What is the basis for franchise tag compensation for a player?

The basis for franchise tag compensation for a player is the average salary of the top five players at their position. This method of calculating the franchise tag amount is designed to provide a fair market value for players who are designated as franchise players. By using the average of the highest salaries at their position, the franchise tag aims to ensure that the player receives a compensation reflective of their position's top talent within the league.

This approach is part of collective bargaining agreements that aim to balance the interests of both players and teams. It allows teams to retain key players while also providing those players with a significant salary that is competitive with others at their position. Consequently, rather than relying on potentially misleading metrics like the lowest salaries or arbitrary figures, this method focuses specifically on rewarding the performance and value of elite players.