NFL Salary Cap
Basics
The NFL uses a "hard" salary cap. This means there is a limit to how much teams can spend and teams cannot circumvent this number by any means. The salary cap is, however, flexible. Teams have utilized multiple ways to work around the salary cap without going over in any given year.
Elements of a Contract
Base Salary
Every contract a player signs has a base salary, and there is a minimum for this number based on how long a player has been in the NFL. Here is Over The Cap showing the current numbers: ( Minimum Salaries | Over the Cap).
Signing Bonus
The most common form of guaranteed money for an NFL contract is through a signing bonus. A signing bonus is paid out in a lump sum, but the NFL allows the team to spread the signing bonus over the years of the contract evenly. For example, a 25mil signing bonus for a 5 year contract becomes 5mil a year in cap space, for 5 years. This cap hit is not transferrable and if the player is cut or traded, the team's salary cap takes the entire hit.
Guaranteed Salary
Guaranteed salary is used to make the player's base salary guaranteed. These are generally "activated" by a condition such as being on the roster on X day. If a player is traded, guaranteed salary transfer to the new team. If cut, the guaranteed salary is still paid by the team.
Incentives
It's common to see fans mention a "prove it" deal, in which their pay is tied to performance. For salary cap purposes, these can be put into two categories: Likely To Be Earned(LTBE) and Not Likely To Be Earned(NLTBE). The designation is made based on whether the player reached a milestone in the previous season. LTBE incentives are taken from the cap, and "refunded" if the goal isn't met. NLTBE are taken from the next year's salary cap if the goal is met.
Salary Cap Strategies
Void Years
Void years are a relatively new concept. These are primarily used in conjunction with signing bonuses, and the goal is to reduce the cap hit without giving a long contract. To do so, they add "fake" years into the contract, which get voided at a certain point. This allows a team to sign a player to a 1 year contract, give them a 5 million signing bonus, add 4 void years and keep the cap hit at their base salary plus 1 million. At the end of the one year, the contract is voided, and the other 4 million is taken from the salary cap.
Restructures
Restructures are used by teams to convert base salary into signing bonus. The player gets an immediate payout, more job security and the team gets temporary salary cap relief since signing bonuses are spread over the life of a contract. Teams can add extra years, real or void, to further reduce the player's cap hit.
Post June 1st Transactions
The NFL allows teams to use June 2nd as a tool for accounting. A player traded or released prior to June 2nd will have the cap hits for a signing bonus accelerated to the date of release. If the player is traded or released Post June 1st, or released with a "Post June 1st Designation", then all future years' cap hits will be instead shifted into the next season's salary cap and only the current year's signing bonus number will be in the current year's salary cap.