Hoops Rumors Glossary: Minimum Salary Floor

The NBA’s salary cap primarily serves as a way to restrict the amount a team can invest in player salaries in a given year. However, because the league has a soft cap rather than a hard cap, there’s technically no specific figure that clubs are prohibited from exceeding once they go over the cap to re-sign players. As long as a team doesn’t use certain exceptions or acquire a player via sign-and-trade, that team doesn’t face a hard cap.

There is, however, a specific threshold on the lower end that teams must meet in each NBA season. The league’s minimum salary floor requires a club to spend at least 90% of the salary cap on player salaries. For instance, with the 2023/24 cap set at $136,021,000, the salary floor for this season is $122,418,000.

For the purposes of calculating whether a team has reached the minimum salary threshold, cap holds and international buyouts aren’t considered, but players who suffered career-ending injuries or illnesses are included in the count, even if they’ve since been removed from the club’s cap.

Under the NBA’s previous Collective Bargaining Agreement, the penalties levied against a team whose salary was below the minimum floor at the end of the season weren’t very harsh — the franchise was simply required to make up the shortfall by paying the difference to its players.

However, the new Collective Bargaining Agreement has made those penalties for teams below the minimum salary floor significantly more punitive. Here are the changes introduced in the latest CBA:

• A team is now required to reach the minimum salary floor by the start of the regular season, rather than the end of the regular season.
• A team whose salary is below the minimum floor at the start of the 2023/24 regular season will only be entitled to 50% of its end-of-season share of the NBA’s luxury tax payouts. Beginning in 2024/25, a team whose salary is below the minimum floor at the start of the regular season won’t receive a share of the end-of-season luxury tax payouts.
• A team whose salary is below the minimum floor at the start of the season will have a cap hold added to its salary in order to reach the minimum floor. For instance, a team with a $117,418,000 salary on opening night in 2023/24 would have a $5MM cap hold added to its salary to reach the $122,418,000 floor and would be unable to immediately access that $5MM of cap room.
• A team that begins the season below the floor cannot reduce the shortfall amount it will owe at the end of the season by spending on player salaries during the season. For example, a team that starts the season $5MM below the floor would owe no less than $5MM at the end of the season. The shortfall amount that club owes could increase if its team salary dips further than $5MM below the floor by the end of the season.

As noted above, the previous CBA called for a team that finished the season below the floor to pay the shortfall to its own players. Under the new agreement, however, that shortfall money is sent to the NBA, which then redirects it to all players. That shortfall money will generally be disbursed to each player in the league in proportion to his salary for that season.

Based on these changes, it’s easy to understand why all 30 of the NBA’s teams have already surpassed the minimum salary floor in 2023/24 and it’s probably safe to assume that trend will continue in future seasons.

After all, essentially every incentive a team has to remain below the floor by the time the regular season begins has been eliminated. A team in that boat wouldn’t be able to access all of its cap room, would forfeit an end-of-season tax payment, and wouldn’t even be able to award its shortfall amount exclusively to its own players.

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. Information from ESPN’s Bobby Marks and Larry Coon’s Salary Cap FAQ was used in the creation of this post.

Earlier versions of this post were published in 2018, 2020, and 2021.