The Burning a Year of ELC Fallacy

For hockey teams, properly managing their young players is critical to long-term sustained success. It is rare to see top players changing teams in their prime years.  Drafting, developing, and signing core players to long-term contracts is the best way for teams to have sustained success. As teams develop their prospects and they show signs of being ready to contribute to the NHL roster, there are two critical decision points teams are faced with when dealing with players signed before they reach 20 years old (which is virtually every player who doesn’t go to college). Players come into the league with pre-prescribed contract lengths based on the age of signing. Players under 21 receive a 3-year entry level contract (ELC).

The Decision Points

Until a player reaches 20 years old, that contract will “slide” (stay at three years) unless a player appears in 10 NHL games. That 10-game threshold is the first critical decision point. If an 18- or 19-year-old appear in 10 NHL games, they “burn” one year from their ELC, meaning they will now need a contract in two years instead of three! This puts them on a collision course with the next important decision point, the 40-game threshold. The 40-game threshold is a little different than the 10-game threshold. To reach the 10-game threshold, they must appear in the game. However, to reach the 40-game threshold, they only need to be on the active roster.

The 10-game threshold means they need a new contract sooner as their ELC will now only have 2 years remaining. Meeting the 40-game threshold means they have earned an “accrued” season. Players need 7 of these to be eligible for unrestricted free agency (UFA), which allows them to freely negotiate with every team in the league, which allows them to have more negotiating leverage and often leads to higher yearly salaries. Prior to reaching UFA status, a player is a restricted free agent (RFA), whose current team holds the negotiating power and can often use that power to keep salaries lower but still pay a player more than their ELC will dictate.

Should Teams be Concerned About Buring ELCs

This is a question that is usually being discussed in October or maybe early November because young players will make the NHL roster out of training camp and get a taste of regular season action to see if they are ready to play at the top level. If they are clear impact players, they stay, if they aren’t, they generally go to the minors or juniors. There is usually one or two players each October/November where there is a question of will they or won’t they stay around because they look good enough to contribute but it is always asked if the team will find it worth it to burn a year of their ELC, resulting in a new contract sooner. The common perception is it is not worth because then the player will cost more sooner. We’re here to say that logic might be a fallacy.

The Case Of Konsta Helenius

This article is being written in early May, when there are only eight teams still playing hockey game yet the discussion of burning a year of an ELC is one of the main topics of discussion on “Sabres’ Twitter.” Why? Enter Konsta Helenius, their 19-year-old first round draft pick from 2024. During the season, Buffalo had a stretch where they had multiple players out with injury and needed a scoring spark. Helenius was recalled and played nine games, making an impact, particularly on the score sheet. The team began to get healthy as Helenius approached the 10-game threshold and needed roster spots so sending the waiver exempt Helenius back to the AHL made complete sense, regardless of the 10-game threshold consideration.

Now, Buffalo finds themselves as one of the remaining eight teams playing and have at times struggled to find an offensive spark. Helenius has been skating with the team, and fans and media are wondering if putting him into the lineup for the spark is worth burning a year of his ELC. I’m here to say yes and argue they should have already done so!

Financial Impact of Burning the ELC

Burning a year of an ELC forces the team to give the player a raise one year sooner but so long as the player is not a year closer to UFA, there may be long-term savings opportunities! Although teams will factor in what they think players will become, negotiations are based on the production players have produced prior to the contract. Therefore, signing a player earlier means less of an opportunity for them to have better production. Waiting an extra year will almost always benefit the player.

If the Sabres were to burn a year of Helenius’ contract, he would have two years remaining on his ELC and eligible for an extension as soon as next offseason. Otherwise, everything will get pushed back one year.

To understand why burning a year could be worthwhile, we need to accept two things: 1) The cap will continue to rise at a similar rate and 2) Helenius’ contract will be based off the percentage of cap in the first year of the contract. This year’s salary cap was set at $95.5M, next year is $104M, and the following is projected to be $113.5M. On average, the cap is set to rise ~6.5% year over year. Following this trend, the following two seasons would be ~$121M and $129M.

For pure illustration, let’s start by assuming Helenius received the same percentage of cap on his contract as his teammate, Josh Doan, recently received. This would translate to an average annual value of $8.13M and $8.66M, respectively. Those $500,000 savings are probably not worth Helenius needing a third contract one year sooner. However, in addition to the natural savings from the rising cap, the percentage will also be lower if the team can get the player locked up a year sooner.

Potential Future Contracts

Last summer, Matt Coronato, Logan Stankoven, and Jackson Blake all signed contracts that could serve as potential comparables in a negotiation if Helenius were to burn a year of his ELC this offseason. For our purpose, let’s assume an average of those three, which comes out to 5.83% of the cap or $7.1M under a $121M cap. If everything gets pushed back a season, JJ Peterka, Mason MacTavish, and Matthew Knies from last offseason would be more appropriate comps. Their average cap hit percentage is 7.84% or $10.12M under a $129M cap. This could equate to a $3M savings per year for six years of his contract! To be clear, this is assuming a very optimistic trajectory for Helenius but there has been nothing in his limited NHL time and extended AHL time to suggest this is unreasonable and this would be the market for most top RFA forwards.

Impact on Buffalo’s Cap

Can Buffalo afford to pay Helenius one year sooner? Probably. We will be releasing our updated contract projections soon but based off of our midseason projections and our friends at CapWages.com, Buffalo would have ~25.5M (which includes a Tuch and Benson extension among others) to sign Helenius, Ostlund, Kulich, Quinn, and Byram plus fill out a few depth pieces. It could be tight but should be manageable especially considering they likely won’t even have lineup spots for all of the forwards.

Regardless of when Helenius needs a new contract, the same decisions will need to be made. Given Thompson, Dahlin, Samuelsson, and Power will all be in need of new contracts during the life of Helenius’ contract, saving $3M a year could be worthwhile.

Another consideration is Helenius will have performance bonuses built into his ELC. This means although the stated cap hit is $942,000, he can earn another $600,000 in performance bonuses, which could bring the cap hit up to $1,542,000.  Although not overly significant, it does factor into the cap savings of pushing the contract back one year.

This all assumes Helenius is still part of the organization by the time he needs a new contract. There have been reports that Buffalo has been in discussions with the St. Louis Blues to acquire Robert Thomas. It would make sense that Helenius would be a trade piece in that deal. In that case, it’s not Buffalo’s concern for when he needs a new contract.

Conclusion

The decision at this point should come down to the simple question – Does Helenius playing give them a better chance at advancing past Montreal? If the answer to the question is yes, Helenius gives them a better chance at advancing, he should play. There are pros and cons to burning a year of his ELC but the main argument against is having to pay him sooner. The long-term cap implications could work in their favor and that’s even assuming he isn’t used as a trade piece!

Feature image created using Co-Pilot AI.