Relegated

Overview

Although not intrinsic to the system, problems can occur due to the differing monetary payouts and revenue-generating potential that different divisions provide to their clubs. For example, financial hardship has sometimes occurred in leagues where clubs do not reduce their wage bill once relegated. This usually occurs for one of two reasons: first, the club can not move underperforming players on, or second, the club is gambling on being promoted back straight away and is prepared to take a financial loss for one or two seasons to do so. Some leagues (most notably English football's Premier League) offer "parachute payments" to its relegated teams for the following year(s). The payouts are higher than the prize money received by some non-relegated teams and are designed to soften the financial hit that clubs take whilst dropping out of the Premier League. However, in many cases, these parachute payments just serve to inflate the costs of competing for promotion among the lower division clubs as newly relegated teams retain a financial advantage.