The Qualifying Offer Explained
How the qualifying offer works, who can receive one, why most players turn it down and how the draft-pick compensation attached to it has been rewritten since 2012.
A qualifying offer is a one-year contract that a club can make to one of its own players just before he becomes a free agent. The salary is not negotiated. It is set by formula, as the average of the 125 highest salaries in the game the previous season, and it has risen from about $13.3 million when the system began to more than $20 million in recent winters. If the player accepts, he plays another year at that figure. If he declines and signs elsewhere, his old club collects a draft pick, and his new club pays a price.
That last sentence is the point of the whole system. The qualifying offer is less a contract than a mechanism for attaching a cost to free agents, and the cost has changed since the system began. This article explains the mechanism, the rules about who is eligible, the timeline, the compensation in each era, and the strategy on both sides. Dollar figures and draft rules change with every agreement, so treat the numbers here as an outline and check the official source at MLB.com for the current values.
What it replaced
Before the 2012 offseason, free agents were sorted into categories by a formula. The Elias Sports Bureau ranked every player at his position by his recent statistics, and the top group became Type A free agents, the next group Type B. A club that lost a Type A player received draft picks, and the club that signed him gave up a pick. To collect, the old club had to offer the player salary arbitration, and in theory the player could accept and stay for a year at an arbitrated salary.
The system had two problems. First, it was opaque: a player's category depended on a statistical ranking that few people outside the bureau could reproduce, and it decided what his signing would cost a new club. Second, the arbitration offer was a clumsy tool. Clubs offered arbitration to players they expected to decline, simply to collect the picks. The 2011 collective bargaining agreement replaced it with a plain, public rule: one fixed-salary offer, one clear set of players eligible, and the compensation tied to that offer.
How the offer works
The rules have a handful of moving parts.
- The amount. The offer is a one-year contract at the average of the 125 highest salaries of the previous season. The league calculates the figure each year, and all players receive the same number.
- The deadline for the club. The club must make the offer within a few days after the World Series ends (five days as of the 2025 season).
- The deadline for the player. He has about ten days from the offer to accept or decline (the exact date is published each winter). He cannot negotiate a different salary with his old club as part of it.
- Eligibility. The player must be eligible for free agency, normally after six years of major-league service time. He must have spent the entire season with the club, which excludes players acquired by trade or waiver claim during the year. And he must never have received a qualifying offer before.
That last condition matters more than any other. A player can receive only one qualifying offer in his career. If he accepts it, he is off the market this winter; if he declines, he is free to sign anywhere, but the offer has been spent either way. A club cannot offer the same player the same deal a second time.
For the full picture of how a player arrives at free agency in the first place, see service time, arbitration and free agency. For why a player acquired at the deadline is not eligible, see the trade deadline rules.
The timeline in order
A worked sequence makes the timing clear.
- The World Series ends. Contracts expire and players become eligible for free agency.
- Within five days, each club decides whether to extend an offer to each eligible player. Most clubs announce their decisions on the final day.
- The player then has about ten days to accept or decline. If he accepts, the contract is signed at the set figure. If he declines, or if the ten days pass without an answer, he is a free agent.
- If the player who declined later signs with another club, the compensation rules apply: the old club collects its pick and the new club forfeits its draft assets.
The signing club does not pay a fine or a tax. It pays in draft position, and, in later versions of the rules, in some of its international bonus money. A player who is not offered a qualifying offer can sign with anyone at no cost to the new club, which is why a team can improve a player's market by deciding not to make the offer.
Why the offer is a gamble for both sides
From the club's point of view, the offer is a free option with one risk. If the player declines and leaves, the club gets a pick. If the player accepts, the club has him for a year at the offer price, and that salary counts against its payroll and its luxury tax calculation. A club that offers a player it cannot afford for a year, or who might be hurt, is gambling.
Take a hypothetical. A club is offering a starting pitcher a one-year deal at $20 million, which is the number for this example, not any single year's figure. The pitcher thinks he could earn a five-year contract worth $100 million on the open market. By declining he gives up a guaranteed $20 million. By accepting he takes the guarantee, plays a season and probably re-enters the market a year older with the same questions and no second qualifying offer, which is a plus. For a star the choice is simple: decline.
The harder decision belongs to the middle of the market. A solid starter or a corner outfielder who expects, in another hypothetical, a three-year deal worth $36 million faces a different calculation: a $20 million guarantee for one year, against a market where clubs know that signing him will cost them a draft pick. Some players in that position take the one-year deal, and others sign late and for less.
What happened to the market
The earliest versions of the rule had a visible effect. Under the first agreement the signing club lost its first-round pick, unless it held one of the ten best picks in the draft, in which case it lost its next-best selection. For a club that expected to draft in the middle of the round, that was a real price. The old club, meanwhile, gained a pick between the first and second rounds, which is why those picks were called "sandwich picks."
Several free agents in the early years signed well after the usual window. Kyle Lohse signed in the spring of 2013, and Stephen Drew and Kendrys Morales both waited until after the 2014 season had started. The common explanation was that clubs did not want to give up a first-round pick for them. Players and the union pointed to such cases as proof that the penalty was holding down the market for the middle class of free agents, and the complaint contributed to the changes in the next round of bargaining.
