Parachute payment

As the name suggests, parachute payments are designed to ensure a soft landing for clubs that have been relegated from the Premier League to the Championship.

Initially, parachute payments were distributed over the course of four years, but the 2015 change reduced that time period to three years and just two in the case of teams that spent just one season in the Premier League.

Parachute payments work in tandem with solidarity payments, with an overall value of £100m, which are distributed among all other English Football League clubs each season.

The solidarity payments are intended to offset the potential for competitive disparity between clubs that could arise out of parachute payments.

Parachute payments to relegated clubs are based on the Premier League’s broadcasting revenue, specifically the slice that is equally shared among the clubs.

As a result the overall value of the payments has varied over time, increasing with the gradual rise of TV money flooding into the top of the English game.

In the first year, the payment is 55 per cent of the amount that each Premier League club receives as part of its equal share of broadcast revenue. Based on the most recent figures, that percentage is roughly £40m. The percentage is reduced to 45% in the second year (roughly £35m) and 20% in the third year (roughly £15m).

It is important to note, however, that teams that have been relegated from the Premier League in their first season after promotion only receive two years of parachute payments.

If a relegated team earns promotion back to the Premier League within that three-year period, they do not continue to receive parachute payments.