How do MLB qualifying offers work? A guide to the process

With baseball's free agency period set to begin Tuesday, MLB teams again went through the process of handing out qualifying offers to their most-prized free agents prior to the deadline at 5 p.m. ET on Monday.

MLB's qualifying offer rules, which were developed to help determine free agent compensation, have now been around for three offseasons. Here is your guide to what happens throughout the qualifying offer process.

What is a qualifying offer?

Teams must make their departing players a qualifying offer in order to be eligible for draft pick compensation. The value of the qualifying offer changes from year to year and is determined by averaging the top 125 player salaries from the previous season. That value is set at $15.3 million for this offseason.

Only players who played the entire previous season with the same club can be extended a qualifying offer. For example, the A's cannot submit one to Jon Lester because they acquired him at the trade deadline.

What if a player accepts the qualifying offer?

Players have one week to either accept the qualifying offer, or (as most will do) head off onto the open market in search of a more lucrative contract.

Since clubs only give out qualifying offers to their best departing players ($15.3 million is a sizable salary, after all), players generally choose not to accept the offer, figuring they can garner more money and years of security in free agency. In fact, every single qualifying offer extended in the past two offseasons has been rejected.

If a player does accept the offer, however, he is in effect agreeing to a one-year, $15.3 million contract with his current team.

What if a player rejects the offer?

Upon declining the qualifying offer, the player then becomes a free agent and can negotiate with every other MLB club.

What is the compensation when a player signs elsewhere?

Teams that sign free agents who turned down qualifying offers must then forfeit their first available pick in the next MLB draft. The forfeited picks don't go to other MLB teams; rather, the rounds just become condensed. The player's former team obtains one compensatory selection at the end of the first round, even if the team sacrificing a pick gave up a pick later than a first.

The first 10 picks in the draft are protected, with clubs selecting in the top 10 of the draft surrendering their second-highest selections instead. If a team signs two free agents who rejected qualifying offers, then that team loses its top two eligible picks, and so on.