Wednesday, October 12, 2011

NHL & NHLPA Agree On Initial Escrow Rate Of 8.5%

NHL and NHLPA have set the players' escrow rate at 8.5% for the first quarter of the season, "the lowest rate since the first year after" the '04-05 lockout. The league and union are "still negotiating the final escrow number" for the '10-11 season.

The NHL uses an escrow system. What is the NHL escrow system?

Players pay a percentage of their salaries from each paycheck to an escrow fund. This money is intended to cover any potential shortfalls in projected league revenue.

For example, if the NHL thinks it's going to make $2 billion in revenue, the salary cap will be based on that number. BUT if the league only ends up making $1.7 billion, there’s a $300 million shortfall. If there’s a shortfall, then the NHL takes the money from the escrow fund to make up the difference. However, if the league makes $2 billion, the players would get this money back.

In the early salary cap years, the league was growing so this money ended up being returned to the players, but with the economy being what it is, there's a chance the players may lose a chunk of their salaries.

The escrow payment has been set as high as 25% - that was in 2009. That meant that a quarter of each player's salary was held in escrow in case the money was needed to help offset shortcomings in the league's projected revenue.

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