With Nathan Mackinnon signing the third largest contract in NHL history, and with 85% of it being paid as signing bonus, there has been a lot of chatter around the league regarding bonuses, and I figured now would be a good time to address them. More specifically, what are they, who is entitled to them, and what are the advantages?
For simplicity, there are two types of player bonuses: Performance Bonuses and Signing Bonuses. Since they are two different topics, I will first cover performance bonuses in this article, and in my next article I will cover signing bonuses.
NHL Performance Bonuses
These are bonuses written into a player’s contract based on the player’s achievement of some agreed-upon benchmark related to his performance during a particular year. There are two types of performance bonuses that can be written into a player’s contract.
- Schedule A Bonus
- For example, scoring 20 goals in a season, is considered a schedule A Bonus.
- These are written into the players’ contract, and cannot exceed $250,000 per individual bonus, up to $1 million total.
- Schedule B Bonus
- League wide award bonuses that are paid by the league, such as winning the Calder Trophy.
- These are paid by the league if the player earns them, and there is no limit on how many awards a player can win, and be compensated for, by the league.
- On top of the league bonus paid, a team can also write into the contract to pay their own bonus (on top of the leagues award), as long as the aggregate bonus amount does not exceed $2.5 million.
Who Can Receive a Performance Bonus
Performance bonuses are not available to all players. You must meet one of the following criteria to be eligible to have a performance bonus included in your contract:
- On an Entry Level Contract
- Be older than age 35 on a one-year deal
- Have played 400 or more games in your career and spent 100 days or more on LTIR in the previous year.
If you don’t fit any of the above criteria, unfortunately, performance bonuses do not apply to you.
An important thing to note is that bonuses must be negotiated into your contract, they are not there by default. Depending on where you were selected in the NHL entry draft, you may have leverage.
For example, the first overall pick from the entry draft could be used as a benchmark. Typically, this player’s agent would negotiate into their entry level contract the maximum performance bonuses available to them. So, using our example above, the first overall pick would likely have $2.85 million of performance bonuses included in their contract. The 20th overall pick on the other hand, would likely have less.
See Juraj Slafkovsky’s contract with the Montreal Canadiens as an example – Juraj Slafkovsky CapFriendly. Juraj was the first overall pick, and you’ll notice he received the maximum performance bonuses of $3.5 million into his contract. Whereas Shane Wright, the fourth overall pick only has $3.062 million of performance bonuses written into his contract – Shane Wright CapFriendly.
Performance bonuses are a nice value add into a contract, if you can get them. From a financial planning perspective, it isn’t guaranteed money, so we wouldn’t want to include them in our budgeting, saving, or investment plans.
Signing bonuses, on the other hand, are guaranteed money and can certainly be factored into a financial plan. Stay tuned for my next article where we’ll explore these.