The biggest surprise of the Vladimir Guerrero Jr. extension is not that he won a $ 500 million contract from Toronto Blue Jays without going to the free agency.
No, the shock is that the contract includes a signing bonus of $ 325 million, according to informed sources from the agreement. Guerrero, 26, will receive the remaining $ 175 million in wages.
This is true, the Jays will pay 65% of Guerrero’s contract in a signature bonus. The bonus and salary will be distributed as an annual amounts variable over the duration of 14 years of the agreement.
Collective baseball negotiations do not limit the amount that a team may include in a signature bonus. The bonus, however, is included in the calculation of the average annual value of a player for luxury tax purposes. Including the salary, the annual blow of the luxury tax of Guerrero will be $ 35.71 million.
For Guerrero, the advantage of obtaining most of his money in a signature bonus would seem double. The signature bonuses are allocated to the state of residence of an athlete. Guerrero lies in Florida, a state without income tax. Thus, it will probably avoid paying tax on the state on the bonus, generating millions of savings.
The other advantage is that the signing of the bonuses does not depend on the performance of the services. Guerrero would receive its annual payment if the major baseball league canceled the matches due to a work stoppage, a possibility with the collective negotiation agreement of sport expiring on December 1, 2026. He would also receive it if the League canceled the matches for another reason, such as a pandemic.
The advantage for Blue Jays by paying more as a signature bonus than the salary – if it exists at all – is not clear.
Within 30 days, Guerrero will receive a payment of an initial signature bonus of $ 20 million. But because its agreement takes place from 2026 to ’39, this money will not count against the pay of the luxury taxes of Jays this season. The ABC indicates that a signature bonus only applies to the payroll of the luxury tax during the guaranteed years of the contract.
(Photo: Mark Blinch / Getty Images)
