How the NHL Salary Cap Works: Cap Hits, LTIR, Buyouts and Entry-Level Deals

The NHL salary cap is the Upper Limit of a "Team Payroll Range": every club's payroll, counted by each contract's average annual value, must sit between a Lower Limit and an Upper Limit. For 2026-27, the league and the NHL Players' Association set the range at $76.9 million to $104.0 million, with a midpoint of $90.4 million. Only two exceptions let a club go above the Upper Limit — long-term injury relief and a cushion for performance bonuses — and from this season the cap applies in the playoffs too.

The rules come from the collective bargaining agreement first signed in 2013, as amended by memorandums of understanding in 2020 and June 2025. The 2025 changes took effect on September 16, 2026. Three items in the published 2025 memorandum are available only to players, so anything they change is not reflected here.

The 2026-27 numbers

The minimum salary rises to $900,000 in 2027-28, $950,000 in 2028-29 and $1 million in 2029-30. From 2028-29, the memorandum ties the Upper Limit to a formula — half of Hockey Related Revenue from two seasons earlier, less projected benefits, divided among the clubs and multiplied by 115 per cent — and says it can never fall below $104 million. The Midpoint is then $15 million below the Upper Limit and the Lower Limit $15 million below that.

How a contract counts: the cap hit

A contract counts against the cap at its Averaged Amount, known as the cap hit: total salary and bonuses divided by the number of seasons. A three-year deal paying $9 million, $8 million and $7 million counts $8 million in each year, whatever cash changes hands.

Averaging invites front-loading, so the agreement limits how much salary can move between years. For a contract whose first half pays more on average than the whole deal — a "front-loaded" contract in the CBA's test — two rules now apply:

• Year to year, salary and bonuses may not change by more than 20 per cent of the first year's figure.
• No year may fall below 71 per cent of the highest year.

Those limits were 25 and 60 per cent under the 2020 memorandum, so the room for front-loading has narrowed. Worked example: the $9 million, $8 million, $7 million deal above passes, because each step is $1 million — under 20 per cent of $9 million — and $7 million is more than 71 per cent of $9 million. A $10 million, $7 million, $7 million deal fails twice: its first step, $3 million, is more than $2 million, and $7 million is below 71 per cent of $10 million.

Two more limits shape new deals: signing, roster and reporting bonuses together may not exceed 60 per cent of a contract's total, and new contracts may not include deferred compensation.

One-way, two-way and "burying" a contract

A two-way contract pays one salary in the NHL and a lower one in the minors; a one-way contract pays the same wherever the player is. Entry-level contracts are automatically two-way.

Sending a player to the minors does not always clear his cap hit. For a one-way contract, the CBA keeps counting the cap hit minus the minimum salary plus $375,000 while the player is loaned. With the 2026-27 minimum at $850,000, that relief is $1,225,000: a buried $3 million one-way contract still counts $1,775,000. For a two-way contract, minor-league pay above the same threshold counts.

The 2025 memorandum also ended "paper" loans. A player sent to the minors must now play in a minor-league game before his club can recall him, with an exception for a goaltender when the club would otherwise not have two available. As the Sabres' summary of the deal explained, clubs can no longer free roster space by loaning a player who keeps travelling with the team and recalling him a day later.

Long-term injured reserve (LTIR)

The CBA's "Bona-Fide Long-Term Injury/Illness Exception", known as LTIR, is the main way a club can exceed the Upper Limit:

1. The threshold. The club's physician must believe the player will be unfit to play for at least 24 days and 10 regular-season games.
2. The relief. The club may add replacements whose salaries push its payroll above the Upper Limit, but only by up to the injured player's own salary and bonuses.
3. The catch. The injured player's money still counts against the cap, and before he can return the club must get back under the Upper Limit.

The 2025 memorandum adds a limit: a replacement's cap hit may not exceed the previous season's average league salary — unless the league and the union approve a larger one based on how long the injury is likely to last, in which case the injured player is ineligible for the rest of that season, playoffs included.

The Carolina Hurricanes' transaction primer, written under the previous agreement, explains two practical consequences that still follow from the CBA's structure. A club's LTIR spending room depends heavily on its payroll on the day it uses the exception, so clubs try to have payroll as high as possible that day. And unlike ordinary cap space, which accrues as a season goes on, LTIR room does not grow.