Parachute payments: How they work and how much Wolves could receive

Wolves chiefs have long been preparing for life back in the second tier - despite relegation being officially confirmed this week.

It has been accepted for some time that Wolves will be playing Championship football next season.

And it was all sealed this week with West Ham’s draw with Crystal Palace condemning Wolves to the drop.

There will no doubt have been work going on in the background to prepare Wolves for the Championship.

And that will now be ramped up in the coming weeks and months.

A drop out of the Premier League has a financial hit on clubs with a reduction in broadcasting revenue among other things.

But clubs dropping down to the Championship are given the luxury of parachute payments.

It has been some time since Wolves have been in the second tier - so what are parachute payments and how much could the club receive?

Parachute payments explained

Parachute payments have been in place for some time and are basically a series of solidarity payments from the Premier League to relegated clubs for up to three years.

They were designed to help clubs adapt to reduced revenues back in the Championship - where they receive less TV money.

The issue has been a contentious one for some time. There have long been discussions about changing the distribution of this money so more of it makes its way down the football pyramid.

The EFL’s view for some time has been that the payments give relegated clubs a significant advantage over others. They also believe those other clubs not in receipt of payments put themselves in financial trouble by overspending to try and compete.

Back in 2023, the EFL chairman Rick Parry said the gap between relegated clubs and other teams was widening due to the payments and the issue had become a major concern.

How does it work and what could Wolves receive?

There is a clear structure on how the payments work.

In the first year after relegation, a club that has dropped down to the Championship receive around 55 per cent of one equal share of the Premier League broadcasting revenue.

In the second year, that percentage drops to 45 per cent and in the third year, that goes down further to 20 per cent.

There are caveats to this if a club such as Wolves were to bounce straight back to the Premier League, or go up in their second season in the Championship.

If they go up, the payments cease immediately.

In past years, clubs who have been relegated have received around £49m in the first year.

In the second year, other clubs have seen that drop to around £40m, while in the third year following the drop, if they haven’t been promoted, they have been given around £17m.