Salary Cap Management Options

By Bob Trask – Like many teams, the Montreal Canadiens are pressing up against the salary cap and still have players to sign. The most notable of which is Kirby Dach. It is worth exploring how Kent Hughes may approach this situation and what tools he has available.

A few options are (or may be) available to him: long term injury reserve, contract buyouts or retaining salary in a trade. A fourth option is to take back a similar contract that might be less expensive or have fewer years remaining on the term. And a final option is to engage in a win-win trade where both teams get something they are looking for.

Let’s look at all five.

LTIR

Hughes can’t proactively adopt this approach; players must qualify and it’s difficult to know whether they will until training camp or the season begins.

Carey Price, for example, might be a candidate for LTIR or he might not be. It would solve some salary cap problems… sort of. His salary would count against the cap every summer until his contract ended, effectively eliminating the 10% overage allowance teams are allowed in the off-season. But it would give them more cap flexibility during the season.

Paul Byron might be another candidate depending upon his recovery and since it would be the last year of his contract, his contract would not impact the team next off-season when it comes to the 10% overage allowance.

Whether Hughes is able to exercise this option or not remains up in the air.

Salary Retention

At the moment, only 5 NHL teams are retaining salary on trades they have made with the average amount retained at around $1.5 million. Clearly this has not been a preferred avenue for teams particularly on longer term contracts.

In Montreal’s case, Kent Hughes was adamant that he would not retain salary on a Jeff Petry trade and he held true to his word. He did however take on a less egregious contract to make the deal happen and at the same time, received a quality NHL player in return.

What we could see happening is salary retention on expiring contracts where the trade is consumed nearer the deadline. It would only impact the Canadiens for the 2022-23 season and not beyond. Those players on expiring contracts are Jonathan Drouin, Evgeni Dadonov, Paul Byron and Jake Allen but a trade later in the season would seem more likely than a pre-season deal.

Contract Buyouts

Contract buyouts are more common than salary retention but they linger on the payroll for an extended period and can hamstring a team badly in the long term.

Currently half the teams in the league have one or more players whose contracts they have bought out. The average cap hit for those 16 teams this year is close to $3 million dollars but that is inflated by the Minnesota Wild situation who face a cap hit of amost $12.75 million related to buyouts this year.

If we take the extreme example of Brendan Gallagher, the buyout option would result in a cap hit for the next 10 years. Even in cases like Joel Armia and Mike Hoffman the cap hit would be for six years and four years respectively. For those wondering, buying out Carey Price would result in a cap hit for the next eight years.

It seems very unlikely that Kent Hughes will want to operate with one arm figuratively tied behind his back for the next four, six, eight or 10 years. I don’t see any buyouts on the horizon.

Swapping Salaries

When Hughes made the Jeff Petry trade, this was the approach he took. It’s not radical surgery when it comes to cap management but it does chip away at the excesses, gradually making the situation more palatable. In the Petry trade he took on a slightly lower salary for a longer period of time while getting a starting NHL player in return.

He could also consider the approach where he takes on an equivalent salary for a shorter period of time. Since he already made a trade with Pittsburgh, let’s use them as a hypothetical example.

The Pens are in a win now mode and with recently signed contracts have given themselves a four year window of opportunity. What if they saw Brendan Gallagher as a fit while at the same time wanted to shed Jason Zucker’s contract? They are also faced with signing the underperforming Kasperi Kapanen with little cap space to do so. In return Montreal could be willing to add a prospect or two like Jesse Ylonen and Gianni Fairbrother.

In the short term a move like this would necessitate other trades to keep the team under the cap but in the long term it would give the Montreal GM a lot of cap flexibility because Zucker has only one year left on his contract.

Win-Win Trades

While no general manager wants to lose a trade, a win or a loss needs to be defined. A win may be measured by getting the better player in return. It might also be measured by the amount of salary cap freed up.

If each team gets something they want, it is a win-win trade even if the talent moving between the teams is unequal. Whereas one team feels they lack only a missing piece but don’t want to disrupt their existing roster, the other team may looking to acquire potential assest for the future.

The Mike Hoffman situation is a perfect example. A team may feel it needs a veteran scoring winger to round out their roster. Montreal has Hoffman available and he doesn’t fit the profile for a long term rebuild. Furthermore, he didn’t cost Montreal any assets to acquire because he came over as a free agent.

In a hypothetical trade of this nature Montreal gets a mid-round pick and frees up cap space to sign Kapanen, who they previously acquired in the hypothetical Gallagher trade (wink). The acquiring team who may be closer to a win-now mode gets a player who can immediately contribute.

Methodical Approach

The season hasn’t started yet and there are more roster moves to be made.

So far Kent Hughes has taken a open, methodical approach to is task of building an NHL roster. The LTIR approach is out of his hands and if it happens, it happens. He has already stated that he doesn’t intend to retain salary and the buyout option looks like a non-starter. I believe he will continue trying to swap salaries and engage in win-win transactions. It is the more patient approach that seems to fit with what he has already done.