The lowest-paid male professional basketball player in America makes roughly $100,000 more in a year than the president. But while it’s true that top athletes are among the highest paid individuals in the world, there’s more to the story than just commas and zeros. Here are 11 things you probably don’t know about how athletes are paid, their obligations to their employers, and how their salaries compare to those of normal people.
1. ATHLETES DON’T TECHNICALLY HAVE TO PLAY TO GET PAID.
Depending on the terms and clauses in a player’s contract, unforeseen circumstances that leave them benched—such as an injury or a performance slump—may not negatively affect his or her purse. Some sports prohibit teams from releasing injured players until they are cleared, and as long as the injury was sustained during sport-related activities, the team is obligated to pay. Suspensions, however, are issued as punishments—while a player is suspended, so is his or her pay. (He or she may also be expected to pay the league additional fines.)
It’s also entirely possible for a player to still be paid by a team he or she no longer plays for. If the long-term benefits of trading a player outweigh the financial obligation (i.e. the team stands a better chance at winning by releasing a player and signing different talent), an organization could move forward with the trade and take the hit, agreeing to pay a portion of the player’s salary to fulfill their contractual obligation—and thus sweetening the deal for the other team.
2. A PLAYER’S SALARY CAN VARY DRASTICALLY FROM YEAR TO YEAR.
In some sports, like professional golf for example, the amount of money that players can earn each year is a bit more complicated. Performance, tour status, and endorsements all contribute to a player’s bottom line, which means financial stability can be a concern from year to year. Millions could be lost if a player suddenly needs surgery and has to sit out high profile tournaments, if controversy causes major brands to break ties, or if he/she is simply bested by other talented athletes.
In boxing and some other individual-based sports, athletes are usually paid per match or per round. This means that if they don’t get in the ring, they don’t get paid.
3. MANY PLAYERS FILE FOR BANKRUPTCY AFTER RETIREMENT.
Relatively speaking, of course, professional football, basketball, and soccer players make a lot of money—but that doesn’t always help them in the long run. An estimated one in every six professional football players files for bankruptcy within 12 years of retiring from the game due to lack of planning, unsustainable lifestyles, and other factors. What’s more, players are often pretty young when they launch pro careers, and may retire after just a handful of seasons. With more years of retirement ahead than a typical 65-year-old, players are forced to make their once impressive paychecks last a lifetime, and with mortgages and other expenses, many are unable to make it work.
4. TEAMS HAVE FOUND WAYS TO GET AROUND SALARY CAPS.
Salary caps in sports are dollar amounts (typically a percentage of the association’s total revenue) that teams are not allowed to exceed when paying their players. It keeps the wealthiest teams from stacking the deck by spending more money on the best players, but there are clever ways to skirt those rules. In football, the money that teams can offer players falls into two categories: base salaries and signing bonuses. All of a player’s base salary counts toward the salary cap for that year, but the signing bonus applies to the life of the contract, which means that it is spread across several years. To have more wiggle room with their caps, teams reduce base salaries and increase bonuses through deal restructuring; the player gets the same amount of money in the long run, and the loophole lets the team keep spending for a given year.
5. TEAMMATES ARE OFTEN IN DIFFERENT TAX BRACKETS.
Professional players warrant higher paychecks because they are greater assets to the team, but the gap between a team’s highest- and lowest-paid players can be shockingly wide. There are salary minimums reserved for rookies playing football at the highest level that can equal less than one percent of what the top players earn ($420,000 versus $48 million). For players in less lucrative leagues, that one percent is a dream—over a full season, some barely break into the five-digit range.
6. PAY DISCREPANCIES BETWEEN TEAMMATES CAN AFFECT PERFORMANCE.
Studies have shown that baseball teams that have more players with comparable salaries win more games. In basketball, teams with more salary disparities win more games. Research has also shown that when it comes to compensation, athletes value the concept of “fairness” over equality.
7. ATHLETE SALARIES ARE INCREASING FASTER THAN NON-ATHLETE SALARIES.
According to reports, earnings for the top 40 athletes in the United States over the past 20 years have increased 7.1 percent annually before inflation, compared to an increase of only 3.7 percent for the average worker in the United States. One explanation for the dramatic increase is that deals between television networks and sports associations grew when more people started tuning in. Advertisers then began paying more to reach the growing audience. Teams have also been building bigger stadiums and arenas to fit more fans, which boosts revenue and in turn increases players salaries.
8. TAX PREPARATION FOR ATHLETES IS MUCH MORE COMPLICATED.
With big paychecks come big responsibilities … to Uncle Sam. Professional athletes at the highest levels in their respective sports can make millions, which means that their tax rates can near 50 percent. On top of that, those who travel to play (and every staff member who travels with them) are subject to additional taxation from each state they visit through what has become known as the “jock tax.” (The taxes differ from state to state, with California topping the list at 13.3 percent.) For championship games held in states or municipalities that have a jock tax, players also have to pay when they win rings or cars.
9. THE GENDER WAGE GAP IS WORSE IN PROFESSIONAL SPORTS.
In a list of the highest-paid athletes in the world for 2015, the top 39 were men, and only two women managed to crack the top 100. Some argue that economics can explain the gender wage gap, with larger audiences equaling more money for men’s teams and their associations, while others say that the math still doesn’t add up. In professional basketball at the highest level, the minimum salary for men is nearly five times higher than the maximum salary for women. The highest-paid female tennis stars earn a third of what the highest paid men make, and the highest-paid female soccer player in the world makes 182 times less than the highest-paid male.
10. SOME ATHLETES HAVE TO KEEP THEIR DAY JOBS.
For professional athletes who don’t make five- to six-figure salaries playing football, baseball, or basketball, having another source of income can be a necessity. The average salary for a professional lacrosse player is around $10,000, so many work normal jobs when not on the field. Others who play for low pay treat it as an opportunity to someday climb the ladder, similar to someone taking an entry-level job.
There is also a subculture of seasonal athletes who, when that short window passes, return to life as usual, earning the rest of their livings as musicians, teachers, pizza delivery drivers, and construction workers.
11. TEAMS CAN SUE EX-PLAYERS FOR OVERPAYMENT.
Thanks to a clerical error, one football player received a massive payday from his former team, to the tune of $40,000. When the organization realized that the error had been made, it sued the player and a judge ruled that he was responsible for paying it back. When he didn’t pay, an arbitration hearing resulted in a settlement of around $21,000 to be repaid (the amount that the player took home after taxes). The player again failed to honor the ruling and was ordered to repay the full amount.
The numbers on an athlete’s paycheck don’t lie—but they also don’t always tell the whole story. For more misconceptions about the world of sports, plus other everyday things we take for granted, tune into an all-new episode of Adam Ruins Everything, Tuesday at 10/9C on truTV.