May 28, 2024

The fifth-year option is a contract provision in the NFL that applies to all first-round draft picks. This provision was negotiated by the NFL owners and the NFLPA as part of the collective-bargaining agreement (CBA).

The fifth-year option gives NFL teams the choice to extend the player’s contract from four years to five. All players drafted into the NFL are given standard four-year rookie contracts. Only players taken in the first round of the NFL draft also have the fifth-year option in their contracts.

Following the third-year of the player’s rookie contract, the NFL teams must determine if they will exercise the fifth-year option. So, when going into their fourth season, the players know of that’ll be the final year of their contract or if they’ll get two more seasons. The fifth-year option is fully guaranteed.

 

First Round Contract Details

Here’s some details of the contracts and the fifth-year options for first round selections:

Contract Length

As previously mentioned, when a first-round draft pick signs his rookie contract, it’s typically a four-year deal. The fifth-year option is a separate component of the contract that the team must decide whether to exercise.

Timing

The decision to exercise the fifth-year option must be made before the player’s fourth NFL season. The deadline for NFL teams to exercise the fifth-year option is typically within 60 days of the start of the league year. For example, first-round players drafted in the 2020 draft just completed their third seasons in the NFL and the deadline for NFL teams to exercise the fifth-year options with those players was May 2, 2023.

Contract Amounts

The amount of all rookie contracts (of all rounds) are primarily based on the player’s draft slot (where the player is selected in the draft). The fifth-year option was introduced in 2011 and at that time its value was determined by a formula that included the player’s draft slot and position. In 2020, the formula changed to include the player’s on-field performances during his first three seasons (more details about this later in this article).

Guarantees

As of 2020, the fifth-year option is fully guaranteed. NFL teams are on the hook to pay players their full salaries after they exercise the option. They exercise the option after year three which triggers the fifth-year being fully guaranteed, and any non-guaranteed base salary in the player’s fourth year also becomes fully guaranteed too.

Team Decision

It’s ultimately the team’s decision whether to exercise the fifth-year option. They hold all the cards there. If the team decides not to exercise the option, the player will become an unrestricted free agent after the completion of their fourth season.

 

Changes to the Option From 2011 to 2020

The fifth-year option was introduced as part of the CBA that was signed in summer 2011, after a lengthy lock-out. The fifth-year option was then modified as part of the 2020 CBA negotiations.

Guarantee Structure Changed

The biggest change from the 2011 version to the 2020 version is the type of guarantee. Previously, as part of the 2011 CBA, the fifth-year option was guaranteed only for injury. This meant that if a player was injured and could not play during the fifth year, their salary for that season was fully guaranteed. However, if a team had decided to exercise the option but then later decided to release the player because he was ineffective on the field, then the salary was not guaranteed.

However, now the fifth-year option is fully guaranteed. If a team cuts the player, they’re on the hook and it’ll count against their salary cap. The option makes the final two years of the player’s contract fully guaranteed (remember, the option is exercised after the player’s third season, so when the option is now exercised it triggers that both the fourth and fifth season become fully guaranteed).

This has caused teams to be more caution with the fifth-year option. The contracts of players like Baker Mayfield and Sam Darnold have become cautionary tales. Their teams gave them the fifth year option after their third years, but both players were ineffective after that and their respective teams were not able to cut or trade them.

Option Value Changed

The 2011 CBA predetermined the amount paid to a player playing on the fifth-year option. There was a simple predetermined formula based on the player’s position and draft slot (where he was taken in the first round).

However in 2020, the NFL and the NFLPA changed the formula that determined how much the fifth-year option would be worth. The player’s draft spot and position would still be a part of the formula, but they added qualifying levels and bonuses for performance on the field. These levels are specifically tied to whether a player reaches a certain amount of playing time or if the player makes the Pro Bowl. There are four tiers of salary.

 

Tiers of Salary for Fifth-Year Option

According to data collected from Overthecap.com, here’s the tiers that determine a player’s salary during his fifth-year.

1) Multiple Pro Bowls Tier

Players who made more than two Pro Bowls (on the original ballot, not alternate) within their first three seasons will have their fifth-year base salary of the fifth-year option be equal to the franchise-tag tender amount at their position.

2) One Pro Bowl Tier

Players who made one Pro Bowl (on the original ballot, not alternate) during their first three seasons will have their base salary for their fifth-year be equal to the transition tag tender at their position.

3) Playing Time Incentive Tier

Players that did not make a Pro Bowl during their first three seasons, but met certain playing time requirements would have the base salary of their fifth-year option be calculated by using an average (mean) of certain specific players; the calculation is the average (mean) of the 3rd to 20th highest paid players at their position at each of the last five seasons. To reach this tier the player must meet one of these standards:

  • 75% or greater of their unit’s snaps (offense or defense) in two of their first three seasons; or…
  • They averaged 75% or greater of their unit’s snaps (offense or defense) over the course of those three seasons; or…
  • They averaged 50% or greater of their unit’s snaps (offense or defense) in each of their first three seasons

4) Basic Tier

Players who do not meet any of the above three requirements will be paid a base salary during their fifth-year  salary calculated by using an average (mean) of certain specific players; the calculation is the average (mean) of the 3rd to 25th highest paid players at their position at each of the last five seasons.

 

Conclusion

The fifth-year option has become a very important component of roster and salary cap management conversations. The fifth-year option was regularly used by teams from 2011 to 2020, but the changes made as part of the 2020 CBA has raised the stakes.

Teams will continually be confronted by the decision on how to manage the contracts of players they previously drafted in the first round. The star players will easily get the options (and eventually longer term deals). Giving Justin Jefferson or Joe Borrow the contract is a no-brainer. But the borderline or above-average (but not great) players will likely bring teams to the crossroads.