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How Cale Makar’s ELC bonuses could impact the salary cap for the Colorado Avalanche

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The Colorado Avalanche need to account the performance bonuses of Cale Makar’s contract

NHL: Detroit Red Wings at Colorado Avalanche Ron Chenoy-USA TODAY Sports

With one year remaining on his entry-level contract, Cale Makar creates a lot of salary cap flexibility for the Colorado Avalanche—though not as much as it would appear on first glance.

ELCs have become incredibly important for NHL teams who hope to maximize their cap space. Good players on near-league minimum contracts is one of the best ways to build depth in a lineup. Rookie contracts allow for more highly priced veterans to fill out the roster and ultimately create a better team.

Having a top-pairing defender like Cale Makar who counts for “less than $900k” against the salary cap can help a contender fill out the rest of its roster with more expensive players than would otherwise be possible.

Unfortunately, it’s not as simply as that.

Unlike most other NHL contracts—the exception being for veterans over the age of 35—ELCs allow for players to earn performance bonuses. Bonuses that can accelerate earnings beyond the rookie contract and that still have to be accounted for against a team’s salary cap. Theoretically, a player on an ELC can earn upwards of an extra $2.5 million a season—drastically inflating the salary cap responsibility of the contract.

NHL entry-level contracts have the following components:

  • Maximum salary of $925,000
  • Signing Bonus: Limited to 10% of maximum salary or $92,500 (included in salary)
  • Type A Bonus: Maximum $850,000 ($212,500 per individual bonus) for such performance-based qualifiers such as ice time, goals, plus/minus
  • Type B Bonus: Maximum $2,000,000 for league performance awards (example: top five postseason awards) per season
  • Theoretically, a player could earn total compensation of $3,775,000

Makar’s contract isn’t that high thanks to the fact that he joined the team during the 2019 playoffs, so the first year of his ELC brings down the three-season average. The full breakdown of Makar’s entry level contract is as follows:

Cale Makar’s ELC

Compensation Type 2018-2019 2019-2020 2020-2021
Compensation Type 2018-2019 2019-2020 2020-2021
Cap Hit $880,833 $880,833 $880,833
AAV $2,591,667 $2,591,667 $2,591,667
Performance Bonuses $132,500 $2,500,000 $2,500,000
Base Salary $700,000 $832,500 $832,500
Signing Bonuses $92,500 $92,500 $92,500
Total Salary $925,000 $925,000 $925,000

This means that the potential exists for Makar to account for a lot more than the $880,833 reserved for him on Colorado’s CapFriendly page.

Performance bonus milestones are different depending on the position of a player. In the case of Cale Makar, he will earn an extra $212,500 for each of the following Schedule ‘A’ bonuses he meets this coming season (for a maximum of $850,000):

  • Player must be among the top four defenders on the team in ice time with a minimum of 42 games played by the player and his teammates.
  • 10 or more goals
  • 25 or more assists
  • 40 or more points
  • 0.49 points per game or more with a minimum of 42 games played by the player.
  • Top three defenders in +/- on the team (min. 42 games)
  • Top two defenders in blocked shots on team (min. 42 games)
  • Player is named to the NHL All-Star Game
  • Player is named Most Valuable Player of the NHL All-Star Game

As long as he doesn’t miss any significant time this season, it’s safe to assume Cale Makar will hit at least four of the Schedule ‘A’ bonuses. That would add an extra $850,000 to Colorado’s cap obligations this season.

While Schedule ‘A’ bonuses are largely based on individual performance, Schedule ‘B’ bonuses are related to how a player compares to the rest of the league. Depending on where a player finishes in league scoring and award voting, Schedule ‘B’ could push a player’s total performance bonuses up to $2.5 million.

For this to happen, one of the following thresholds must be met:

  • Winning an individual trophy or award: Hart, Norris, Vezina, Selke, Richard, Lady Byng, Jennings or Calder
  • Named to the first or second All-Star Team (end of season All-Star team)
  • Forwards: top 10 in goals, assists, points, points per game for forwards
  • Defensemen: top 10 in goals, assists, points, points per game for defensemen
  • Goalies: top five in GAA (25 game min.), SV% (25 game min.), wins (30 game min.)

As the winner of the Calder trophy, Schedule ‘B’ bonuses kicked in for Makar last season, and given how good he was as a rookie, it’s easy to envision him meeting at least one of the above milestones again this season. Even if he doesn’t win the Norris, which he will inevitably do one day soon, it’s hard to believe Makar will finish outside of the top 10 in scoring among defenders this season.

As good as he is, it’s safe to assume that Cale Makar’s bonuses will max out at $2.5 million this season, pushing his total cap hit well above the base ELC compensation most publicly available salary cap sites have allotted for him.

Thanks to being well below the cap ceiling last season, the Avalanche were able to retroactively tack for Makar’s $2.5 million of bonuses for the 2019-20 season onto last year’s season ending cap total. For teams that are already at the salary limit, these rookie bonuses would be allocated toward the subsequent year’s cap.

After some big spending this offseason, General Manager Joe Sakic has his Avalanche team a lot closer to the cap than last season. While his bonuses don’t have to be counted against this year’s cap, the Avalanche are likely hoping to leave room for them as the team’s salary commitments are expected to jump significantly next season. With a flat salary cap and extensions necessary for both Makar and team captain Gabriel Landeskog, Colorado is going to need every available dollar at their disposal for the 2021-22 season. That means we are very likely to see Sakic keep the team’s salary cap obligations below the cap to allow for the $2.5 million bonuses to be allocated at the end of this season.

2020-21 Avalanche as per Cap Friendly

COLORADO AVALANCHE 2020-21
COLORADO AVALANCHE 2020-21
STANDARD PLAYER CONTRACTS 42
AVERAGE AGE 27
UPPER LIMIT $81,500,000
PROJECTED CAP HIT $79,676,386
PROJECTED CAP SPACE $1,823,614
CURRENT CAP SPACE $1,823,614
DEADLINE CAP SPACE $4,285,493
ESTIMATED SALARY EXPENDITURE $75,190,792
CARRYOVER BONUS OVERAGES $0
POTENTIAL PERFORMANCE BONUSES $2,500,000

That said, it’s not a guarantee. The Avalanche are expected to be contenders this season, and if that cap space is necessary to bring in reinforcements throughout the season, Sakic likely won’t let Makar’s bonuses get in the way of him improving the team.

As a team that hasn’t had to worry about the salary cap over the past few seasons, the Avalanche are back to a place where it has to be a concern. Big extensions are coming, and while Sakic and his front office will likely be able to make them all fit into the team’s salary structure, they are already doing the work to prepare for the future—including saving cap space this season. While it’s likely the least fun part of the sport, watching the finances are going to be a necessity this season for the Avalanche to maximize the team’s long-term growth. Particularly with so many question marks surrounding the economic future of the NHL.