Will I receive my annual salary in installments until after retirement? Unprecedented deferred payment contract. Is this possible in the KBO league?
Shohei Ohtani's future, which has attracted the attention of baseball fans around the world, has finally been decided. Ohtani said on his SNS account on the 10th (Korean time), "I chose the LA Dodgers as my next team. I'm sorry it took so long to make a decision." He personally announced his destination through social media before the media's confirmed report came out.
Ohtani signed a huge 10-year contract worth $700 million (about 920 billion won) with the Dodgers. This immediately surpassed the 12-year, $426.5 million contract signed by Mike Trout (LA Angels), which was the previous highest-paid contract in the major leagues, and signed the largest contract in global sports history, surpassing even the 'Emperor of Soccer' Lionel Messi.
It is surprising that the contract was signed for $700 million, far exceeding expectations of up to $600 million, but what is even more surprising are the terms of the contract. Although the details are not yet known, it has been revealed that Ohtani has chosen a deferred payment method with the Dodgers, in which a significant portion of his salary will be paid at a later date.
This deferred payment method, which Ohtani first proposed to the Dodgers, involves receiving a portion of the total annual salary after retirement or the end of the contract period. The club can pay the salary to Ohtani, the highest-paid player, in 'installments' over a long period of time, and at the same time, is relatively free in salary cap management. Rather, even with Ohtani, there is room to recruit other good players.
Ohtani is known to have said, "I hope my salary does not become a shackle for the club, and I hope I can receive it in deferred payments so the team can strengthen its power." 'ESPN' reporter Jeff Passan reported, "Ohtani plans to receive most of his total annual salary in arrears."
In fact, the club benefits more than the player. Although there is a burden of having to pay the player's annual salary for a long period of time, planned consumption is possible while avoiding the luxury tax. Also, as time goes by, considering rising prices and interest rates, the player may actually incur losses. However, despite this, the method chosen by Ohtani was a plan that could greatly ease the burden on the Dodgers.
Although the deferred salary payment method is not very common, it is a contract form that is often found in the major leagues. It has existed in the Major League since the 1980s, and the most famous example was Bobby Bonilla's contract with the New York Mets. Bonilla retired in 2001, but he is still paid an annual salary of $1.19 million (about 1.5 billion won) until 2035, when he turns 72. In addition, Mookie Betts, another ‘superstar’ of the Dodgers, also signed a contract in which his salary will be paid in installments for 24 years until 2044.
Conversely, there are also cases where players refused. The Washington Nationals offered their star Bryce Harper (now of Philadelphia) a contract extension guaranteeing payments through 2072 during the 2018 season. If he signed, Harper could receive his salary from Philadelphia until he turns 80. However, Harper refused, saying "he doesn't want to be a salaried person until he's past 65," and he subsequently switched teams.
So, is this kind of deferred annual salary contract possible in the KBO League? To conclude, it is a ‘question mark’. So far, no club or player has made inquiries regarding deferred payment contracts, and there have been no such cases. Additionally, related regulations are not clearly defined.
The large contracts currently being signed are divided into two types: FA contracts or non-FA multi-year contracts. The largest contract in KBO League history is catcher Yang Eui-ji. Yang Eui-ji signed a contract to return as a free agent with his former team, the Doosan Bears, a year ago, and set a new record for the highest amount of money in 4+2 years, up to 15.2 billion won.
Looking at the details of Yang Eui-ji's contract, the down payment of 4.4 billion won for the first four years was paid in a lump sum. And he is paid a total annual salary of 6.6 billion won divided over four years. The amount guaranteed over four years is 11 billion won, including down payment and annual salary. And after the end of the 2026 season, when the fourth season ends, +2 years can be realized, and during this period, up to 4.2 billion won can be received, including incentives according to mutually agreed upon options. The exact amount of coverage is not known to the outside world.
Yang Eui-ji's contract type is the most common and common in the KBO League. It consists of a contract deposit, salary, and incentives based on options. There were no cases of ‘payment later’ or ‘payment after retirement’.
A KBO official said, "Currently, when a player and a club sign a contract, they must follow the unified contract. It is a contract using the same form, and it specifies the payment date for receiving the money. Because 'a few days per month' is written, in case of postpayment, “We need to look at the relevant regulations and discuss whether it is possible,” he explained.
Until now, neither players nor clubs have felt much need for deferred payment. Also, because the size of the contract itself was much smaller than that of the major leagues, there was no reason to sign a contract that could be detrimental to the player. But the future cannot be guaranteed. As the player's price increases, clubs want various types of contracts, and players also want long-term contracts that allow them to receive stable salaries for a long time, large contracts with deferred annual salary payments can appear.