Hrr And Escrow

[JA_Boomer]

Does the players portion of the HRR go towards paying their salaries, or do they get that money in addition to the salaries paid to them by the owners?

Also, can someone explain escrow to me? I understand it is a percentage shaved off the players wages. But how is it determined, where does the money go, and does it shave off the players HRR portion or their salaries?

Thanks, Boomer

[CastleMania]

Does the players portion of the HRR go towards paying their salaries, or do they get that money in addition to the salaries paid to them by the owners?

I'll try to answer this for you.

The "players portion of the HRR" is what determines the salary cap. HRR is used to determine the salary cap. So for instance if the players are getting a 57% cut of HRR, that means the salary cap will be 57% of HRR divided amongst 30 teams. Under the old CBA, that would mean that this years salary cap of $70.2 million suggests that the league believes that the NHL will earn $3.69 billion in HRR this season ((57%*$3.69 billion HRR)/30 teams = $70.2 million salary cap). This number is calculated using the prior year's HRR multiplied by an automatic kicker which represents the expected growth in revenues. It is because of this prediction that escrow is used.

Edit: Ok, so I have had a chance to go over the CBA again and look at the actual calculation. The calculation I gave you above captures the basic theory behind the salary cap and HRR, but is not quite the formula in use. Currently, the formula in use is:

Salary Cap Midpoint = (((Preliminary HRR for the prior League Year X Players' Share) - Preliminary Player Benefits) / Number of teams playing in the NHL) X HRR Growth Factor (typically 1.05)

Then, once the salary cap midpoint has been calculated,the league adds $8 million to attain the salary cap ceiling and subtracts $8 million to attain the cap floor.

So to answer your question more directly, the players' share of HRR goes towards paying the players' salaries. The formula is based on the assumption that there will be a distribution of team spending between the floor and the ceiling so that ultimately the players receive about 55%.

Also, can someone explain escrow to me? I understand it is a percentage shaved off the players wages. But how is it determined, where does the money go, and does it shave off the players HRR portion or their salaries?

Like you said, a percentage is shaved off of players' salaries throughout the year. The percentage that is shaved off under the old CBA was negotiated between the league and the PA. For instance, in the first quarter of last season, the escrow was set at 8.5%. This is money would be put into an escrow account and is held there until the league has determined what the revenues are for that year. Once revenues have been determined, the money is divided between the players and owners so that the revenue are split as determined by the CBA (i.e., in the old CBA it is split so that players receive 57% and owners receive 43%).

The purpose of an escrow account is to deal with risk and uncertainty. Salary cap numbers are based on the prior year's revenues, so they are only predicitions of what the year's revenues will be. The escrow system ensures that if those predictions are low, the owners still get their cut.

***I want to qualify this by stating that I am in no way a CBA expert, and that this is just how I believe the salary cap works at a basic level. There are some posters on this forum who are much more informed than I am on this topic, and I am sure they will correct me***

[JA_Boomer]

I appreciate the answer.

So basically player's portion of the HRR is the number that determines the salary cap. So there is no DIRECT relation to the HRR and the players salaries besides the fact that the higher the players percentage of the HRR the higher the salary cap will be, and in turn the higher player salaries will be (when they sign new contracts).

The escrow also makes sense, the the players salaries in a given year aren't guaranteed, and if the actual HRR winds up being lower than estimated, the players will loose a portion of their wages via escrow, so the owners still get their percentage of the HRR.

Did I interpret correctly?

[CastleMania]

I appreciate the answer.

So basically player's portion of the HRR is the number that determines the salary cap. So there is no DIRECT relation to the HRR and the players salaries besides the fact that the higher the players percentage of the HRR the higher the salary cap will be, and in turn the higher player salaries will be (when they sign new contracts).

The escrow also makes sense, the the players salaries in a given year aren't guaranteed, and if the actual HRR winds up being lower than estimated, the players will loose a portion of their wages via escrow, so the owners still get their percentage of the HRR.

Did I interpret correctly?

