Can players be given a bonus when they are traded?
Teams are permitted to write a bonus called a “trade bonus” (sometimes referred to as a “trade kicker”) into contracts. This bonus is paid to the player when he is traded, but only upon his first trade and not upon any subsequent trades (in the case of a sign-and-trade, they don’t count the initial trade when the contract is signed). The trade bonus can be defined as a specific dollar amount, a specific percentage of the remaining value of the contract, or some combination (e.g., “$1 million or 10% of the remaining value of the contract, whichever is less”). In either case, the actual amount cannot exceed 15% of the remaining value of the contract. For example, suppose a player has a six-year contract that pays $1 million per year. This player also has a $500,000 trade bonus.
Teams are permitted to write a bonus called an “assignment bonus,” or more conventionally a “trade kicker,” into contracts. This bonus is paid to the player when he is traded (within 30 days following the trade), but only upon his first trade and not upon subsequent trades. The trade kicker is for a specific dollar amount, but this amount is limited to 15% of the remaining value of the contract. For example, assume a player has a seven-year contract that pays $1 million per year. This player also has a $500,000 trade kicker. Since the trade kicker is limited to 15% of the remaining value of the contract, the actual value of the kicker varies from year to year, as follows: Year Remaining value of the contract 15% of the remaining value of the contract Actual value of $500,000 trade kicker 1 $7,000,000 $1,050,000 $500,000 2 $6,000,000 $900,000 $500,000 3 $5,000,000 $750,000 $500,000 4 $4,000,000 $600,000 $500,000 5 $3,000,000 $450,000 $450,000 6 $2,000,000 $300,000 $300,000 7 $1,000,000
