Hoops Rumors Originals

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.

The Pacers have about $89MM in guaranteed money committed to player salaries for 2024/25 — or about $96MM if Tyrese Haliburton makes an All-NBA team. However, even though next season’s salary cap is expected to come in at $141MM, Indiana won’t begin the 2024 offseason with $45MM in cap room to spend.

In fact, the Pacers technically won’t open the new league year with any cap space at all. Each of Indiana’s own free agents will be assigned a free agent amount – or “cap hold” – until the player signs a new contract or the Pacers renounce his rights.

The general purpose of a cap hold is to prevent teams from using room under the cap to sign free agents before using Bird rights to re-sign their own free agents. If a team wants to take advantage of its cap space, it can renounce the rights to its own free agents, eliminating those cap holds. However, doing so means the team will no longer hold any form of Bird rights for those players — if the team wants to re-sign those free agents, it would have to use its cap room or another kind of cap exception.

The following criteria are used for determining the amount of a free agent’s cap hold:

• First-round pick coming off rookie contract: 300% of the player’s previous salary if prior salary was below league average; 250% of previous salary if prior salary was above league average.
• Bird player: 190% of previous salary (if below league average) or 150% (if above average).
• Early Bird player: 130% of previous salary.
• Non-Bird player: 120% of previous salary.
• Minimum-salary player: Two-year veteran’s minimum salary, unless the free agent only has one year of experience, in which case it’s the one-year veteran’s minimum.
• Two-way player: One-year veteran’s minimum salary.

A cap hold for a restricted free agent can vary based on his contract status. A restricted free agent’s cap hold is either his free agent amount as determined by the criteria mentioned above or the amount of his qualifying offer, whichever is greater.

No cap hold can exceed the maximum salary for which a player can sign. For example, the cap hold for a Bird player with a salary above the league average is generally 150% of his previous salary, as noted above. But for someone like Pacers forward Pascal Siakam, whose cap charge is $37,893,408 this season, 150% of his previous salary would be nearly $57MM, well beyond his projected maximum salary.

Instead, Siakam’s cap hold will be equivalent to the maximum salary for a player with between seven and nine years of NBA experience. If we assume a cap of $141MM, that figure works out to $42.3MM.

One unusual case involves players on rookie contracts whose third- or fourth-year options are declined. The amount of their declined option becomes their cap hold, and if the player’s team wants to re-sign him, his starting salary can’t exceed that amount.

For instance, the Hornets declined James Bouknight‘s 2024/25 fourth-year option last fall, then waived him in February. If Bouknight had remained on Charlotte’s roster, the team wouldn’t have been able to offer him a starting salary this offseason worth more than $6,064,496, the amount of that option. That figure would also have been his cap hold.

That rule is in place so a team can’t circumvent the rookie scale and decline its option in an effort to give the player a higher salary. It applies even if the player is traded after his option is declined, but only to the club the player is part of at season’s end. For instance, if Bouknight had been traded from the Hornets to the Pistons, Detroit would have been prohibited from offering him a starting salary greater than $6,064,496 as a free agent, but any other team could have exceeded that figure.

If a team holds the rights to fewer than 12 players, cap holds worth the rookie minimum salary are assigned to fill out the roster. So, even if a front office chooses to renounce its rights to all of its free agents and doesn’t have any players under contract, the team wouldn’t be able to fully clear its cap.

An incomplete roster charge in 2024/25 projects to be worth $1,160,544, meaning a team without any guaranteed salary or any other cap holds would have closer to $127MM in cap room than $141MM due to its 12 rookie minimum holds.

A player who has been selected in the draft but has not yet officially signed his rookie contract only has a cap hold if he was a first-round selection. A cap hold for a first-round pick is equivalent to 120% of his rookie scale amount, based on his draft position. An unsigned second-round pick doesn’t have a cap hold.

Cap holds aren’t removed from a team’s books until the player signs a new contract or has his rights renounced by the club. For example, the Warriors are still carrying cap holds on their books for retired players like David West and Matt Barnes, who never signed new contracts since playing for Golden State.

Keeping those cap holds allows teams some degree of cushion to help them remain above the cap and take advantage of the mid-level exception and trade exceptions, among other advantages afforded capped-out teams. If and when the Warriors want to maximize their cap room, they’ll renounce West and Barnes, but they’ve remained over the cap – and haven’t needed to remove those holds – since those players became free agents in 2017.

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 the Basketball Insiders salary pages were used in the creation of this post.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron.

The NBA made it a priority in its latest Collective Bargaining Agreement to do all it could to reduce load management and to ensure that the game’s biggest stars suited up more often. That resulted in the league beefing up its existing Player Participation Policy and introducing a new requirement for players to qualify for end-of-season awards.

In order to be eligible for all of the NBA’s end-of-season awards, a player must appear in at least 65 games (out of 82) during the regular season. That means they can’t miss more than 17 regular season contests.

Sixers center Joel Embiid and Cavaliers guard Donovan Mitchell are among the players who were on track to be All-NBA locks but who won’t play in 65 games this season due to injuries and therefore won’t be eligible.

However, it’s not quite as simple as looking at a player’s games played total at the end of the season and seeing whether or not it’s at 65+. There are scenarios in which a player could still qualify for award consideration if he appears in fewer than 65 games and scenarios in which a player would not qualify for consideration even if he technically appears in more than 65 games.

