Explaining how the compensatory draft picks system works

With the Pittsburgh Steelers losing a number of free agents going into the 2025 league year, they are in position to potentially gain multiple compensatory draft picks for the 2026 NFL Draft. With the last time the Steelers received a compensatory pick being the in the 2022 draft, there may be many fans who haven’t bothered to understand the system for several years and may need a refresher of things work.

Have no fear, I’m here for you.

This is a subject I have studied a lot for years. In fact, I’ve written about the process several times at our previous outlet, but haven’t had the need to tackle the subject here at Steel Curtain Network.

Now that time has come.

Let’s buckle up and dive into the very complex system (in terms of calculations) and at least attempt to understand how this may work to help out the Steelers in 2026.

Rationale and History

When free agency (the way that it currently stands in the NFL) was introduced in 1993, the next offseason of 1994 brought the first awarded compensatory picks. While the first two years had picks awarded outside for normal rationale, the understanding of the compensatory formula has evolved more over the years. In the most recent Collective Bargaining Agreement (CBA) in 2020, the methodology behind the compensatory formula was outlined much more specifically than ever before.

The purpose of awarding teams compensatory draft picks is to offset the losses a team may see from losing players, whose contracts expired, to free agency. Not all players fit the qualifications of becoming a compensatory free agent (CFA) which means they are taken into account in the compensatory formula.

What teams are eligible?

For a team to be eligible for a compensatory draft pick, the most likely route is for them to lose more CFAs than they gain in a given offseason during a specific time period. In some cases, a team can be awarded a compensatory draft pick even if they do not lose more free agents than they gain, but the net loss is considered greater based on the level of players they lost versus gained. Additionally, a team cannot receive more than four compensatory draft picks in a given draft due to players lost in free agency.

Potential Rounds

In the current compensatory formula calculation, teams are awarded draft picks which fall into a given round. These picks fall anywhere from the third round through the seventh round with the picks coming after the normal selections of that round. Assuming that every team has one scheduled draft pick in each round, this means the compensatory picks would be pick 33 and beyond in a given round.

Methodology

The best way to look at the methodology of determining compensatory draft picks is in the following six steps:

1: Eligibility

The first step is to determine if a player who signed with a new team is a CFA. First, they must be an Unrestricted Free Agent (their previous contract was filled to completion) and not a Street Free Agent (they were released by their previous team with time left on the contract). Second, they could not be a player who potentially had more years under contract with the team. If there was a team option that was not exercised, or at any point in their contract a player renegotiated their deal for fewer years, they are not eligible to be a CFAs. If there are void years in a players contract, these do not preclude the player from being a CFA.

2: Salary

The next step is to determine what round a player qualifies under which cannot be done until the first season of their new contract is complete. Although there are projections of where a player could fall, the exact amount is based on things that aren’t determined until the season is over. The biggest factor involved is a players salary which is determined by their average per year (APY) salary over the life of a contract which includes their base salary, signing and workout bonuses, and any other bonus that are in the category of a likely to be earned (LTBE).

At the conclusion of the season, every player who received regular season pay in the NFL (not just CFAs) is ranked from highest to lowest. The player in the lowest position is given one point and the second lowest player is given two points all the way up until the highest player receives the most points. Obviously, the number of players will determine the number of points for the highest salary.

3: Playing Time and Awards

With the previous number being the starting point and largest contributor, the next largest contribution will be applied which is the number of snaps played. Looking only at either the offensive or defensive side of the ball, the percentage played of the team’s total snaps of the season could award the player between 25 and 100 additional points. A player only receives points if they play at least 25% of the snaps of the season otherwise there are no points awarded. If a player played 87% of the team’s snaps, they will receive 87 points. There is a different method used for kickers and punters that is not determined by their snap counts.

The final points which can be awarded are if a player lands on the Associated Press First Team All-Pro List or the Pro Football Writers of America’s All-Conference List. A player selected First Team All-Pro receives an additional 20 points. If the player is selected All Conference, they would receive five additional points. A player cannot receive points for both awards, only the greater amount.

4: Determining Rounds

After taking all these things into account, the players are re-ordered from the highest number of points to the lowest. Players in the top 5% of the league (95% to 100%) would classify the player as a third-round compensatory value. Players in the next 5% (90% to 95%) would be assigned a fourth-round value with players in the third group of 5% (85% to 90%) would be a fifth-round value. The next 10% (75% to 85%) would be given a sixth-round valuation while the next 10% (65% to 75%) would be a seventh-round value. Players that are not in the top 35% (below 65%) do not qualify as CFAs.

5: Cancellation

Once all of the CFAs have been assigned a round value, the next step is the cancellation process to see where a team will receive a compensatory draft pick. If a team has more CFAs lost than gained, they begin the cancellation process. For each team, all the players lost are listed in one column in order from lowest round (third) to highest round (seventh). The same is done with the CFAs gained. Any player gained will cancel a player lost in an equal round. If there is no player lost in that round, then the player in the next highest round (moving down on the list) would be canceled. If there is no player to cancel in an equal or higher round, then the last remaining player on the list is canceled. Any CFA lost who is not canceled out makes the team eligible for a compensatory draft pick in that round.

6: Awarding the Picks

Once a team is deemed to be in the running for a compensatory draft pick for a lost CFA, all the eligible remaining CFAs in that round are placed in order of the points used to determine which round they were in. If four different teams are eligible for a third-round compensatory pick, the team who picks first will be the team with the player with the highest point total.

Only 32 compensatory draft picks will be awarded each year for CFAs. Teams who have a potential net loss where the points of their players lost are significantly more than those gained could be eligible for a seventh-round compensatory pick but only if the previous 32 spots are not filled. If the spots are not filled, the final compensatory picks would awarded to teams in order of the draft that particular year.

Special cases

If an NFL player is a CFA and has 10 or more credited seasons, there is a cap on their round in which they are designated. Unless the player is a quarterback, any player with more than 10 years experience cannot be ranked higher than a fifth-round compensatory pick.

Now that I did my best to explain how the system works, it’s important to know that compensatory draft picks the Steelers could receive in 2026 contain a lot of speculation at this time. Yes, the biggest factor, which is their new contract, is known. But other factors could tweak things a little bit. For more information on that subject, be on the lookout for a follow-up article here at SCN in the coming days.