A two-way contract is a professional sports contract which stipulates that an athlete's salary is dependent upon the league in which the athlete is assigned to play. This is opposed to a one-way contract that would pay the same salary regardless of where the athlete is assigned to play.
Two-way contracts are common for professional ice hockey players who aspire to play in the National Hockey League (NHL). Any hockey player entering the NHL for the first time will sign an entry-level, two-way contract with an NHL team stipulating that he will receive a higher salary if assigned to play with the NHL team, but will receive a lower salary if assigned to play for a team in the minor leagues such as the American Hockey League or the ECHL.
Beginning in the 2017-18 season, the National Basketball Association added two-way contracts between NBA teams and their NBA G League affiliates. Each team can offer two contracts per season to players with fewer than four years of NBA experience. Unlike in the NHL, these contracts are not offered to every aspiring NBA player, but are intended for players whom a team would like to keep "on retainer" without having to sign to a full-time contract. However, some players drafted during the first or second-round of an NBA draft can be retained by teams under a two-way contract as an alternative signing method for them. Two-way players are typically considered to be the "16th and 17th men" on a roster.
The two-way contract system benefits young undrafted players who do not want to play professional basketball overseas and want to play in the NBA, as well as those who believe an organizational investment in them is beneficial toward their development. Some player agents have been concerned about this system, because in exchange for guaranteed employment at a higher salary than a typical G League player, two-way players give up the freedom to be called up from the G League by any NBA team, possibly one with intent to sign the player to a 10-day contract, which could eventually lead to a full-time NBA roster spot sooner than with a two-way contract. However, some players that have proven themselves during their time under a two-way contract can then be given a full-scale contract for the rest of the season, though they can require removing another player from the team to maintain the maximum of 15 full roster spots.
Originally, excluding time spent before and after the G League's season, players on two-way contracts could spend up to 45 days per season with their NBA team, with these players being ineligible for the NBA Playoffs. During the 2017-18 season, players earned $75,000 while they were in the G League and roughly up to $204,000 if they spent the maximum 45 days on an NBA roster, increasing yearly up to $92,241 by the 2024-25 season.
However, as a result of the COVID-19 pandemic, during the subsequent suspension of the 2019-20 NBA season, the league allowed two-way players to become eligible for the 2020 NBA Playoffs within their 2020 NBA Bubble, as part of the effort to avoid any COVID-19 outbreaks spreading among the players.
For the 2020-21 season, which was shortened to 72 games and paired with a truncated 2020-21 NBA G League season, the NBA allowed a significant increase in salary for two-way contracts from an initial $81,955 minimum to an overall salary worth up to $449,155. The amount of time allowed with the NBA team also increased from 45 total days to 50 games. Even this restriction was eventually lifted, permitting two-way players to play the entire regular season and the 2021 NBA Playoffs. Players going over the initial 50-game cap receive a veteran's minimum salary. However, as of April 2021, it is currently unknown if these alterations will be made permanent.