salarycap

A salary cap is a league-imposed limit on the total amount a professional sports team may pay its players in a single season. Implemented through a negotiated agreement, it is intended to promote competitive balance, financial stability, and predictable rosters across teams.

Caps are typically expressed as a fixed dollar figure or as a formula based on league revenue, recalculated annually. Teams account for each player's contract as a cap hit, often influenced by contract length and guarantees. Some leagues enforce a hard cap with strict limits; others use a soft cap that allows excess spending under certain conditions or exemptions.

Most systems include a cap floor to ensure a minimum level of team payroll, and many impose penalties such as luxury taxes or punitive measures for exceeding thresholds. Common exceptions cover sign-and-trade, mid-level and veteran minimum signings, and other negotiated provisions. Rookie-scale contracts, minimum payroll requirements, and other rules further shape spending.

Examples vary by sport. The NBA and NFL employ soft or near-soft caps with multiple exemptions; the NHL uses a hard cap with limited exceptions; MLB lacks a traditional cap but imposes a luxury tax or competitive balance tax; MLS uses a hard cap and designated-player rules. The salary cap influences roster construction, free-agent decisions, and strategic choices aimed at maintaining league parity.