Mid-Level and Bi-Annual Exception Explained

We have all been there with our favorite NBA teams. They are one or two roster moves away from vying for an NBA title but our salary cap has hit the ceiling.
Nowadays, teams always look for transcendent stars to help build a dynasty. The role players, however, make a crucial difference as well. If only there was a way to help the team without paying the tax or remaining stuck in the middle of the pack with the rest of the NBA teams.
Well, for some, there is a way to get a leg up without murdering your cap, and that method is the mid-level exception.
Many basketball fans love the sport but don’t love everything that goes into it, like rooting for billionaire owners, understanding the business side, or the minutiae of player contracts. Well, you’re in luck!
In this article, we will break down the mid-level exception and prove that it could land your team a title!
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NBA Contract Terms You Should Know
Before we hop into what the mid-level means, let’s discuss some other terms that you should know before your head spins right off:
Salary Cap
Every team in the NBA has a limit (or cap) on what they can spend to field their roster. That is what is known as the Salary Cap. For example, the salary cap before the 2021-22 season is $112.414M.
The NBA incorporated a salary cap back in the 1940s but was then scrapped. In 1984, the cap was reinstated and teams were allowed to spend only $3.6M in total payroll (a far cry from where the cap is today!). To ensure that owners are holding up their end of the bargain, the teams must spend at least 90% of each season’s salary cap.
Luxury Tax
The NBA has what is known as a “soft tax” which means that teams are allowed to exceed the salary cap, but must pay a fee (or luxury tax) if they do. The luxury tax is not a dollar-for-dollar system in which a team pays to the league every penny they are over the cap.
The team will actually pay more in luxury tax dollars than the dollar amount they are over and there is a repeat offender clause in which additional dollars are paid for those always above the cap.
The Mid-Level Exception
The NBA’s mid-level exception allows teams to sign players without ruining their salary cap or their luxury tax in the process. In other words, it gives teams a chance to compete on the court and not break the bank off it.
Another reason the league created the mid-level is to incentivize players to stay with their current teams. Teams are able to use the mid-level on a current roster player while still adding to their depth.
In an age of player empowerment, when every franchise is looking for their version of a “Big Three” (a la the LeBron, Bosh, and D-Wade-led Miami Heat), team salaries are heavily invested in a couple of guys.
This means that, in order to compete late into the season and field a deep enough team to play into the Playoffs without injury, you need some value guys on the roster. Mid-level exceptions are a great way to get high value without the exorbitant contract.
Mid-level exceptions in the NBA right now are set at $8.4M for teams above the tax and $4.449M for those under the salary cap.
A mid-level exception contract can be as long as four years for those over the cap and two years for those below it.
So, enough talk about the Xs and O’s of the NBA contract. Let’s take a look at past mid-level exception guys that signed with a team and made a huge impact.
The most common tool that over-the-cap teams use to sign free agents from other teams is the mid-level exception, but that’s not the only exception those clubs have to squeeze an extra player onto the payroll. The bi-annual exception is a way for a team to sign a player who may command more than the minimum salary, but less than the mid-level.
As its name suggests, the bi-annual exception can only be used every other season. Even if a team uses only a portion of the exception, it’s off-limits during the following league year.
During the 2020/21 league year, four teams - the Mavericks, Pistons, Grizzlies, and Raptors - were ineligible to use the bi-annual exception at all, since they used it in 2019/20.