The technicalities:

First, it’s important to clarify that for the purposes of this rule, a player is considered to have played in a game only if he logged at least 20 minutes in that game. That requirement was implemented so that a player couldn’t, say, start a game, check out after 30 seconds, and have it count toward his total.

A player is permitted to fall short of the 20-minute threshold twice and still have the game count toward his minimum as long as he logs at least 15 minutes in those games. So a player who plays 20 minutes in 63 games and 15 minutes in two more contests would reach the 65-game minimum. However, any outing of less than 15 minutes would not count toward the minimum.

Jamal Murray provides an excellent case study of how this rule operates in practice. If Murray plays in every Nuggets game for the rest of the 2023/24 regular season, he’ll technically have appeared in 66 contests. However, due to various injuries, Murray fell short of the 20-minute mark in three of those games, including two outings in which he logged fewer than 15 minutes.

As a result, Murray’s end-of-season game count may look like this:

• Games of 20+ minutes: 63
• Games of 15+ minutes: 1
• Games of fewer than 15 minutes: 2
• Total games: 66

In that scenario, he’d fall short of the minimum-game criteria despite appearing in 66 total games, since only 64 of them would qualify toward the required minimum.

The season-ending injury exception:

Rockets center Alperen Sengun, conversely, is an example of a player who may still qualify for end-of-season awards despite not reaching the 65-game benchmark.

A player retains his award eligibility if he logged 20+ minutes in at least 62 games (including 85% of his team’s games to that point), then suffers a season-ending injury.

The NBA defines a season-ending injury in this case as one that an independent physician (jointly selected by the league and players’ union) deems more likely than not to sideline the player through at least May 31.

Sengun played in 63 games for the Rockets, logging 20+ minutes in all of them, before suffering a severely sprained ankle and a bone bruise in his knee, an injury that could very well end his season. If an independent doctor determines the injury would likely keep him on the shelf through May 31, he’d be eligible for end-of-season awards, including Most Improved Player.

Grievances and challenges:

A player whose eligibility for awards could affect their next contract is permitted to file an “Award Eligibility Grievance” if he falls shy of the 65-game requirement. Such a grievance would be heard by a league arbitrator.

Murray would be eligible for a Designated Veteran (super-max) extension if he makes an All-NBA team this season, while Sengun could become eligible for a Rose Rule rookie scale extension if he’s named Most Valuable Player this season (this obviously won’t happen, but could in theory). As a result, both players would be eligible to file an Award Eligibility Grievance, if necessary.

However, the threshold for prevailing in a grievance of this sort is high. According to the CBA, the player must provide “clear and convincing evidence” that his team “willfully limited the player’s number of minutes played or games played during the regular season with the intention of depriving the player of (award) eligibility.” If Murray and Sengun fall shy of the requirements, it will be because of injuries, not because of any sort of underhanded tactics by Denver or Houston.

An Award Eligibility Grievance must be filed by 11:59 pm Eastern time on the day after the final day of the regular season, or within two days of the date on which it becomes mathematically impossible for the player to reach the 65-game minimum, whichever comes first. So Murray would have already had to file this grievance if he intended to do so.

A player who falls short of the 65-game minimum can also file an “Extraordinary Circumstances Challenge” in an effort to regain his award eligibility. In this case, the player must prove that if not for extraordinary circumstances, he would have met the 65-game requirement and that it would be “unjust” to exclude him from award consideration.

An Extraordinary Circumstances Challenge must be filed between 12:00 pm Eastern time on the final day of the regular season and 11:59 pm ET on the day after the last day of the regular season. The challenge would be heard by an “independent expert” jointly selected by the NBA and NBPA.

The CBA doesn’t define what sort of extraordinary circumstances would fall under this umbrella. Any sort of injury seems unlikely to qualify, but given that Murray may end up falling shy of award eligibility because he played 14:07 in one game instead of 15 minutes, perhaps his case will merit consideration.

Since we don’t yet have any precedents to refer to, we may have to see how situations like Murray’s play out to get a better sense of how this sort of challenge might – or might not – succeed.

The awards the 65-game rule does and doesn’t apply to:

Failing to meet the 65-game requirement doesn’t necessarily mean that a player is ineligible for every end-of-season award. The 65-game rule only applies to the following awards:

• Most Valuable Player
• Defensive Player of the Year
• Most Improved Player
• All-NBA teams
• All-Defensive teams

That means the following awards don’t require 65 games played:

• Rookie of the Year
• All-Rookie teams
• Sixth Man of the Year

Although the NBA offered no explanation for why 65+ games aren’t required for these specific awards, we can probably assume the league didn’t feel the need to impose extra requirements on awards that already only apply to a smaller group of players.

A player who made his NBA debut prior to 2023/24 won’t be eligible for Rookie of the Year or All-Rookie, and a player who starts more than half his games isn’t eligible for Sixth Man of the Year.

Being able to qualify for these awards despite not meeting the 65-game minimum does nothing for Murray, for example, since he’s not eligible for any of them anyway. However, the lack of a 65-game rule could come in handy for certain All-Rookie hopefuls who won’t reach that total this season, such as Mavericks center Dereck Lively II.

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.