A qualifying offer is a one-year contract offer made by a team to a player who is about to become a free agent. The proposal must fit certain guidelines to be allowed, such as not representing more than a minimal pay cut from the player's previous salary, but in practice, it is likely to include at least a small raise. The player may then accept the offer and re-sign for a year for that salary, or become a free agent with compensation in the form of one or more choices in the amateur draft attached to his signing by another team. If no qualifying offer is made, the player becomes a free agent immediately, and the team that signs him owes no compensation to his former team.
Qualifying offers were introduced in the 2011 Collective Bargaining Agreement to replace the offer of salary arbitration as the mechanism to trigger free agent compensation. It was felt that a qualifying offer would provide more certainty, both for the team and for the player, regarding the salary he was to be paid. However, no qualifying offers were accepted in the first three years of the CBA's existence until a few potential mid-level free agents decided to do so following the 2015 season. In the meantime, a few free agents who had turned down qualifying offers had found themselves in a difficult position, with no team willing to make an offer. Their only choice was to re-sign with their original team at a discount (e.g. Stephen Drew) or wait until after the amateur draft, thereby losing half a season (e.g. Kendrys Morales).
The 2017 Collective Bargaining Agreement clarified the rules for qualifying offers: teams have five days after the end of the World Series to make an offer, and players have ten days from that point to accept or reject it. The qualifying offer must be equivalent to the mean salary of the top 150 players in the major leagues the previous season, putting this at $17.4 million in 2017. This ensures that only top-notch players are affected, and a qualifying offer can only be made once during a player's career, and only after a season spent entirely with one team (mid-season acquisitions, who are often players headed to free agency, are thus excluded). Compensation was now linked to whether a team losing a player was beneficiary of revenue sharing and on the size of the contract received, the highest picks, those tacked on at the end of the first round, being reserved for lower revenue teams losing a free agent receiving a contract over $50 million. In contrast, the compensation received by a team over the luxury tax threshold would be a much lower draft choice, i.e. one inserted after the 4th round of the following year's draft. The default scenario would be a pick after Compensation round B, after the second round. Any team signing such a player will also lose draft picks and money from the international bonus pool. The number and value of the picks lost depend on a team's revenue status as well; however all teams' first pick in the first round proper are now exempted (not just the top ten picks of the first round, as was the case until then).