Hoops Rumors Glossary: Maximum Salary

There are many NBA players technically on maximum-salary contracts, but most of those players didn’t earn identical salaries this season, making the league’s “maximum salary” something of a misnomer. While each NBA player has a maximum salary that he can earn in a given season, that number varies from player to player, with a handful of factors playing a part in determining the exact figure.

The primary factor in determining a player’s maximum salary is his years of service. If a player has been in the NBA for six seasons or fewer, he can earn up to 25% of the salary cap in the first year of his deal. Players with seven to nine years of experience can earn up to 30%, while veterans with 10 or more years in the NBA are eligible for up to 35% of the cap. In 2023/24, the salary cap was $136,021,000, meaning the maximum salaries are as follows:

The figures above explain why Fred VanVleet, who signed a maximum-salary contract with the Rockets last July following his seventh NBA season, earned a salary of $40,806,300 this season. But they don’t explain why Timberwolves big man Karl-Anthony Towns, who was also in that 7-9 year window and is on a max contract of his own, made just $36,016,200.

The reason Towns’ maximum salary is a few million shy of VanVleet’s is that those league-wide maximum salary figures only apply to the first year of a multiyear contract.

When a player signs a maximum contract, he can receive annual raises of up to either 8% or 5%, depending on whether he signs with his previous team or a new team. So by the third, fourth, or fifth year of his contract, he could be earning significantly more or less than his updated max for that season, depending on the rate the salary cap has been increasing and whether or not he has moved into a new “years of service” group.

Towns signed his first maximum-salary contract extension in 2018 and it went into effect in 2019/20, when he had fewer than six years of NBA experience. Although he has received annual 8% raises since then, those raises haven’t been enough to keep up with the annual cap growth and with his move into the 7-9 year window. As a result, he earned about $4.8MM less than his actual max in 2023/24, despite being on a “max contract.”

Towns signed a new contract extension in 2022 that will go into effect in 2024/25, so he’ll receive a major pay bump heading into next season and will comfortably surpass VanVleet’s annual earnings at that time.

Here are a couple more ways a player’s usual maximum salary can fluctuate:

• A free agent’s maximum salary is always at least 105% of his previous salary. For example, Lakers star LeBron James earned $47,607,350 this past season. If he were to decline his player option for 2024/25 in order to sign a new contract, he’d be eligible to receive a starting salary of up to $49,987,718 (105% of this year’s salary), even though that figure projects to exceed 35% of the ’24/25 cap ($49,350,000).
• In certain situations, players eligible for new contracts can earn the maximum salary for the level above the one they’d typically fall into. A player coming off his rookie scale contract can earn up to 30% of the cap instead of 25% if he meets certain performance criteria. A veteran can become eligible to earn up to 35% of the cap instead of 30% if he meets the same criteria, which are related to MVP, Defensive Player of the Year, or All-NBA honors.

Because a player can receive a raise of up to 40% in the first year of a veteran extension, there are some instances when a player who signs an extension not necessarily designed to be a maximum-salary contract sees the first-year salary in his new deal adjusted downward based on that year’s cap. Clippers forward Kawhi Leonard is one example. His new extension, which will begin in 2024/25, calls for a first-year salary of $52,368,085, which is a raise in the neighborhood of 15% on this season’s $45,640,084 salary.

However, because next year’s league-wide maximum salary for players with 10+ years of NBA experience projects to be $49,350,000 (which would be more than a 5% raise for Leonard), he can’t exceed that figure. That $49.35MM figure will be the value of his 2024/25 salary if the cap comes in at $141MM, as estimated. And Kawhi’s three-year extension, which was originally said to be worth over $152MM, will actually end up closer to $149MM.

A player who signs a maximum-salary contract can receive a trade kicker as part of his deal, but he can’t cash in on that bonus for any amount beyond his maximum salary in a given league year. For instance, Trae Young‘s max-salary contract with the Hawks features a 15% trade kicker, but if he had been traded this season, he wouldn’t have been eligible to receive that bonus, since he was already earning his maximum salary of $40,064,220.

A player on a maximum-salary deal that includes a trade kicker can potentially cash in on that bonus if he’s dealt later in that contract. For example, Brandon Ingram is on a max contract, but – like Towns – was earning well below his actual max in 2023/24, year four of that five-year deal. If he had been moved by the Pelicans this season, he would’ve been eligible to take advantage of his trade kicker. That remains true for Ingram going forward.

A maximum-salary player whose team finishes the season below the minimum salary floor isn’t eligible to receive a share when the team distributes that money to its players, since his max salary for that year can’t be exceeded.

The current figures for maximum salaries in 2024/25 are as follows, based on the NBA’s projection of a $141MM salary cap:

These figures will apply to players who previously signed maximum salary extensions that will go into effect in ’24/25, including Towns, Devin Booker, Anthony Edwards, Tyrese Haliburton, LaMelo Ball, and Jaylen Brown.

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.

Earlier versions of this post were previously published by Luke Adams and Chuck Myron.