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Free Agency, the Re-Entry Draft, and End-of-Year Waivers: What Actually Happens to an Out-of-Contract MLS Player
In our companion piece comparing MLS Free Agency to the Bosman Rule, we covered the basic shape of this system: not every out-of-contract player is actually a “Free Agent” in the formal MLS sense, and the ones who aren’t get routed into one of two other processes instead. That piece kept things conceptual. This one goes deep into the actual mechanics of all three paths, since each one has real, detailed rules that shape how a player’s next contract actually gets built.
Free Agency, Properly Explained
To qualify for genuine Free Agency, a player needs to be at least 24 years old in the year the previous MLS season concluded, and have logged at least four MLS Service Years. There’s no limit on how many Free Agents a club can sign in a given year.
Contract length follows a defined menu, not open negotiation. A Free Agent contract has to fit one of several approved structures: two years (either 1+1, or a flat 2 if the player is 30 or older), three years (1+1+1 or 2+1), four years (2+1+1 or 3+1), or five years (3+1+1). The numbers describe guaranteed years plus option years.
Compensation is genuinely the most complicated part, and it works on a three-tier system, based on what the player calls his Free Agent Salary Budget Charge (his prior season’s compensation level):
| Tier | Where His Prior Compensation Falls | Year 1 Raise | Later Years |
|---|---|---|---|
| Tier 1 | At or below the Maximum Salary Budget Charge | Greater of $25,000 above Max Salary, or 20% above his prior compensation | Up to that year’s Max Salary, or up to a 5% annual increase if Year 1 exceeded Max Salary |
| Tier 2 | Above Max Salary, up to the Maximum TAM Amount | 20% above prior compensation (or 15% if his prior pay was already more than $500,000 above Max Salary) | Up to 5% increase per year in guaranteed years and the first option year; up to 15% in a second option year |
| Tier 3 | Above the Maximum TAM Amount | Up to the Maximum TAM Amount, or whatever’s separately negotiated with the league | Same framework continues |
In plain terms: the better a player was already paid before hitting Free Agency, the smaller his guaranteed raise, in percentage terms, tends to be, and the more his new deal gets negotiated directly with the league rather than following a simple formula.
In plain terms: the better a player was already paid before hitting Free Agency, the smaller his guaranteed raise, in percentage terms, tends to be, and the more his new deal gets negotiated directly with the league rather than following a simple formula.
A worked example: picture a hypothetical Player X, a 28-year-old midfielder becoming a Free Agent after his contract with Inter Miami expires, having earned $1,000,000 in his final season there. Since $1,000,000 sits above the 2026 Maximum Salary Budget Charge ($803,125) but below the Maximum TAM Amount ($1,803,125), he falls into Tier 2. Because his prior pay doesn’t exceed Max Salary plus $500,000 (which would be $1,303,125), his Year 1 raise works out to 20% above his prior compensation, meaning any club signing him as a Free Agent has to offer him at least $1,200,000 in Year 1. From there, his compensation in guaranteed years and any first option year can rise by up to 5% annually, with a larger 15% jump allowed if his deal reaches a second option year.
A few other real rules attached to Free Agency:
- His performance bonuses carry over. A new Free Agent contract has to include the same bonus structure as his most recently expired deal, unless the league specifically approves a change, and any change can’t leave him better off overall than standard Free Agency would have.
- A No-Trade Clause is only available here. As covered in our piece on trading players without consent, this is the one entry point where a player can actually negotiate real protection against being moved later.
- Re-signing with his own club has a real deadline attached. A player can re-sign with his existing club at any negotiated compensation, subject to league approval, right up until Stage 2 of the Re-Entry Draft begins. After that point, though, if he re-signs with his own club, he’s bound by the same compensation tiers above, no more open negotiation.
- A club that loses more free agents than it signs gets compensated. If a club made a genuine, bona fide offer (at least 105% of the player’s previous salary) before Free Agency opened and still lost him, it receives $50,000 in GAM per net player lost, paid out at the end of the following season.
- Former MLS players currently abroad follow a stricter process. If a club wants to bring back a former MLS player who’s under contract with a non-MLS club, it can’t negotiate directly with that foreign club at all, the league has to handle those discussions. Going around that is a Tampering violation.
