The MLS salary cap works by setting a maximum total budget that each team can spend on its senior roster player salaries. Each player's guaranteed compensation counts against this budget. Teams have several mechanisms to exceed the cap strategically.
Designated Players (up to three per team) have only a set charge hit the cap regardless of actual salary. Targeted Allocation Money (TAM) can be used to buy down player salaries to below the Designated Player threshold. General Allocation Money (GAM) can be used to reduce cap charges for any player. These mechanisms allow savvy front offices to build rosters that spend well beyond the base salary cap while maintaining the spirit of competitive balance.