What a flat salary cap is going to mean for the NHL’s free agent market (2024)

Over the 15 years of the NHL’s salary cap era, the league has become comfortable with the assumption that revenues – and thus money for player salaries – would increase every year. For the first time since the 2013 lockout, that isn’t going to happen.

In the wake of the coronavirus pandemic, league revenues have declined sharply. The NHL is expected to address the deficiency through a combination of measures, one of which will be maintaining the current upper limit of $81.5-million.

The problem for teams is that compared to last season they’re spending more money on fewer players. In the 31-team NHL, this coming offseason will mark a low for existing contracts and a high for committed dollars.

These aren’t perfect measures. Some players currently on the books will find their way to buyouts or long-term injured reserve. Not every team will spend to the cap, either; in 2019-20 teams used 90 percent of their available cap space, as opposed to 74 and 78 percent the two previous years. Finally, late May/early June 2019 doesn’t compare precisely with the same stretch of the calendar in 2020.

Yet the broad trend is obvious. Every year at the start of June, NHL teams have committed between $80-120 million more than they had the previous season.

Current 2020-21 commitments reflect this pattern, with two notable exceptions. First, teams have more roster spaces to fill, suggesting this would be a tougher year than usual for free agents even with regular cap growth. That’s the other problem: there isn’t expected to be any cap growth.

The combination is going to lead to hard choices for teams and disappointing paydays for players.

A year ago, assuming perfectly efficient use of cap space, NHL teams had $2.9 million to spend per vacant roster spot. That’s in line with what we’ve seen every summer since the league added the Golden Knights; the average is just under $3 million per roster spot.

This summer it’s $1.9 million, a 36 percent drop from the past three years.

Even that $1.9-million figure is optimistic, because teams don’t spend all of their cap space. There are signs, however, that the league is getting better at using every available penny. We’re now three seasons into a 31-team league, and 2019-20 looked a little different than the previous two. Just compare how much of their available money teams actually used:

We saw two changes this year, both of which had the object of squeezing every penny possible out of the system.

Notice that teams started with 525 contracts in the summer of both 2018 and 2019. Yet when the next season began, they’d added 188 contracts in 2018 and 166 in 2019. How is that possible, when the number of roster spaces didn’t change?

The answer is that some teams began the year with rosters below the league’s 23-man limit. Philadelphia, for example, submitted a 20-man opening night list to the NHL. It’s a move which means different things to different teams.

In a lot of cases, there’s some deliberate fudging so that teams can make the best use of long-term injured reserve. It can be helpful to start an injured player on the opening night roster and then bump him to LTIR the next day in favour of others who didn’t make the cut on paper.

There’s also a little bit of fat in a 23-man list. Teams only dress 20 players on any given night, and since most clubs don’t carry three goalies it’s possible to have a spare forward and defenceman and still save the money on that last roster spot. For clubs like Toronto with a farm team in the same city or within an easy commute, it’s possible to cut closer to the bone. Why carry a spare forward on the roster when his cap hit can be stashed in the minors but he’s still in town if you need him?

The other change is efficiency. In the first two seasons of the 31-team NHL, the league’s clubs as a whole used roughly 75 percent of the money they started with in the summer, leaving some room for low-spending teams and a safety margin. That was gone this season: not only are cap-floor teams becoming rarer but the margin for error has decreased for upper-limit clubs.

This year, 90 percent of cap space across the league was in use on opening night. With no increase to the upper limit this year, we just may see how close the NHL can get to 100 percent.

That assumes that owners bow to pressure from their hockey operations departments. The NHL is in its own weird little bubble but it isn’t impervious to outside forces. The economic damage inflicted by the pandemic will include varying hits to the businesses of NHL owners, and already there have been quiet rumours of franchise instability. It would be surprising if at least some owners weren’t screaming at their managers to reduce costs.

That’s easier said than done, though. Lots of teams are facing hard choices thanks to the combination of real-dollar and salary cap pressures, leaving relatively few teams in a position to trade for money. It hasn’t been all that easy to dump contracts the last couple of summers, and the 2020 offseason will be more difficult still. Teams may find themselves forced to honour commitments they would otherwise have shifted elsewhere.

That inflexibility in the trade market is matched in other areas. There just isn’t much room to squeeze at the bottom end of rosters. Entry-level contracts and the NHL minimum wage mean that teams aren’t able to extract savings from these classes of players.

Buyouts will certainly be part of the answer. A compliance mechanism (i.e. where the cap hit gets completely erased, as after the last two lockouts) would make life a lot easier for some teams with especially poor contracts. If the NHL doesn’t go down that road we’re bound to see an uptick in standard buyouts.

Much of the answer, however, will have to come in the form of discretionary spending. The league might have 36 percent less money to spend than it normally does, but the discount on free agent contracts could range even higher than that.

It’s not possible to squeeze the guys on the bottom of the depth chart. It’s dangerous to be too aggressive with key restricted free agents, though doubtless they’ll feel some of the pinch, perhaps with more teams/players opting for bridge deals over long-term pacts. Trading away money will be difficult and in some cases impossible, while buyouts leave long and ugly blocks of dead money years into the future.

The most squishable class of player is the unrestricted free agent, and this offseason it’s going to be squished.

The 36 percent drop in available money is going to be disproportionately directed at the UFA class. The exact amount remains to be seen, but it wouldn’t surprise me at all if a 50 percent discount relative to previous market rates is the standard.

We’ll see the UFA market hit in other ways, too. For a lot of players, especially those on the younger side of the UFA ledger, one- or even two-year contracts might be a way to get around the current difficulties without giving up the possibility of a big multiyear deal down the line. The closer a player gets to 30, the more risk there is in that kind of approach.

It’s also extremely interesting to wonder how long it takes for players and teams to find equilibrium this offseason. We don’t know what the official offseason is going to look like, but it might be of a surprisingly normal length because the NHL will want to delay the start of 2020-21 in the hopes of being able to sell tickets to its games. If that’s the case, expect a slow opening to free agency as players and agents try to minimize the financial hit they take.

Once the players who can get jobs sign, there’s also the certainty of clawbacks and lower paycheques. A flat cap doesn’t come close to addressing the amount of revenue the league has lost.

NHL paycheques have long been worth less than their face values, with players frequently complaining about escrow numbers in the mid-teens. Over the next couple of years, they’re likely to look back at those times as the good old days.

(Photo of Taylor Hall: Brett Holmes / Icon Sportswire)