We now know the structure of Terry McLaurin’s contract

Last week, we got the news that wide receiver and offensive captain Terry McLaurin had signed a contract extension to stay in Washington. The initial report was that it was a 3-year deal worth $71m, but now, thanks to the good people at Over the Cap, we know the details and structure of the deal.

Void year & 2022

The contract contains one void year (2026), and McLaurin’s 2022 money was reworked as part of the extension, which means that the deal covers 4 actual years, but the signing bonus is, for initial accounting purposes, spread over 5 seasons. The 5th season (2026) cap charge will automatically get charged to the 2026 season after the ‘25 season ends.

When Eric Schaffer was in charge of the Redskins contracts and cap management, he avoided the use of void years. Rob Rogers, who took over contract & cap management in 2020, has used void-year contracts more aggressively. By my informal count, this is the 4th contract this offseason, and the 6th overall in Rogers’ tenure, to utilize void years.

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If you are interested in learning more about the structure of void year contracts, click here.

If you want to read more about the benefit of using void year contracts, click here.

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Signing bonus

Terry receives a $28m signing bonus, which is a fact that had been widely reported.

In structuring Terry’s extension, the Commanders changed the 2022 compensation, converting part of the scheduled base salary into bonus money. Prior to the extension, Terry was scheduled to earn a base salary of $2.79m; under the new contract, his base salary drops to $1.05m.

Terry didn’t take a pay cut. Rather, the difference between the two amounts was paid as signing bonus instead of salary, and forms part of the $28m total signing bonus, which puts the money into Terry’s hands earlier, and allows the team to manage the cap hit more effectively.

Let’s treat this as a new 4-year contract in this article

The change to Terry’s 2022 salary is just a detail, and if we have to keep adjusting for it as we discuss the dollar amounts & effects of his extension, it will get tiresome, I think.

In fact, while the contract has been widely reported as a $71m extension, it actually contains $68.36m in new money; the balance of the $71m is the money ($2.79m) that Terry was already scheduled to make in 2022 prior to the extension.

For this reason, I will talk about the contract as if it were a new 4-year deal that covers 2022-2025 + a void year (2026). I think this will reduce the confusion and make the explanation of the structure more straightforward.

While the ‘new money’ average of this contract is $22.79m ($68.36m / 3), the average cap hit of the $71m over 4 years is $17.85m ($71m / 4).

Guarantees

In addition to the signing bonus, Over the Cap cites PFT as saying that all of Terry’s 2022 and 2023 compensation — not just his base salary — is guaranteed at signing.

Total guaranteed money at signing - $34.65m

Thus, his total money guaranteed at signing is $34.65m (signing bonus + ‘22 & ‘23 guaranteed money; $28m + $1.479m + $5.175m).

2024

Terry’s ‘24 compensation totals $18.5m (salary, roster bonus, workout bonus, per game roster bonus).

• Terry McLaurin also has a $12.5m salary guarantee for 2024 based on being on the roster on March 20 of 2023. This means that, to avoid triggering Terry’s guarantee 2024 guarantee, the Commanders would need to release Terry before the start of the 2023 league year.
• The balance of his 2024 salary (another $6m) is guaranteed if he is on the roster on the 3rd day of the ‘24 league year (in March ‘24).

This may seem strange, as it is almost unthinkable that the team would cut Terry in time to avoid triggering the first guarantee of $12.5m, but it is simply a cash flow management tool, and one which is designed to give Terry comfort that this money will be paid to him.

Guaranteed money needs to be deposited to an escrow fund in cash by the owner on the day it is guaranteed. If Terry’s ‘24 money had been guaranteed at signing, then the $18.5m would have had to have been deposited last week.

By using the roster triggers instead, Terry is still almost virtually assured of getting at least $12.5m of the ‘24 money, but Dan Snyder can wait until until 20 March 2023 to deposit $12.5m, and another year after that to deposit the remaining $6m.