Compensation in two eras
The rule on what a club receives and loses has been rewritten once since the system began, and the table gives the broad outline. The details are in the collective bargaining agreements and should be checked against the current one.
| Era | Old club receives | Signing club loses |
|---|---|---|
| 2012 to 2016 | A pick between the first and second rounds | Its highest unprotected pick, the first round for most clubs |
| 2017 onward | A pick whose position depends on whether the club paid the luxury tax or received revenue sharing, and for a revenue-sharing club on the size of the new contract | Lower picks and international bonus pool money, with the amount depending on the signing club's payroll and status |
The agreement reached in 2016, which took effect for the 2017 offseason, made the system depend on the same financial categories that govern the luxury tax and revenue sharing. A small-market club that received revenue-sharing money got a better pick than a large club that paid the tax, and the signing club's penalty fell in the draft, shifting from the first round to later picks. For the mechanics of the tax and of revenue sharing, see the competitive balance tax and revenue sharing. A revenue-sharing club receives its better pick only if the player signs a large enough contract, a threshold of $50 million. The agreement reached in 2022 kept this structure in place. The principle held throughout: a signing club pays in draft assets, and the old club collects draft assets.
What it costs a club, in real terms
A draft pick does not have a price tag, but its value is real. A first-round pick comes with a bonus slot, a chance at a player who may reach the majors and years of cheap control if he does. A pick in the later rounds is worth much less, because the odds of any individual draftee reaching the majors fall with each round. That is why the change of 2017, which moved the penalty later in the draft, lowered the cost of signing a player who had received an offer.
That is the logic behind the changes. A first-round penalty is steep for a player who might help a club only modestly, while a club that loses a good player it developed wants something back. Each version of the rule has been a compromise between those two interests.
How a club decides whether to make the offer
Making the offer is a decision with four inputs, and a front office weighs them in roughly this order.
- Would we pay him this much for one season? If the answer is no, the offer is a risk, because the player might accept. A club that is not prepared to see him back at the set salary should think twice, however good the compensation looks.
- Will he decline? A player who expects a long contract at a higher annual value will almost always decline. A player who is coming off an injury, or who is old enough that a long deal looks unlikely, is the one who might accept.
- What will his market look like? A strong market means a pick for the old club and a worse market for the player's suitors. A weak market makes the offer more likely to be accepted.
- What does the payroll look like? An accepted offer is real money, and for a club near the luxury tax threshold it can change the winter's plans. The tax is explained in the competitive balance tax and revenue sharing.
The first question is the one that gets clubs into trouble, since a general manager who makes the offer assuming it will be declined is, in effect, betting on the player's market. The offer is a public document, and it can make or break a player's winter. A club that wants a player back has an easier path, which is to negotiate a multiyear deal directly.
What the offer does to a player's winter
For the player, the offer is a fork. Decline, and he enters a market where some clubs will price in the pick they would have to give up. Accept, and he has a one-year guarantee at a known salary. Agents spend the ten days weighing offers they already have, rumored interest from other clubs and the club's own willingness to talk about a longer contract.
The pick attached to a declined offer is also an argument that agents use. A player with a modest track record and a heavy price in draft capital is harder to place than one with a brief record and no attached cost, and a few of the most visible stories of late signings in the sport's recent history involved players who carried the offer. That does not prove the rule was the cause; those players also had concerns about health, age and defense. But it explains why players and their agents pay close attention to every change in the compensation tables.
How to read the news each winter
When the offers go out, the news usually arrives as a list: a number of players received offers, and a number of those declined. Three things are worth looking for in that list.
- The names that were not offered. A good player who is not offered usually has an issue with health, age or price. His market may be better for it.
- The players who accept. Acceptances are rare and tend to involve a player coming off a poor or injured year, for whom a one-year guarantee at a high salary beats the open market.
- The clubs. Teams that are rebuilding can have a reason to offer more freely, because a draft pick may be worth more to them than one year of a veteran.
The scale of the effect
It is easy to overstate what the rule does. It does not stop a team from signing a player, and the cost to a signing club is a draft asset, not cash. In the largest deals, the pick is a small part of the price. Where it bites is in the middle of the market, where a player of modest impact is asked to carry a cost that is large relative to his value. That is why the compensation tables have been revised.
Common mistakes about the rule
- Thinking the offer is a negotiation. It is not. The salary is set, and the club and the player cannot bargain over it as part of the offer.
- Thinking every free agent can get one. Only a player who has been with his club all season and has never had one before is eligible. A midseason trade removes the chance.
- Thinking a player who accepts is locked in for years. He signs for one season. He is a free agent the next winter, with no offer attached.
- Thinking the old club always gets the pick. It gets compensation only if the player signs elsewhere; if he returns to the old club, nothing is awarded.
- Thinking the player carries a penalty. The player pays nothing. The cost falls on the club that signs him.
Common questions
Is the amount the same for everyone? Yes. Every player who receives an offer in a given winter gets the same number.
Can a player negotiate a multiyear deal with his old club instead? Yes, at any time, but that is a separate negotiation and not a qualifying offer. The offer is the one-year contract the club must extend to preserve compensation.
Does the player have to decide quickly? He has about ten days. After that, the offer lapses and he is a free agent with compensation attached.
Is it the same as a tender? No. A tender is a contract a club offers to arbitration-eligible players who are under club control, to keep them from becoming free agents. The qualifying offer is made to players already on the way out the door.
Where to go next
To see how the draft picks that the offer moves fit into the larger picture, read the Rule 5 draft explained and how the MLB postseason works, which explains the October that precedes every free-agent winter. For ongoing coverage of signings and offers, see the trades and free agency topic page.