applied generally to Incentive Compensation (explained above) apply to Performance Bonuses. Performance Bonuses then have their own requirements and limitations, explained below.

Requirements

Performance Bonuses have the following requirements:

1. Incentive must provide for positive achievement;
2. Must be based on specific numerical benchmarks or “Generally Recognized League Honors”;
3. Must be based on official league statistics as published on NBA.com;
4. Cannot relate to being on a team’s roster by a specific date or active for a certain amount of games.

Likely vs. Unlikely Bonuses

General Determination of Likely or Unlikely

All Performance Bonuses are considered either Likely or Unlikely, and such determination affects whether the Bonus is included in the Player’s Salary, and therefore applied to Team Salary for Salary Cap purposes.

A Performance Bonus is deemed Likely if it would have been achieved by the Team or Player in the preceding Salary Cap Year. Otherwise, it is deemed Unlikely.

Appealing the General Test

If the League or NBPA do not believe this accurately reflects the the nature of the Performance Bonus, they can request a “Basketball Expert” review the likeliness of the Bonus at the time of signing the Contract/Extension/Renegotiation.

The applicable standard for the Basketball Expert depends on the party appealing, who will carry the burden of proof :

1. The League: If it is more likely than not that the bonus will be earned, then it is considered a Likely Bonus.
2. The NBPA: If it is very likely that the bonus will not be earned, then it is considered a Unlikely Bonus.

The Expert’s ruling is final and unappealable as to how the Performance Bonus is treated.

What if No Preceding Season?

If there is no applicable preceding season (either the Player did not play or it is an Expansion Team), then the NBPA and League will agree on the likeliness.

If they cannot agree on the likeliness, then the Expert will conduct a hearing, but apply a different standard than a standard appeal: In this situation, the Expert simply determines whether the Bonus is likely to be earned or not likely to be earned.

Team Salary Pending a Likeliness Determination

While the appeal process takes place, the entire Performance Bonus is included in the Team’s Team Salary.

Performance Bonuses and Trades

When a Player is traded to a new Team and has team-related Performance Bonuses, those bonuses will be reassessed for likeliness based upon the Receiving Team.

Performance Bonuses Achieved Prior to Extension

When a Player adds a Performance Bonus as part of an Extension, but achieves the Performance Bonus during the original term of the Contract that did not include the Bonus, it is not awarded. The achievement will, however, change to Likely if it was originally Unlikely, and count toward Team Salary.

Limitations for Unlikely Bonuses

Amount of Unlikely Bonuses

The CBA adds an additional limitation specifically on the amount of Unlikely Bonuses:

1. Original Contract – Unlikely Bonuses cannot exceed 15% of Regular Salary for such Season.
2. Extension – If the amount of Unlikely Bonuses in the Salary Cap Year in which the Extension is signed exceeds the 15% of the Player’s Regular Salary for that year, the Extension may provide for up to the same percentage of Unlikely Bonuses in the first year of the extended term.
3. Renegotiation – Cannot increase Unlikely Bonuses in a Renegotiation if after such Renegotiation the amount of Unlikely Bonuses covered by the renegotiated contract exceeds 15% of the Player’s Regular Salary.

Room Requirement for Unlikely Bonuses

Although Unlikely Bonuses are not counted as Salary–and therefore don’t count toward the Salary Cap–a Contract cannot include Unlikely Bonuses if his Unlikely Bonuses plus his Salary would cause the Team’s Team Salary to exceed its Room.

When calculating Team Salary to determine if there is Room for a new Unlikely Bonus, you add in all Unlikely Bonuses included for all Players on the roster that might be paid that season.

Physical/Academic Achievements

Requirements for Physical/Academic Achievements

Attendance/participation in off-season skill/conditioning program cannot exceed two weeks.

Must provide incentive for a positive achievement, cannot relate to a negative achievement.

Can be linked to achieving educational degrees or attending programs such as Summer League.

If bonus relates to attendance of certain programs (e.g. Summer League/conditioning programs), the Team must provide sufficient information and allow a reasonable opportunity for Player to attend.

Payment Despite Non-Attendance

The Team can still pay the Player a bonus linked to attendance when the Player did not attend under three circumstances:

1. Waiver – The Team Waives the Player’s requirement to attend;
2. Substitution – In lieu of the specified services, the Player trains/plays with his national team during the offseason;
3. Illness/Injury – The player is unable to perform.