What is “Base Year Compensation?” How does base year compensation affect trades? Why does it exist?
Base year compensation (BYC) prevents another salary cap loophole. Without BYC, a team over the salary cap that wants to trade a player, but can’t because of the Traded Player exception (which says teams can’t take back more than 125% of the salary they trade away), could just sign the player to a new contract that fits within the desired range, then do the trade. BYC says “if you re-sign a player and give him a big raise, then for a period of time his trade value will be lower than his actual salary.” BYC defines the salary that’s used to compare players for compliance under the Traded Player exception (see question number 68 for more information about the Traded Player exception). Usually the salary used for comparison is the player’s actual salary.
