Salary cap

A salary cap is a system which limits the amount of money a team can spend on player salaries. There are many ways to implement such a system, the simplest being to impose a maximum total amount for salaries paid by a team. More complex systems may also include a salary minimum, limits on individual salaries, and provisions that allow certain players' salaries not to count towards the capped amount. A salary cap can be implemented in conjunction with a luxury tax.

Salary caps exist in many professional leagues in North America, including the National Football League, National Basketball Association, National Hockey League and Major League Soccer. In the case of the three long-established leagues, the cap was only implemented after a period of bitter labor struggles and prolonged strikes, and its implementation has proved to be problematic, encouraging teams to "game" the system in order to circumvent its most rigorous features. Players tend to oppose caps unless they are indexed to the growth of revenues, while richer owners are also unfavorable, because they limit the competitive advantage they have.

In Major League Baseball, a proposed salary cap was a key issue in the 1994 strike, and was again at the center of discussions when another strike was threatened during the 2002 season. However, it was never implemented and there remains huge discrepancies between the salary mass of the teams made up of the most expensive players, and those that try to put together their roster "on the cheap". This clearly demonstrates that there is no salary floor, but many have argued that the luxury tax is in effect working as a salary cap, as teams - even very rich ones that could otherwise afford to - have been very reluctant to increase their spending in a way that would subject them to the tax. This was one of the core issues during the 2021-2022 lockout.