The Re-Entry Draft, Properly Explained
A player who’s at least 22 years old with at least one MLS Service Year, but who doesn’t clear the Free Agency bar, generally lands in the Re-Entry Draft process instead.
Before the draft itself, his current club gets one real opportunity. It can extend him a formal Bona Fide Offer, and this comes with its own real requirements: the offer’s term can’t run longer than however many years remain until he’d actually qualify for Free Agency, and the compensation has to include the greater of a 10% raise on his current salary or $15,000 above his last base salary, with every option year increasing by at least 5% on top of that, plus all the same recurring bonuses his expired deal already included. If he accepts, he simply stays, no draft involved. If he declines, or his club later withdraws the offer, the club keeps a Right of First Refusal over him, and critically, once a Bona Fide Offer has been extended at all, he becomes ineligible for the Re-Entry Draft entirely.
If no Bona Fide Offer is made, the actual two-stage draft begins, run in the same order as Waivers, worst record from the previous season picks first. As covered in our Bosman companion piece, his own former club is barred from selecting him in Stage 1, every other interested club gets first crack. If a club selects him in Stage 1, the league is obligated to make him a real, binding Bona Fide Offer on that club’s behalf, and for a player selected here, clubs can’t negotiate him down below his previous contract’s value until a league-specified date.
Stage 2 follows the same order, and his original club remains locked out until every other club has already passed on him. A club selecting him in Stage 2 is obligated to extend him a Genuine Offer instead of the stricter Bona Fide Offer standard. If nobody selects him in either stage, he becomes available on a simple first-come, first-served basis, original club included.
A worked example: say a hypothetical Player Y, a 23-year-old with two MLS Service Years, comes out of contract at Inter Miami, earning $150,000 in his final season, too young and too new to the league for Free Agency. Inter Miami chooses not to extend him a Bona Fide Offer, so he enters the Re-Entry Draft. In Stage 1, Inter Miami cannot select him, only rival clubs can, and the process runs in order from the league’s worst record to its best. Suppose every other club passes on him in Stage 1. Stage 2 opens in that same order, and Inter Miami is still shut out, until every other club has passed there too. If that happens, Inter Miami finally gets a chance to select him, now obligated to extend him a Genuine Offer to bring him back.
End-of-Year Waivers: The Bottom of the Funnel
This is genuinely the simplest of the three paths to understand, precisely because it’s defined by exclusion. A player lands in End-of-Year Waivers only if he’s out of contract at year’s end, isn’t protected by a club’s Right of First Refusal, and doesn’t qualify for either Free Agency or the Re-Entry Draft.
A player lands in End-of-Year Waivers only if he’s out of contract at year’s end, isn’t protected by a club’s Right of First Refusal, and doesn’t qualify for either Free Agency or the Re-Entry Draft.
The mechanics mirror standard in-season Waivers, covered in full in our companion piece on Waivers, just shifted to the offseason calendar. Any player not selected here becomes available first-come, first-served afterward, exactly like the regular-season process.
Putting the Whole Funnel Together
Picture an out-of-contract player, and ask a simple sequence of questions to see where he actually lands:
- Is he 24 or older with four-plus MLS Service Years? If yes, he’s a genuine Free Agent, subject to the three-tier compensation structure above.
- If not, is he 22 or older with at least one MLS Service Year? If yes, he’s Re-Entry Draft eligible, unless his own club locks him up early with a Bona Fide Offer.
- If he clears neither bar, and isn’t protected by a Right of First Refusal, he falls all the way through to End-of-Year Waivers, the least favorable path for a player, since it comes with the fewest built-in protections and no guaranteed offer structure at all.
That funnel, not simply “his contract expired,” is what actually determines an out-of-contract MLS player’s real options every offseason.
That funnel, not simply “his contract expired,” is what actually determines an out-of-contract MLS player’s real options every offseason.
MLS Explained | The Football Week
The MLS Explained series breaks down the rules, mechanisms and structures behind Major League Soccer for anyone who wants to understand how the league actually works.