What are parachute payments? Chelsea, Liverpool and Man Utd to receive slice of £83M boost

The immediate promotion of Norwich City and Watford back into the Premier League means that all 20 Premier League clubs will receive a slice of an £83M financial boost. After last year's relegation, all three relegated clubs were paid a total of £83M, referred to as 'parachute payments' by the Premier League clubs. So, what are parachute payments? And why were relegated clubs given this financial boost?

What are parachute payments and why do Premier League parachute payments take place?

Both Norwich and Watford were relegated from the English top-flight last season and have secured promotion back into the Premier League at the first time of asking. Daniel Farke's Norwich sealed promotion with a 3-1 win at QPR. Meanwhile, Xisco Munoz's Watford achieved promotion after a 1-0 win at home to Milwall. The promotion of both Norwich and Watford at the first time of asking means that all 20 Premier League clubs will receive a financial boost.

When clubs are relegated from the Premier League, 'parachute payments' are handed to them over three years in an attempt to help these clubs deal with the financial blow that arises as a result of dropping out of England's top flight. Since Norwich and Watford both successfully returned after just one season in the EFL Championship, they will no longer receive the parachute payments for next year. The successes of both these clubs will have a positive effect on the balance sheets of Premier League clubs, who will receive over £4m as a result.

Relegated clubs have received these Premier League parachute payments since the formation of the Premier League back in 1992. The parachute payments are spread over four years to help these clubs adjust to life outside the lucrative top flight, where promotion is believed to be worth some £180m to clubs from the Championship. As per the current system, the parachute payments are calculated on the basis of the club's Premier League revenue from the season in which they were relegated. 55 per cent of that figure is handed out in the first year in the Championship, 45 per cent in year two and 20 per cent in year three.

Championship playoffs

The Championship playoffs make for a compelling end to the season as a coveted place in the Premier League is at stake. The mini-tournament takes place at the end of the EFL Championship season with only one team achieving promotion from a possible four. The four teams that will compete in this year's Championship playoff are Brentford, Bournemouth, Swansea and Barnsley.

This also means that if Bournemouth were to achieve promotion, Premier League clubs would receive a higher amount of parachute payments since Bournemouth too would achieve promotion at the first time of asking. The EFL 2021 Championship playoff final is scheduled for May 29, 2021, while the semi-final Championship playoffs dates are still to be decided.