Under the previous Collective Bargaining Agreement, players’ full salaries counted toward trades. It didn’t matter whether the salary was fully guaranteed, partially guaranteed or unguaranteed. Teams are generally required to match salary in trades, but this offered a workaround.
A team could trade someone with a guaranteed $10 million salary for someone with a $10 million unguaranteed salary then waive the unguaranteed player. The salaries technically matched, but one team added $10 million in payroll while the other team shed $10 million in payroll. That hardly met the intention of matching salaries.
The current CBA closed that loophole. Now, only the guaranteed portion of a player’s salary counts as outgoing for matching purposes while the full salary counts for incoming. That’s why J.R. Smith – who signed under the previous CBA and therefore still fit under the previous rules – looked so valuable.
But the Rockets have found another way to get a similarly helpful player. (Of course, Daryl Morey cooked this up.) Houston’s deal with Nene makes him one of the NBA’s most intriguing trade chips.
Nene and Houston signed a two-year contract that will pay him the minimum in each year in base salary and enough likely bonuses to take him to $10 million in total salary each season.
The bonuses in his contract are broken down into 3 categories; 1) $2.435M for playing at least 10 games and 52+ wins; 2) $2.5M for playing at least 25 games and 52+ wins; 3) $2.5M for playing at least 40 games and 52+ wins.
Incentives are deemed likely or unlikely by whether or not they were met the previous season. Nene played 42 games for the 53-win Rockets. So, these incentives are likely. The only limit on likely incentives is a max salary. (Unlikely incentives are capped at 15% of base salary.)
Nene re-signed through Bird Rights, meaning Houston could give him any salary up to the max. His base salary plus likely incentives count as his cap number.
So, that’s a $10 million trade chip. The key: His team can pay only the guaranteed portion of his salary. These technically likely bonuses are realistically unlikely ever to be triggered. It’s a great way for another team to trim salary.
Nene can be traded Jan. 15. The trade deadline is Feb. 6. That’s the window to watch.
Here’s the big catch: Trading Nene this way would likely push the Rockets into the luxury tax. The main idea is using his contract to acquire a better, more expensive player. Will owner Tilman Fertitta go for that? He has talked big but delivered less.
Only base salary plus met incentives count toward the luxury tax, which isn’t assessed until the final day of the regular season. Houston controls his playing time and surely won’t let him trigger too many, or any, bonuses. So, if they don’t trade him for value, the Rockets should easily enough avoid the tax if desired.
Whatever money Nene earns this season will be a nice windfall for a player who seemingly planned to retired. Remember, an important aspect of this scheme is him not playing much. That could explain why he didn’t retire. Will the Rockets even make him show up?
This type of contract isn’t completely unprecedented. The Laker structured Yi Jianlian’s contract similarly in 2016. But that was under the previous CBA, when a simpler unguaranteed deal would’ve brought the same trade upside. Los Angeles waived Yi before the season.
This too could amount to nothing. But this opens the door for big spending to improve the team. We’ll see whether Houston steps through it.