Early entry-level signings: More salary cap wizardry by the Montreal Canadiens

Sliding an entry-level contract is a clever way of lowering the cap hit of players .

On Monday, the Montreal Canadiens signed London Knights defenceman Victor Mete to a three-year entry-level contract, even though the 2016 fourth-round draft pick has another season of junior hockey eligibility.

Was the signing because Bergevin believes that Mete can lend a hand at a professional level as soon as next season? It’s unlikely, however Bergevin is also leveraging a rule in the Collective Bargaining Agreement to lower Mete’s salary cap hit should he be returned to junior next season, delaying the start of his three-year contract by a season until 2018-19; referred to as a contract “slide.“

There are several rules that need to be explained to establish a baseline in the conversation:

  • The maximum an entry-level player can earn from base salary and signing bonuses is $925,000.
  • A player with an entry-level contract who is still junior-aged (up to and including 19 years of age on September 15th of the season in question) can be returned to his junior club, with the following ramifications:
  • Their contract does not count towards the maximum 50 contracts as long as they remain in junior;
  • The player still receives his signing bonus, and;
  • The player does not receive any other compensation./

The net effect is that the signing bonus paid out in the first year does not count towards the averaging calculation for cap hit in subsequent seasons, thereby decreasing the cap hit.

The Canadiens in fact have slid the contract of three players this season: Mikhail Sergachev, Noah Juulsen, and Michael McNiven. The former signed his entry-level contract last July after the 2016-17 season. Juulsen and McNiven signed theirs in 2015, so this was the second season that those contract slid as he continued to play in the OHL.

To show how this works, here is an illustration of Sergachev’s cap hit before and after the slide, with information pulled from the ever-excellent CapFriendly.com:

By signing Sergachev a season before they needed to, and letting the contract slide by a year, the Canadiens will save some space against the cap for the three seasons his entry-level contract will cover.

It’s not a very large savings when taken alone, but performing this exercise on additional players who have had their contract slide and who are likely be on the Canadiens simultaneously, a clearer picture of the cap savings becomes evident.

With most first-round players signed to the maximum $925,000 entry-level salary, that’s around $31,000 in savings per junior year per player. If all four of their first-rounders currently on ELCs — Sergachev, Juulsen, Nikita Scherbak and Michael McCarron — are on the Canadiens roster next season, that’s six years worth of slide savings, or about $186,000 in cap savings from their initial contracted values. That’s no longer an insignificant amount. By also reducing the per-day cost of a call-up in future seasons, these numbers start adding up quickly, and Bergevin is well known to stretch every dollar when it comes to the salary cap.

It’s really a win-win situation for all parties. The player receives his signing bonus out of the gates as a teenager. Meanwhile, the Canadiens get a small cap savings in the event of a slide and an extension of the tenure of the player with the organization. And should the player make the NHL and his contract not slide? Well, everyone wins again.

So the question remains whether Victor Mete will play his over-age season in the OHL next season or if he will be part of the Canadiens for the maximum nine games before the ELC begins. What is not in question is the clever usage of contract slides and how the Canadiens can use it to their advantage as one of the tools to get an edge in the salary-cap era.

Listen to Andrew weekly on TSN 690 Radio Sundays at 8:05am on Habs Breakfast, part of Weekend Game Plan.

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