The Rangers’ performance bonus issue gets complicated

Performance bonuses are a good problem to have and the New York Rangers have that problem

While having a slew of young players on the roster helps a team keep under the salary cap, there are issues especially when those young players are some of the best in the NHL.  We’ve discussed the issue of performance bonuses before and how it could be an issue for the New York Rangers as they manage their salary cap next season. With the addition of Alexis Lafrenière it got a lot more complicated.

To summarize, players on Entry Level Contracts (ELC’s) can be paid a maximum of $950k, but teams can supplement that with performance bonuses to a maximum of $2.85 million more.  That’s great for the player, but any performance bonus money earned counts against the salary cap and that is the issue.

While the salary cap is a hard $81.5 million, the NHL doesn’t hold it against teams if they are over the cap due to performance bonuses. They are allowed an overage of 7.5% more than the cap for bonus payments.  That means that the Rangers could be over the salary cap by $6,112,500 in performance bonus payouts.  It’s called the “Bonus Cushion.”

Here’s where it gets complicated. If the Rangers pay out more than $6.1 million in performance bonuses, it counts against their 2020-21 salary cap of $81.5 million.  For example, if they pay $10 million in performance bonuses, $3.9 million would count against the salary cap.

Since performance bonuses are not paid until the end of the season, teams are never sure of how much they will have to ante up.  As a result, if a team goes over the cap because of performance bonuses, they are hit with a “Bonus Cushion Penalty.”   The penalty reduces the salary cap for the next season by the amount that a team is over.  So, if the Rangers exceed the Bonus Cushion by several million dollars, it reduces their salary cap in 2021-22 by that much.

Of course, that is if the team has no salary cap space when the season ends.  If team can absorb the overage within the $81.5 million, there is no penalty the next season.

Vince Mercogliano of Lohud.com did a story laying out the salary cap issues and opined that a big payout of performance bonuses to young Ranger players could mean that the team will not promote some players to the NHL roster to keep their performance bonus exposure to a minimum.   That  could mean that we won’t see Vitali Kravtsov, Morgan Barron or K’Andre Miller in a Ranger uniform because they could earn performance bonus money that will hit the salary cap.