Explainer: How NHL entry-level contracts work, affect Golden Knights

By Justin Emerson

Friday, Aug. 2, 2019 | 2 a.m.

The Golden Knights this week announced the signing of fifth-round pick Marcus Kallionkieli to a three-year entry-level contract.

It was really a formality. We knew from the beginning that Kallionkieli’s contract would be for three years with a cap hit between $700,000 and $925,000 if he reaches the NHL because there are strict rules for what an entry-level contract is and what it can look like.

That’s why it’s likely that Kallionkieli’s contract will resemble the one first-rounder Peyton Krebs or second-rounder Kaedan Korczak will eventually sign, but why third-rounders Pavel Dorofeyev and Layton Ahac won’t get a contract for quite awhile.

Here we'll explain how entry-level contracts work.

What is an entry-level contract?

An entry-level contract (ELC) is the rookie contract that all players younger than 25 years old sign. All ELCs are two-way contracts, the length of the deal is dependent on the player’s age, and the amount is capped at $925,000. If a player is between 18 and 21 years old, their ELC is for three years. If a player is 22 or 23, their ELC is for two years, and a 24-year-old’s will be for one season.

Players are also typically waiver-exempt for their first 160 NHL games so they can be sent down and called up at will. ELCs can also include performance bonuses, the only time a player is eligible for a contract worth bonuses until they are 35 years old. Players most often become restricted free agents when their ELC expires.

So Kallionkieli is taking up almost $1 million in cap space next year?

The short answer is no. His cap hit won’t kick in until he is in the NHL. He’ll play junior hockey next season, so he actually won’t even be making any money off his contract, instead setting up the two years of "slide," or extension, before he makes money. More on that in a moment.

A two-way contract means he makes a different salary when he’s in the minors or the NHL. When he makes the NHL, he’ll make his cap hit in salary. But once he is assigned to the minors, he’ll make about a tenth of that.

Cody Glass signed a three-year ELC after he was drafted two years ago. Will he be a free agent after this season?

No. Players under age 20 have their contracts “slide” if they don’t play 10 or more games in the NHL, meaning an extra year is tacked onto the end at the same terms. Because Glass signed when he was 18 and has yet to see the NHL, his contract slid for two years. He has three years remaining on his deal. He is also age 20 this season, meaning a year of his ELC will be used this year if he plays in the NHL or not.

The same will happen with Kallionkieli. Unless he plays at least 10 games in the NHL this season or next, his contract will slide twice, and he will have three years remaining beginning with the 2021-22 season, and will be eligible for restricted free agency in the summer of 2024.

Does a team have to sign a drafted player to an ELC right away?

No. Teams typically have four years to sign an ELC after drafting a player. That holds in true in most cases, such as the player going to North American junior hockey, college, or non-North American professional leagues with an NHL transfer agreement like the SHL in Sweden or Liiga in Finland.

But some leagues don’t have an NHL transfer agreement, like the KHL in Russia. In that case, the player’s rights remain with the team indefinitely. That’s how the Golden Knights retained Nikita Gusev’s rights seven years after he was drafted.

Why do some draft picks get ELCs while others don’t?

In most cases it depends on where they play after getting drafted. It’s common to see players who go to major junior in Canada receive ELCs, because they don’t count against the 50-contract limit while they are in juniors and the junior leagues don’t have rules against a player signing one. A player cannot play junior after they are 20 years old, so teams must provide them a “bona-fide offer” within two years of their draft to keep their rights. Most top picks sign the summer they are drafted. Fifteen first-round picks already have.

The NCAA does not allow its players to have ELCs, so signing one would cost a player his college eligibility. Because of that, the NHL is more lenient on how long a player’s rights remain under team control and a bona-fide offer is not required to retain their rights.

Take the 2019 draft. The Golden Knights must tender a bona-fide offer to Krebs and Korczak within two years because they are playing junior. As long as they do that, they have until 2023 to sign them, though they would most likely sign when offered.

Third-rounder Layton Ahac is going to college, meaning that signing an ELC would make him ineligible by NCAA rules. Vegas has until 2023 to sign him. There is no timetable for third-rounder Pavel Dorofeyev, who was drafted out of Russia.

Should I be worried that Krebs hasn’t signed yet?

Not at all. As mentioned above, he has two years of junior to play before it becomes an issue. He’s also hurt, so the Golden Knights may decide to wait and see how he heals before dishing out a contract.

If he is still unsigned, or at least un-offered, when the Stanley Cup is raised in 2021, it would be time to worry.

What happened with the ELCs of Nikita Gusev and Jimmy Schuldt last year?

Those were non-standard cases. Jimmy Schuldt went undrafted when he was eligible, then starred at St. Cloud State. After he left college, he became an unrestricted free agent and was free to sign with anyone. But because he was considered 24 by the league rules, his ELC was for one year.

Gusev came from Russia, meaning the standard ELC rules about age limit and rights expiry did not apply to him. He was capped at one year and $925,000. Vegas owned Gusev’s rights unlike Schuldt’s, so Gusev could only sign his ELC in Vegas and was eligible to play in the postseason, when Schuldt was not.

Did the Golden Knights have any regulars on ELCs last season?

Just one. Alex Tuch signed a three-year ELC when he was in Minnesota at age 20 after his sophomore year at Boston College in 2016. There was no slide, and the third year was last season, which is why he signed an extension in October. Had he not, he would have become a restricted free agent this summer.

Because ELCs are capped at $925,000, it seems like a good idea to have a few in order to stay under the cap. We’ll see Vegas deploy a few players on ELCs this season, notably Cody Glass and Nicolas Hague, who both could see time with the Golden Knights.

The Lightning built their powerhouse last season in part because they had Brayden Point, Mikhail Sergachev, Anthony Cirelli and others on ELCs. When those three players are each making less than $1 million against the cap, there is room to fill the lineup elsewhere with expensive stars.