The Pittsburgh Pirates agreed to an eight-year, $70 million extension with Ke’Bryan Hayes this week, and Jason Mackey has the details on the contract breakdown.
Ke'Bryan Hayes' contract structure, per source:
2022: $10M
2023: $10M
2024: $7M
2025: $7M
2026: $7M
2027: $7M
2028: $8M
2029: $8M
2030: $12M club option/$6M buyout
$70M guaranteed/$76M possible— Jason Mackey (@JMackeyPG) April 9, 2022
The biggest thing that stands out is how front-loaded this deal is for a young player extension. Under a normal schedule, Hayes would have been making the league minimum for the next two seasons, followed by arbitration for 2024-2026. Here’s a breakdown of what Hayes’ earnings would have looked like without the extension.
Extension Breakdown
Year: Proj. Salary Before / Extension Salary
2022: $700,000 / $10,000,000
2023: $720,000 / $10,000,000
2024: Arb1 / $7,000,000
2025: Arb2 / $7,000,000
2026: Arb 3 / $7,000,000
2027: FA / $7,000,000
2028: FA / $8,000,000
2029: FA / $8,000,000
2030: FA / $12,000,000 option ($6,000,000 buyout)
Front-Loaded in 2022/2023
There are two aspects to an extension: How many years a team is keeping a player, and how much it will cost them to keep his services for that duration, with all potential risks and potential rewards accounted for.
Once the two sides have agreed to a year and price — in this case eight years and $70 million guaranteed, with up to nine years and $76 million possible — then the money can be spread around however you want in those years. Teams aren’t required to stick to the standard zero-through-six salary structure.
The Pirates originally would have been paying Hayes anywhere from $1.42 million to about $2 million in those first two seasons. Under the extension, they’re paying him $20 million in those years.
There are questions about whether the Pirates will contend in 2023, and it seems very unlikely that they will contend in 2022. The Pirates are paying Hayes a lot of money to play for losing teams, or at best, one losing team and the first year of the new window.
Arbitration Savings?
It’s nearly impossible to say what Hayes could receive in arbitration in 2024 without seeing his 2022 and 2023 seasons. However, we know that Bryan Reynolds was eligible for his first year this year, and is due either $4.25 million or $4.9 million. Either one is less than what Hayes is making in that 2024 season under the extension. In total, the Pirates probably front-loaded $21-23 million dollars by paying Hayes more than he would have received under the normal salary structure.
However, from there, Hayes is making $7 million in each of his remaining arbitration years. There might be some over-pay here compared to the normal salary structure, although the normal salary structure is meant to restrict earnings during the league minimum and arbitration years.
If Hayes is an impact player, then the Pirates are probably seeing a zero sum game in these years for savings. The salary remains consistent at $7 million, but his second year of arbitration as an impact player would be in that range, and the third year would exceed it — likely by the same amount that the first year fell short.
In total, the Pirates are paying Hayes what he would have probably made in arbitration as an impact player. They might even be over-paying him a bit, if he’s just a good starter. And that’s not a bad thing to be. It’s just that this system really represses salaries, and we’re comparing an actual contract to speculated earnings under a repressive system.
The Free Agent Years
Here’s where the payoff comes. Hayes would normally be a free agent starting in 2027. If the Pirates start contending in 2023 or 2024, you would hope that their window is still open in 2027. An extension also removes any talk about trading Hayes leading up to the 2026 season, when the window to contend should be in its prime.
Hayes is essentially signed to a three-year, $29 million deal that could be expanded to four-years and $35 million.
I don’t need to tell you that if Hayes is an impact player, the savings here for the Pirates will far exceed what they overpaid in the early days of this deal. If Hayes is just a good starter with solid defense and capable of holding down the position into his 30s, he will still be worth this salary.
By these years, the Pirates should be contending, or something has gone wrong. Hayes can play a role on those contending teams, either as a starter who is more defensive-value driven from a premium position, or as a guy who can make an impact on both sides of the game. In either role, he will lock down a key position, while saving money that can be used elsewhere on that contending team.
These savings were paid for by the higher salaries in the non-contending years.
This is the way small market teams should operate.
Same Team, Different Plan
One decade and one month and one day before Ke’Bryan Hayes signed his extension, the Pirates extended another young potential star in Andrew McCutchen. That deal followed the typical MLB salary structure more closely.
McCutchen was paid $500,000 in 2012, which was his final league minimum season. He received $3.5 M, $7.25 M, and $10 M in what would have been his arbitration years. That total is $250,000 less than what Hayes will receive in his arbitration years, not factoring in the ten years and one month and one day of inflation.
In 2016, McCutchen would have normally been a free agent. Instead, the Pirates paid him $13 million. They paid him $14 million in 2017, and $14.75 million in 2018, with a $1 million buyout.
We know how this worked out.
Money was tight after 2015, when the Pirates were at their height of contending. The moves they made to remain under Bob Nutting’s strict budget were not good ones.
Imagine what it might have been like if they paid McCutchen $10 million in 2012, and had $9.5 million extra to spend in 2016-17.
Or, imagine if they would have given him a $7 million buyout in 2018. It wouldn’t have mattered what the buyout was to them, because they were only paying it if McCutchen bombed, and he hadn’t shown signs of that, to that point. The Pirates obviously traded him before that year, so we saw that there was no eventual buyout risk in that case. However, had they backloaded the buyout price, they could have saved another $6 million.
Now imagine what the Pirates could have done with an extra $16 million to spend between 2016-2017. Maybe they don’t see such a wide-spread decline in their key players, and morale sapped from the fan base if they get creative under a strict budget. If we’re idealizing outcomes, then how many more moves could they have made to save even more money?
That’s an important question going forward. The Pirates just got a payroll boost in 2022 and 2023, in years where their payroll was projected to be… low. They’re saving money for when their team is universally expected to contend. They could do this with multiple extensions going forward.
The Pirates extended Hayes, locking him up through the 2029 or 2030 seasons. What they did with the contract breakdown was distribute spending from contending years to the non-contending years, and the final year of his deal. As a result, the Pirates diverted almost $25 million dollars away from their expected contending window from 2024-2029 by stashing that money in the 2022, 2023, and 2030 seasons.
