Service Time, Salary Arbitration and Free Agency: How a Player's Pay Is Determined
How major-league service time is counted in days, what six years and Super Two status unlock, how a salary arbitration hearing works, and why a call-up date can decide when a player reaches free agency.
Most major-league players are not paid what the open market would give them. For the first three years of a career the club sets the salary, and the sum is usually not far above the league minimum. For the next three, or four in some cases, an arbitration system sets pay by comparing the player with others of similar standing. Only after six years of service can a player negotiate with every club, which is why a single day on a roster can matter more than a good month of hitting.
The mechanism that governs all of this is called service time, and it is counted in days. This article explains how service is earned, what the thresholds of three and six years unlock, how the Super Two exception works, how a salary arbitration case is argued and decided, and how those rules shape the way clubs handle prospects. The rules described are those in the collective bargaining agreement as understood through the 2025 season. A new agreement can change any of them, so check MLB and the players' union for the current text.
How service time is counted
Service time measures the days a player spends on a major-league roster. A day on the active major-league roster counts, and so does a day on the major-league injured list. A day in the minor leagues does not, even when the player is on the 40-man roster. A player is credited with at most 172 days in a season, and 172 days make one year of service, which is why a player who is on a roster for the entire season earns exactly one year.
Service is written as years, a decimal point, and days. A player with 5.171 has five years and 171 days. Since 172 days make a year, the highest the days figure can reach is 171, and 5.171 is one day short of six full years. That one-day gap is the subject of much of the story that follows.
A regular season runs for roughly six months, about 185 days depending on the schedule that year, so the cap of 172 leaves a cushion of about two weeks. A player who starts the year in the minors and joins the major-league club within that cushion still earns a full year. A player called up after it earns less. Consider a hypothetical season of 186 days. A player who joins the roster on the 15th day is on it for 172 days and earns a full year. If he joins on the 16th day, he earns 171 days, and he is one day short of a year for the rest of his career, unless a later season makes up the day. Real season lengths differ, so the exact day changes from year to year.
The three thresholds
Three service numbers matter most. Everything else, from the minimum salary to the draft-pick compensation attached to a free agent, flows from where a player stands relative to them.
| Service time | Status | Who sets the pay |
|---|---|---|
| Under 3 years | Pre-arbitration | The club, subject to the league minimum |
| 2 to 3 years, top 22 percent of the class | Super Two | Salary arbitration, one year early |
| 3 to 6 years | Arbitration eligible | Agreement, or a panel if they cannot agree |
| 6 years or more | Free agent when the contract ends | The market |
The league minimum is set in the labor agreement and rises over the life of the deal, so the article does not quote a figure. A first-year player's salary, if he has no contract beyond the minimum, is decided by the club alone. A club can pay above the minimum to a player it values and often does, but it is under no obligation to, and the player has little leverage because the club controls his rights.
Pre-arbitration: the club's years
In the first three years of service, a player is under what is called club control. The club can renew his contract at a salary it chooses, subject to the league minimum and to limits on how far it can cut him from the year before. The player's choice is to sign or not to play, and not playing is not a practical option for an employee whose only employer in the major leagues is that club.
This is the reason clubs value young, productive players so much. A player who becomes an All-Star in his second year is still paid close to the minimum, so the surplus value goes to the club. The 2022 labor agreement added a pool of money for the best pre-arbitration players, distributed on the basis of performance and award voting, in part to narrow that gap. A pool is not a salary, and it is small compared with what the same players earn after free agency.
The Super Two exception
Most players become eligible for arbitration after three years of service. A small group qualifies a year early. A player who has at least two years of service but fewer than three, who was on a major-league roster for at least 86 days in the previous season, and who ranks in the top 22 percent in service time among the players in that group, is called a Super Two.
The reason the rule has a name is the cutoff. Each year the line falls at a different place in the two-year class, in recent years a little over two years and a hundred days, and a difference of a few days can be worth a great deal of money to a player who just clears it and nothing to one who just misses. A Super Two player gets four arbitration years instead of three, which is a large bonus in a career in which salaries rise quickly. The 22 percent cutoff and the 86-day minimum are fixed in the agreement; the actual dates vary with the class.
How arbitration works
In the winter, a club and an arbitration-eligible player exchange salary figures on a set date in January. If they have not agreed by the time hearings are held, in late January and February, the case goes before a panel of three arbitrators. Each side presents its argument. The panel may not split the difference. It must choose one of the two figures, which is why the system is called final-offer arbitration.
The design is deliberate. A panel that can only pick one figure pushes both sides to propose a reasonable one, because an extreme number loses. Most players and clubs settle before a hearing, and only a handful of cases reach the panel in a typical year. Some clubs follow a policy often called file and trial, under which they stop negotiating once the figures are exchanged and go to a hearing if there is no deal, which is intended to discourage players from filing high.
