Incentives are conditional payments written into an athlete’s contract that reward them for reaching certain performance, team-based, or behavioral milestones.
They are not guaranteed, and only paid when the condition(s) are met.
They can add significant upside to base salaries and are commonly used as negotiation levers in contracts with cap or performance concerns.
Incentives can be classified into:
- Likely To Be Earned (LTBE): Based on past performance.
- Not Likely To Be Earned (NLTBE): Considered less probable and often don’t count against the salary cap until earned and paid out by the team.
These terms are especially important in cap sports like the NFL, NBA, and NHL, where incentives affect cap flexibility and roster decisions.
Incentives are also considered to be 1099 income, as they are not apart of the total contract value, they are additional paychecks that can be earned if an athlete meets metrics that their organization sets for them.
Meaning, that pro athletes tend to pay both federal taxes and often income taxes across dozens of states, and incentives add another layer of gross earnings outside of the athletes “W-2 Earnings” from their contracts.
How Incentives Work In Different Leagues
🎓NCAA / NIL Athletes
Incentives in NCAA athletics exist primarily through NIL agreements rather than team contracts, since universities cannot directly pay players for their performance.
NIL incentives are written into endorsement or collective-backed deals and reward athletes for on-field success, name visibility and reach.
These payments are conditional and only triggered when specific benchmarks are met. NIL based incentives can add, and are a major factor to the gross earnings of a student-athlete.
Use Cases
- Performance-based bonuses tied to awards, starting roles, or postseason appearances.
- Social media incentives for follower growth, impressions, or content output.
- Transfer portal deals where incentives increase if the athlete starts, plays a minimum number of snaps, or remains with the program for a full season.
Example
A star college quarterback signs an NIL deal with a regional brand that includes bonuses for making a conference championship game, being named an All-American, or surpassing passing-yard thresholds.
If those milestones are hit, the athlete earns additional payouts beyond the base NIL amount.
🏈NFL
The NFL uses incentives frequently to manage cap space and motivate performance without committing guaranteed money.
Use Cases
- Helps teams sign aging vets or injury-prone players with lower risk.
- LTBE counts against current year cap; NLTBE counts next year if earned.
- Incentives include: playing time %, individual statistical benchmarks and performance and team achievements (e.g., playoffs).
Example
Tom Brady had multiple years with incentives tied to Super Bowl appearances, Pro Bowl selections, and Top 5 QB stats, adding $5+ million to his annual salary, but only if he earned it.
🏀NBA
Incentives are rarer in the NBA, but can still play a role in salary cap structure and bonus negotiations.
Use Cases
- Structured as bonuses for All-Star selections, minutes played, regular season performance and playoff wins.
- All incentives are reviewed by the league and classified into categories of likely/unlikely to be earned and paid out.
- Can impact the “cap hit” of a deal if the incentive considered LTBE.
Example
Joel Embiid’s max extension included injury-related and games played incentives due to his early-career health concerns.
⚾MLB
MLB incentives are less restricted due to lack of a hard cap. They’re often built around veteran deals.
Use Cases
- Often tied to innings pitched, games played, or awards won.
- Used to reduce risk on aging or injured players.
- Can lead to balloon payouts if players stay healthy or peak late.
Example
Justin Verlander earned over $3 million in 2022 based on innings thresholds after returning from his Tommy John injury.
🏒NHL
Used mostly in entry-level contracts or short-term veteran deals.
Use Cases
- Performance bonuses tied to games played, points scored, or awards.
- Allows flexibility on young talent without huge guaranteed commitments from teams if they don’t play to expectations.
Example
Connor Bedard’s rookie deal includes over $3.5 million in potential performance incentives tied to Calder Trophy voting and point thresholds.
⚽MLS / International Soccer
Incentives are a standard part of contracts in both MLS and international soccer, often layered on top of signing bonuses, guaranteed wages and other bonus options.
Clubs use incentives to align pay with production while managing roster budgets, salary caps, or Financial Fair Play limits.
Players benefit from upside without teams fully committing guaranteed money upfront.
Use Cases
- Goal, assist, or appearance bonuses written into player contracts.
- Team-based incentives tied to league position, playoff qualification, or trophies.
- Performance bonuses used to attract talent without inflating guaranteed salary figures.
MLS Example
An MLS forward signs a contract with a modest guaranteed base salary, but earns additional bonuses for scoring ten goals, qualifying for the playoffs, and winning MLS Cup.
International Example
Internationally, similar incentives are common in European contracts, where players unlock extra payments for Champions League qualification or individual awards.
🥊UFC / Combat Sports
Incentives in combat sports typically come as win bonuses, fight of the night nods, or locker room bonuses rather than structured clauses.
Use Cases
- “Show” vs. “Win” split in pay (e.g., $100K to show, $100K to win).
- Bonuses for “Fight of the Night”, knockouts, or other highlights.
- Used by promotions to reward popularity and performances.
Example
Sean O’Malley doubled his purse at UFC 292 by earning a performance bonus and title win bonus in the same night.
⛳Golf / Tennis / Individual Sports
Traditional incentives are less common since prize money at tournaments are performance and finish-based already.
Use Cases
- Some leagues (like LIV Golf) include team- or round-based incentives.
- Brand endorsements often include incentive triggers (e.g., winning a major = extra $1M from Nike).
Example
Rory McIlroy’s Nike deal includes undisclosed performance bonuses tied to Major wins and global rankings.
🏎️Racing / NASCAR / F1
Common and built into most top-level driver deals.
Use Cases
- Bonuses for podiums, wins, pole positions.
- Teams structure deals to reflect season-long success goals.
- Not unusual for drivers to double base salary through incentives.
Example
Max Verstappen reportedly earned an extra $10+ million in 2023 via title incentives and race wins.
Why Incentives Matter
Incentives give teams flexibility and protect them from overpaying players when their performance doesn’t follow the paycheck they’re wanting.
For players, Incentives are a chance to earn more and show value on deals that may have started modest.
- Keeps the salary cap cleaner.
- Motivates high-level production.
- Lets teams bet on potential, not just past performance.
When structured correctly, incentives are the bridge between team caution and player confidence.
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“The diligent lead surely to abundance, but everyone who is hasty comes to poverty.”
— Proverbs 21:5
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