This is a common feature of NFL contracts.

Total guaranteed money in contract - $53.15m

Terry’s total guaranteed money, then, comprises the amount guaranteed at signing ($34.65m) + the 2024 guaranteed money ($18.5m), which has two separate triggers.

The total guaranteed money of $53.15m represents roughly 74.4% of the total contract value.

Cash flows

The cash paid to Terry over 4 years looks like this:

As you can see, Terry will be able to treat his family to ice cream any time he wants, with over $29m flowing into his bank account in 2022.

By contrast, 2023 will feel a bit ‘skinny’ with just over $5m in cash due, though the average cash for the first two years is a comfortable $17.33m.

The final two years of the contract are pretty level, with the McLaurin coffers being enriched by $18.5m and $18m in ‘24 and ‘25, respectively.

Salary cap hits & 2022 available cap space

Here is the salary cap impact of Terry’s contract extension, as detailed by Over the Cap:

2022

Prior to the extension, Terry was scheduled to count $3.04m against the cap. Under the new structure, he will count $7.33m, reducing available cap space by roughly $4m.

Per Over the Cap, the Commanders current available cap space for the 2022 season is estimated to be $13.44m.

Remembering that most teams want to enter the regular season with at least $4-5m in contingency cap space available to sign players as injury replacements, the team probably has about $8.5m in cap space available for contract extensions or veteran free agent signings.

2023

The team opted to keep Terry’s cap hit under $11m in ‘23, probably to give them flexibility to sign or extend other players next offseason.

This was accomplished by keeping Terry’s base salary very low in combination with the high signing bonus & void year structure, which acts to backload the contract a bit.

2024

2024 is the most ‘normal’ year in this contract, with a cap hit that is close to the new money average of the extension, at $24.1m.

Over the Cap estimates the league salary cap to rise sharply over the next two seasons. While the cap is currently set at $208m, OTC projects the cap to be $256m in 2024.

2024 is also the final year of Carson Wentz’s current contract. If he plays well enough to get an extension, the quarterback’s ‘24 cap hit would likely be reduced. If, on the other hand, Wentz falls flat, then he can be cut by the Commanders after the ‘22 or ‘23 season without any dead cap hit since Carson Wentz has no guaranteed money beyond this season.

2025

The ‘25 cap hit of $23.6m shown on this chart looks similar to the ‘24 cap hit, but that is a bit of a mirage.

The Commanders will be able to go through the ‘25 season with only the $23.6m counting against the available cap space, but at the end of the season, Terry’s contract will void, triggering an additional $5.6m to be charged to the 2026 cap.

Cutting or trading Terry under this contract

In these contract structure articles, I usually show the average cost per year for a player if he were cut at the end of any given year of his contract. Because of Terry’s structured 2024 guarantees, I think that this type of summary would be needlessly complex, so I’ll just offer my own considered opinion of when McLaurin could be cut or traded under this contract structure.

This contract shows a lot of commitment to Terry McLaurin. Basically, cutting Terry anytime before the end of the 2024 season would be a form of salary cap negligence, although trading him after either the 2023 or 2024 seasons would be a defensible position, and probably not cost-prohibitive for the acquiring team.

Overall, the team has structured a contract that puts a lot of cash in Terry’s hands early, and arranges the guarantees and cap charges in a way that indicates that they expect him to still be on the team at least through 2024, and preferably to the end of the contract.

The length of the extension means that Terry McLaurin will have another chance at free agency in his age 31 year, meaning that he will probably still be able to garner interest and earn one more strong payday before his career starts to wind down.

All in all, this is a fairly complex contract that was designed to reward Terry and offer him genuine income security and ‘another bite at the apple’ in 2026, while giving the team an additional 3 years of control with maximum cap flexibility in ‘22 and ‘23 at the cost of fairly substantial cap hits in the ‘25/26 season(s) when the hit will likely be much more affordable.