The NHL has strict rules for how much teams can spend. Here's how it works

For a National Hockey League team to hoist the Stanley Cup, it takes playing an 82-game regular season, winning four playoff series and some strict attention to math along the way. 

The NHL is one of two of the big four North American sports leagues with a hard salary cap, meaning each team cannot have a payroll over a predetermined amount in a given season.

For the 2024-25 season, the pay ceiling is $88 million and the lower limit is $65 million. Therefore, regardless of whether a team is worth as much as the Toronto Maple Leafs at $4 billion, or as little as the Columbus Blue Jackets at $1 billion in CNBC’s Official NHL Team Valuations, every team is on roughly equal footing for how much they can pay players.

The range is calculated by using a formula outlined in the league’s collective bargaining agreement that involves taking a percentage of the previous year’s preliminary hockey-related revenue, among other inputs.

There was a brief pause in year-over-year salary cap increases when the league’s revenues took a hit during the Covid-19 pandemic in the 2020-21 and 2021-22 seasons.

The pay limit has been in place since the end of a labor dispute that caused the cancellation of the entire 2004-05 NHL season.

The National Hockey League Players Association and NHL after that campaign agreed to a collective bargaining agreement, or CBA, that included a salary cap, among other terms, for the following season. The current CBA was put in place beginning with the 2012-13 season after a shorter labor disagreement that led to an abbreviated 48-game slate.

The NHL and NHLPA declined to comment for this story.

Sports business experts said the strict salary cap has helped the league’s financial health since the full season stoppage.

“Since that [missed season], the NHL has had notable fiscal stability, which I think a lot of leagues are probably impressed with how the NHL is run,” said Syracuse University professor of sports management Rick Burton, who co-authored “Business the NHL Way: Lessons from the Fastest Game on Ice.” 

Burton pointed to the increase in franchise valuations, attendance and salary health as ways the NHL has shown success over the past couple of decades.

“The net result, I think, looking back over the last 20 years, is that both parties worked together to bring about a solution that appears to have worked pretty significantly,” he added.

The hard salary cap is a stark difference from Major League Baseball and the National Basketball Association, which have no salary cap and a soft salary cap, respectively. Both of those leagues have some version of a fee that teams have to pay when they exceed a certain threshold. 

The National Football League, along with the NHL, has a hard salary cap, something sports leagues have traditionally used to try to keep parity and prevent the richest teams from taking top talent. 

“If you have a business that limits the amount that wealthy owners can put into the players, it will enable the lesser clubs to compete with the more wealthy clubs,” said Irwin Kishner, a sports lawyer at Herrick Feinstein and co-chair of the firm’s Sports Law Group.

It’s not that payroll management isn’t important in other sports. The MLB’s Los Angeles Dodgers reworked Shohei Ohtani’s contract to have $680 million of the $700 million deal deferred, with payouts on the bulk of it not beginning until 2034, according to The Athletic. The NBA’s New York Knicks caught a huge break when their star Jalen Brunson agreed to take more than $100 million less than he could have in his contract extension, according to ESPN.

But the hard cap means NHL teams have to be especially diligent.

There are some exceptions to the NHL’s $88 million max, one of which is the long-term injury clause that allows teams to be over the cap for the duration of a player’s injury. But the team has to be at or below the salary cap once the injured player is healthy again and ready to rejoin the team.

The memorandum of understanding that extended the current CBA will expire in September 2026, and a new CBA will be negotiated between the league and the NHLPA. The NHL is planning to start negotiations with the NHLPA in early 2025, NHL Commissioner Gary Bettman said at this year’s NHL Board of Governors meeting.