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Salary Cap Raises to $71.4 Million

The NHL salary cap was rumored to be in danger of stalling out heading into the 2015-2016 season — and sure enough, there’s not a lot of wiggle room heading into the fall.

This was roughly what was estimated, since it was assumed (seemingly correctly) that the NHLPA would see votes from the players to trigger a 5% cap escalator in the instance that the projected salary cap went down.

There was controversy, of course, over whether the players would opt to trigger the escalator — which increases the salary cap (and therefore available payroll), but also increases the amount of each player’s salary that gets withheld in an escrow account to start off the season. In the 2014-2015 season, players saw 14% of their checks withheld in an escrow account — this will only get redistributed if the league’s revenue figures were able to meet the figures allowed in spending payroll by the $69 million cap established last summer.

The escrow account has been somewhat of a formality in recent seasons. For those who aren’t familiar with the characteristics of an escrow fund, think of it as a pool of money similar to income tax. It’s withheld from player’s paychecks throughout the year, then redistributed to the players (in our loose comparison, this is similar to your tax return at the end of the year) if the league doesn’t need to use it.

For some players, this is something they don’t want. Like when an employee gets a raise that sees him jump from the upper percentile of his tax bracket to the lower percentile of the one above it, this can actually lower a player’s paycheck month to month even if he sees a slight salary increase with the higher cap. Some would argue that the money is almost always returned at the end of the year, but the decision making has to be approached from all angles and perspectives — and this is the concern that some players (rightly) have.

For others, though, not activating the escalator clause is a far worse option — because they can lose their jobs altogether. For a depth player on a team that already has multiple high-paying, long-term contracts, seeing the salary cap remain stagnant (or seeing it actually drop altogether, as many were concerned it would) would mean this option is a very real possibility without the escalator.

Why would the cap stagnate, though, despite what seems to be a thriving league and increasing revenue?

Part of the problem is the plummeting Canadian dollar. Although the league has set a precedent in the past of creating a revenue sharing program to assist the less financially stable Canadian clubs during times that this happens — the league first adopted this option in the late 1990’s to save the Ottawa Senators and the other non-Toronto markets in the wake of Winnipeg and Quebec City’s relocations — a significant portion of the league’s revenue that gets distributed among the clubs comes from Canadian sponsorship. The Rogers deal worth roughly $433 million per year is paid out in Canadian dollars — meaning that when the nation’s finances take a dip like this, the league suffers for it.

The salary floor is also a concern right now for a handful of teams. The Buffalo Sabres and Arizona Coyotes will need to bring in high contracts to hit the floor, and an increase in the salary cap’s lower limit always means keeping an eye on Ottawa.

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