The concept of proration is one used in variety of fields and professions, and isn’t specific to the NBA. The term, which shows up frequently in the league’s Collective Bargaining Agreement, refers to the practice of calculating a figure proportionately.
In the NBA, the most common examples of proration apply to players on non-guaranteed contracts who are waived before their salaries become guaranteed, or players who sign minimum-salary contracts partway through the season. In each instance, the player would receive a prorated portion of his salary based on the number of days he was under contract during the season.
For example, when Taj Gibson signed with the Pistons on March 16, he received a minimum-salary contract. For the 2023/24 season, the minimum salary for a player with Gibson’s years of NBA service (10+) is $3,196,448, though such a deal would only count against his team’s cap for $2,019,706, as we explain here. However, since Gibson wasn’t with the Pistons since the start of the season, he wasn’t entitled to that full minimum salary from the team.
The ’23/24 NBA season is 174 days long and Gibson signed his contract on the 145th day of the season, meaning his “one-year” contract will span 30 days. Due to proration, his minimum-salary deal is worth only 30/174ths of a full minimum salary. So instead of earning $3,196,448, he’ll make $551,112. And instead of counting for $2,019,706 on Detroit’s books, Gibson’s cap charge is 30/174ths of that amount: $348,225.
If the Pistons had signed Gibson using cap space or a cap exception, his salary wouldn’t necessarily have been prorated, but the minimum salary exception begins to prorate after the first day of the regular season.
The same principle of proration applied to a contract that Gibson signed earlier this season with the Knicks. Gibson finalized a non-guaranteed minimum-salary deal with New York on December 15, the 53rd day of the regular season. That deal was initially worth $2,241,188 (122/174ths of $3,196,448), but Gibson was waived on January 7 before it became fully guaranteed.
Gibson was officially under contract with the Knicks for 24 days, and the NBA also pays players for the two days they spend on waivers, so the veteran center was credited with 26 days of service. That means, due to proration, he was entitled to 26/174ths of a minimum salary — that amount worked out to $477,630.
A 10-day contract serves as another example of proration, with a player on a 10-day deal earning a salary that is prorated based on his full-season minimum salary — the player makes 10/174ths of the full-season amount. For instance, when Gibson signed a pair of 10-day contracts with the Knicks, he earned $183,704 on each deal (10/174ths of $3,196,448), with the team taking on a prorated cap hit of $116,075 in each instance (10/174ths of $2,019,706).
Situations like Gibson’s in Detroit and New York are the most frequent examples of the impact proration has on NBA finances, but there are many more instances where it pops up.
Here’s a quick breakdown of several of those other instances of proration:
- Mid-level and bi-annual exceptions: These exceptions begin to prorate on the day after the trade deadline. The exact amount of proration depends on how much of the exception was unused as of January 10 and how many total days there are in the regular season. If a team had $3MM of its mid-level left on January 10 and there are 174 days in that season, the MLE would decrease in value by $17,241 per day (1/174th of $3MM).
- Trade kickers: In the event a player with a trade kicker in his contract is traded during the season, the kicker only applies to his remaining (i.e. prorated) salary. If a player with an $8MM salary in his contract year has a 15% trade kicker and is dealt halfway through that season, his 15% kicker would only apply to the $4MM left on his deal, giving him a $600K bonus (15% of $4MM).
- Signing bonuses: If a team gives a player a signing bonus in a free agent contract, that bonus is prorated equally over the guaranteed seasons of the contract for cap purposes. For instance, a $4MM signing bonus on a four-year contract would add $1MM to the player’s cap charge for each of the four seasons.
- Salary floor calculations: When calculating a team’s payroll in relation to the league’s minimum salary floor, we count the salary that a team actually pays to a player, rather than the player’s cap hit. For example, if a team traded for a player on a $12MM contract halfway through the season and kept him the rest of the way, he would count for $6MM toward that team’s salary floor, rather than $12MM.
- Active games limits for two-way players: Typically, a player who signs a two-way contract is permitted to be active for up to 50 NBA games in a season, but that limit is prorated if the player signs after the regular season has begun. A two-way player who signs on the 100th day of a 174-day season could be active for up to 22 NBA games (75/174ths of the season multiplied by 50 games, then rounded to the nearest whole number).
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 was used in the creation of this post.
Previous versions of this glossary entry were published in 2018 and 2022.
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