(Photo Credit: Arnie Papp)
An NFL free agent is a player whose contract with his former team has expired, making him free to sign with any team he chooses … usually one that agrees to pay the most money. So as of 4 p.m. on March 9, free agent football players — and their agents — and team general managers have been negotiating, cajoling, threatening, and pleading with each other, attempting to have the best available players suit up for the teams that need them most … under the right contract.
If you’re a rock star in your industry — likely not football — and you’re hunting for your next position, you know what it’s like to be a free agent; you want to find the right job and the right cultural fit, and you want the best offer.
At a basic level, free agents often agree to contracts that pay them a “base salary” — money they will receive regardless of performance (theirs or the team’s) — along with a certain amount to be paid as a result of incentives built into the contract. Last year, for example, during the pre-season free agency period, aging Arizona Cardinals’ linebacker Dwight Freeney agreed to a contract that guaranteed him a relatively paltry — for a player of his caliber — $870,000 for the season. For the Cardinals, this meant they had little invested in Freeney if his level of play declined due to age. And from the team’s point of view, there was little risk; Freeney totaled 3.5 sacks in 2014, the season prior.
Great, you’re thinking. Good for him. But how does this apply to my comparatively paltry paycheck? Well, you can apply the same concept to the way you think about your salary; employers already do. Tying salary increases to specific metrics is known as “pay for performance,” and according to PayScale’s 2016 Compensation Best Practices Report, it’s becoming more common, especially among top-performing companies. If your employer isn’t already talking about metrics-based salary increases, take a cue from the NFL and bring it up yourself.
Freeney bet on himself to perform. Knowing he still had what it took to be successful in 2015, he and his agent negotiated some serious incentives into his contract, meaning he could more than double his salary if he successfully hit certain milestones over the course of the season. For Freeney, an NFL legend when it comes to quarterback sacks, his contract stipulated he would receive a $200,000 bonus when he reached four sacks on the season, and then would receive $100,000 for each sack thereafter, up to a maximum of 12.
Freeney had a total of eight sacks in 2015, meaning he eventually made $600,000 in incentive money — from sacks alone — on top of his $870,000 base salary. It turned out that betting on himself paid off in a big way.
This year, on March 12, the Super Bowl champion Denver Broncos agreed to a similar contract with their own aging defensive star, Demarcus Ware. Also a sack machine, Ware agreed to terms that will pay him a base salary of $6.5 million for the season, but there are built-in incentives that mean he’ll collect additional money every time he wrestles a quarterback to the ground: If he records eight sacks, Ware will earn an additional $1.25 million. He’ll earn another $1.25 million if he reaches nine, another $.5 million for 11, and another $.5 million for 13 or more. So, if he reaches 13 sacks on the season, Ware has the potential to earn $3.5 million dollars on top of his base salary of $6.5 million.
Though we can all dream of pulling on the uniform of our favorite team and pulling down millions of dollars in incentives on the field, for the typical employee it’s more likely we’re focused on less exciting — though certainly no less important — metrics than quarterback sacks. But that doesn’t mean we can’t learn from the financial and negotiating success of big-name athletes.
Even if you’re not running onto the football field in front of tens of thousands of fans under the lights of Monday Night Football, and even if you don’t get a bonus for sacking Peyton Manning or Tom Brady, performance-based pay is becoming more and more common in the post-recession era. As evidenced in PayScale’s 2016 Compensation Best Practices Report, the use of variable pay is increasing. In fact, 81 percent of top-performing companies gave bonuses in 2015. (After having to cut costs during the recession, many companies are minimizing fixed costs — like base salary — and putting more emphasis on incentives, which encourage standout performance.)
You can take a page out of the free agent’s playbook using these three tips:
Bet on yourself:
- Freeney and Ware were confident in their ability. If you’re confident in yours, and if you find yourself being offered a contract with a smaller base salary than you’d like, try to negotiate performance-based incentives. Adopting this strategy also means you need a strong work ethic, which is, of course, why employers might be more likely to agree to it.
Play to your strengths:
- Make sure incentives are aligned with your strengths. Freeney and Ware didn’t tie their bonuses to touchdowns; they tied them to their areas of expertise, sacks.
- Make sure your contract is worded plainly, that there are clear expectations, and that financial incentives are linked to clear metrics. Freeney’s contract clearly stipulated that he would receive a $200,000 bonus once he reached four sacks, followed by $100,000 per sack for the remainder of the season.
Regardless of whether you’re hunting for a salary of $87,000 or $870,000, you can potentially augment that base by negotiating financial incentives.
Oh, and if Seahawk’s Head Coach Pete Carroll is reading this, I’m willing to sign a contract that pays a base salary of nothing at all, but $100,000 for every sack.