Essendon chairman Paul Little has released a statement explaining the deal, which he claims has been accepted by the AFL.
Little maintained the AFL never included statements about Hird's pay in the deed of settlement regarding the 40-year-old's suspension, due to his culpability in Essendon's supplements programme from 2011 to 2012.
But the Bombers chairman indicated the club were willing to find a solution and will now pay Hird his 2014 salary before the end of this year to ensure the former midfielder does not receive a dollar for 12 months.
"To settle this impasse, the Essendon Football Club has resolved that it will pay James Hird in advance to cover the 2014 year consistent with Hird's employment contract obligations," Little said in a statement.
"This also meets the implied terms of the deed of settlement. The implied terms of the AFL sanction indicate that James Hird cannot be paid for a 12-month period therefore he will not be paid during the calendar period January 1 - December 31, 2014.
"The AFL has accepted the Essendon Football Club's position that James will not be paid in 2014, and equally the AFL have accepted that the Essendon Football Club has the right to make payments to James Hird in the 2013 year as it sees fit."