Maximum Salary

When superstars like Deron Williams or Dwight Howard approach free agency, they are often referred to as "maximum-salary players" — players that will likely earn the maximum contract offers permitted under the CBA. Because NBA teams are limited by a salary cap, clubs can only offer a single player a certain percentage of the cap. However, the maximum salary varies from player to player.

If a player has been in the NBA for six years or less, he can earn up to 25% of the salary cap. Players with seven to nine years of experience can earn up to 30%, while veterans with 10+ years in the NBA are eligible for up to 35% of the cap.

When determining the actual amounts of maximum salaries for a given season, a different cap calculation is used — so while 25% of 2011/12's $58.044MM salary cap would be $14,511,000, the actual maximum salary for players with zero to six years of experience in 2011/12 was just $12,922,194. For 30% players, the maximum was $15,506,632, and for veterans of 10 or more years, the max was $18,091,071. These figures will fluctuate from year to year, depending on the projected Basketball Related Income for a given season.

There are a number of exceptions to the maximum salary, as follows:

• The maximum salary only applies to the first year of a multiyear contract. For example, if Deron Williams were to sign a maximum-salary deal this summer, he would be subject to the maximum salary for the first season, with either 7.5% or 4.5% raises, depending on where he signs. So by the third or fourth year of his contract, he could be earning significantly more than the max salary.
• A free agent's maximum salary is always at least 105% of his previous salary. For instance, Kevin Garnett's 2011/12 salary was $21,247,044. For 2012/13, he is eligible to earn a maximum of $22,309, 396 — 105% of his prior salary.
• A first-round pick coming off his four-year rookie scale contract is eligible for a maximum-salary contract extension worth 30% of the cap (rather than 25%) if he meets one of the following criteria: (1) Wins a Most Valuable Player award; (2) Voted an All-Star Game starter at least twice; (3) Named to an All-NBA team at least twice.

Let's take a deeper look at Williams' case as he approaches free agency. The All-Star point guard is coming off a $16,359,805 salary in 2011/12, which exceeds the maximum for a player with his NBA experience. He has a player option for next season worth $17,779,458 that he doesn't intend to exercise, which will make him a free agent. Since he's already making more than the maximum, Williams will be eligible for a new max of up to 105% of his prior salary — $17,177,795.

If Williams were to re-sign with the Nets, who hold his Bird rights, he could earn 7.5% annual raises over a five-year deal that started at $17,177,795 in its first year. Signing with another team, such as the Mavericks, would mean 4.5% annual raises and a four-year maximum. So the largest contract Williams could earn from the Nets would be worth about $98.77MM over five years, whereas a maximum-salary deal from another team would be worth about $73.35MM over four years.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ and Storyteller's Contracts were used in the creation of this post.