The criteria are written into the agreement. The panel considers the player's performance in the past season, the length and consistency of his career contribution, his past salary, injuries, and the salaries of comparable players, meaning players of similar service time and similar production. The agreement bars arguments about the finances of either side, press opinion, and earlier offers. The comparison to other players is the heart of the argument, and each side's lawyers or advisers pick the comparisons that help it.
A worked example
Here is a hypothetical case with made-up numbers, for illustration only. A pitcher entering his first arbitration year made $1.2 million last season. His agent files at $5.0 million, and the club files at $4.2 million. If they do not settle, the panel will award one of those two figures, not $4.6 million. Each side makes a case with comparable pitchers: the agent points to pitchers with similar innings and strikeouts who earned more in their first arbitration year, and the club points to pitchers with similar service whose salaries were lower.
Because the panel must pick one figure, the club has an incentive not to file too low and the player has an incentive not to file too high. The result is that most pairs settle somewhere near the middle before they ever see a hearing. Whatever the outcome, the player's salary for the next season becomes the new base, and the next year's arbitration case builds on it. A first arbitration award is therefore important beyond the single season, because it becomes the base for the next one, and the agreement limits how far a salary can be cut.
The path to free agency
When a player reaches six years of service and his contract ends, he becomes a free agent. The negotiating market opens soon after the World Series ends, and any club may bid. A club that wants to keep its own free agent can attach a qualifying offer, a one-year offer at a set salary level; if he declines it and signs elsewhere, his old club can receive a draft pick. The qualifying offer article covers the details. Large contracts can also trigger penalties under the competitive balance tax, which is one reason the richest clubs still weigh long deals carefully.
Not every player waits for six years. A club can sign a young player to an extension that covers some arbitration years and perhaps free-agent years. The player gets security; the club gets a price it controls. Extensions are common for star young players and are one of the main ways a team lengthens control.
Before free agency, a player who is traded keeps his service time, and his arbitration rights travel with him. A veteran with ten years in the majors and five with his current club also earns the right to veto a trade, known as 10-and-5 rights.
Why the call-up date matters
The arithmetic of the 172-day year creates an incentive that the sport has argued about for decades. A club that keeps a top prospect in the minors for the first two weeks of the season can leave him a day or two short of a full year. Come back to the arithmetic: if he then earns a full year in each of the next five seasons, he reaches 5.171 and not 6.000, so his free agency is pushed back a full season. The delay barely changes his pay, which the club sets in his early years, so it amounts to an extra year of control at a low price.
The practice, often called service time manipulation, has been widely criticized, and a famous grievance by a star third baseman over his 2015 promotion brought public attention to it. The 2022 agreement added the Prospect Promotion Incentive, which gives a club draft-pick rewards in some cases when a top prospect is on its opening-day roster and performs. The goal was to remove some of the reason to hold players back. Whether it has changed behavior is a question beyond the numbers in this article.
The rules on roster limits interact with the same issue. A player out of minor-league options cannot be sent down without being exposed to other clubs, which is explained in the minor league options article, and a Rule 5 selection must stay on the active roster all season or be offered back, as the Rule 5 article shows. Each of those rules changes when a player's service clock starts. The prospect rankings explainer describes how the players at the center of these decisions are evaluated.
How we got here
None of this existed before the 1970s. Under the reserve system, a club could renew a player's contract each year, and the player had no right to move. Curt Flood refused a trade after the 1969 season and sued, and the Supreme Court ruled against him in 1972, leaving baseball's antitrust exemption in place. The change came in 1975, when an arbitrator, Peter Seitz, ruled in a case involving pitchers Andy Messersmith and Dave McNally that a player who played a year without signing a new contract was free of the reserve clause. The owners and players then negotiated a free-agency system in which six years of service became the threshold, and the first free agents followed in 1976.
The result was a rise in salaries that has run for half a century. Arbitration, which had been added to the labor agreement in the early 1970s, gave the players in between a way to share in that rise. The three-tier system, with club-set pay, arbitration pay and market pay, has been the base of every agreement since.
Common questions
Do days on the injured list count as service time? Yes. Days on the major-league active roster and the major-league injured list both count. Days spent on a minor-league assignment do not.
What is the difference between arbitration and free agency? In arbitration the player stays with the club and a panel chooses between two salary figures. In free agency the player is free to sign with any club for whatever the market offers.
Can an arbitration-eligible player be traded? Yes. His service time and arbitration rights go with him, and the new club has the same control.
What does it mean to be non-tendered? Before a deadline in the offseason, a club must offer a contract to its arbitration-eligible players. If it declines, the player becomes a free agent. Clubs use this to avoid paying salaries they expect to be higher than a player's value.
Is the system fixed? No. It comes from a collective bargaining agreement, which expires and is renegotiated. Anyone relying on a figure or deadline should check MLB and the players' union for the current terms.
Where to go next
For news on labor and contracts, see the business and labor topic page and the trades and free agency page. To read a box score and see who is playing, start with how to read a baseball box score, and for the rules around deadlines read the trade deadline explained.