Looks good to me

[JA_Boomer]

So after today's meetings the players are saying that under the NHL's Tuesday proposal there was a hidden component that the current player salaries (contracts signed under the old CBA) would be rolled-back in order to comply with the 50/50 sharing of HRR.

Now is this because the contracts currently in existence were created under a 57% of HRR salary cap, and even if the new CBA had the cap calculated at a 50% HRR, the contracts currently in existence would exceed that amount? Meaning the actual salaries owed to the players by the owners would exceed 50% of HRR.

[CastleMania]

So after today's meetings the players are saying that under the NHL's Tuesday proposal there was a hidden component that the current player salaries (contracts signed under the old CBA) would be rolled-back in order to comply with the 50/50 sharing of HRR.

Now is this because the contracts currently in existence were created under a 57% of HRR salary cap, and even if the new CBA had the cap calculated at a 50% HRR, the contracts currently in existence would exceed that amount? Meaning the actual salaries owed to the players by the owners would exceed 50% of HRR.

Yes.

[PokernHockey]

I appreciate the answer.

So basically player's portion of the HRR is the number that determines the salary cap. So there is no DIRECT relation to the HRR and the players salaries besides the fact that the higher the players percentage of the HRR the higher the salary cap will be, and in turn the higher player salaries will be (when they sign new contracts).

The escrow also makes sense, the the players salaries in a given year aren't guaranteed, and if the actual HRR winds up being lower than estimated, the players will loose a portion of their wages via escrow, so the owners still get their percentage of the HRR.

Did I interpret correctly?

Looks good to me

From my understanding it works both ways, if the players recieved to much then they give back a percentage, if the players receive too little, they would get a "bonus" check from the owners. Escrow is there to smooth it for the players and make it so that they don't have to individually write checks back to the owners, budget, etc. Whereas the owners are able to do that.

However throughout the entire CBA I do not believe there was once that the players salary at the end of the year didn't equal more then 57%, so to my knowledge they gave back a portion of their salary every year.

I am not a CBA expert by any means either however.

[CastleMania]

From my understanding it works both ways, if the players recieved to much then they give back a percentage, if the players receive too little, they would get a "bonus" check from the owners. Escrow is there to smooth it for the players and make it so that they don't have to individually write checks back to the owners, budget, etc. Whereas the owners are able to do that.

However throughout the entire CBA I do not believe there was once that the players salary at the end of the year didn't equal more then 57%, so to my knowledge they gave back a portion of their salary every year.

I am not a CBA expert by any means either however.

Yes it does. I was answering his question about what the escrow account is.

If there is a "Shortfall" under the CBA (which means the Player's Share exceeded the amount spent on League-Wide Compensation) then that money is disbursed to the players on a pro-rata basis of their individual pay to the League-Wide Compensation.

[PokernHockey]

Yes it does. I was answering his question about what the escrow account is.

If there is a "Shortfall" under the CBA (which means the Player's Share exceeded the amount spent on League-Wide Compensation) then that money is disbursed to the players on a pro-rata basis of their individual pay to the League-Wide Compensation.

That is the part of the players argument about the league honoring current contracts that I don't understand... and I doubt they understand the significance.

Say the league (contractually) pay's 800 players 1.8 billion dollars this year. Weber signed a contract for 13million this year. So in all effect weber gets .7222222% of the players share, or .4117% of league revenues The Dollar amount doesnt actually mean they make that much, it is at the end of the day more of a % of the players share.

Heck, the players have given back money through escrow every single year of the last CBA, by the players logic, the owners have NEVER honored the contracts they have signed (dollar number on the contract)... And the players have not asked them to in the past.

[JA_Boomer]

Heck, the players have given back money through escrow every single year of the last CBA, by the players logic, the owners have NEVER honored the contracts they have signed (dollar number on the contract)... And the players have not asked them to in the past.

I read a CBC article that stated that in one of the years of the previous CBA, actual HRR was 106% of the estimated, and the players did receive all their escrow back plus the additional kickbacks. I'm not sure what year that would have been.