Once Major League Baseball has concluded it's amateur player draft, teams and players will begin the process of signing bonuses and minor league contracts. Players then begin an often lengthy journey through small town America toward what they hope will be a career in MLB.
Teams may no longer sign newly drafted players to a major league contract right away. Over 80 percent of players drafted in the first round make it to the major leagues. After that, the odds are less than 50 percent. Players selected in the draft will receive a signing bonus. For most players, this is the only significant amount of compensation that they will receive for a few years, so the signing bonus is very important to drafted players.
Under the terms of the latest collective bargaining agreement (CBA) between team owners and players, each draft slot is assigned a "slot recommendation," which usually dictates the signing bonus that the player will receive. Often, it will also determine whether a player opts to chase his baseball dream, or accept a college scholarship.
Each team has a limit -- called a bonus pool -- that they can spend on signing bonuses.The amount of the bonus pool is equal to the total of the "slot recommendations" for the selections that teams have in the first 10 rounds of the draft. Bonus pools for the 2015 season range from $17,289,200 for the Houston Astros, who have two first round selections, down to $3,587,800 for the New York Mets, who have lost their first round selection.
The Detroit Tigers have a bonus pool of $7,114,300 to spend on players drafted in the first 10 rounds, plus their compensation round selection. The Tigers will select 22nd with a slot bonus of $2.1 million, and 34th, with a slot bonus of $1.8 million.
Bonus slot recommendations for the first round range from $8,657,300 for the first pick, held by the Arizona Diamondbacks, to just over $2 million for the last regular first-round selection, held by the Los Angeles Angels, who had baseball’s best record in 2014.
If a team does not sign a drafted player by July 15th, they lose the right to sign that player, and will forfeit the amount of the slot recommendation for that selection. The player is then eligible for the next year’s draft and must wait another year to join the MLB system. The team gains another draft pick the next year. The Houston Astros failed to sign 2014 first overall pick, Brady Aiken, who has since had elbow surgery, and will have the second pick, plus the fifth pick in the 2015 draft.
Bonus slot recommendations range from $1.43 million to $800,000 for second round selections, $800,000 to $540,000 for the third round, and down from there to $150,000 for a late 10th round selection. After the first 10 rounds, there is up to a $100,000 signing bonus trough round 40, with any excess counting toward the team's bonus pool amount.
|$7,114,300 - $7,470,015
|75% tax on overage
|$7,470,015 - $7,825,730
|75% tax on overage plus loss of 1st round pick
|$7,825,730 - $8,181,445
|100% tax on overage plus loss of 1st and 2nd round picks
|100% tax on overage plus loss of 1st round picks in next two drafts
|Tax is on the amount spent above the bonus pool limit
So, if a team has a $8 million bonus allotment, and they spend $9 million in bonuses, that puts them 12.5 percent over the limit. The team would pay a penalty of $1 million, and would lose their first and second round draft selections the next season.
If a team exceeds their pool amount by less than 5 percent, they would only pay a financial penalty. Teams may pay more than the slot recommendation for a player and less to another player selected, as long as the total does not exceed their bonus pool limit.
A player could wait four to five years just to get on a 40-man roster, and another three years being optioned before seeing the major leagues. After six seasons in the minor leagues, if they're still playing baseball, players who are not on a 40-man roster are minor league free agents. If a player hasn't made his major league debut within five years of being drafted, the odds are against him making it.