At the end of the season, Formula 1 distributes its money to the constructors rather than individual drivers.
This means drivers don’t receive any prize money because their teams pay their salaries.
However, their contracts may include clauses that grant them extra bonuses based on their performances during the season.
The eighth Concorde Agreement states that 50% of Formula 1’s commercial rights profit becomes the prize money for the ten teams.
That 50% is a little misleading.
For example, Ferrari receives an additional sum due to their historical significance in the sport, believed to be 5% of the prize pot, as Ferrari has competed in every F1 season since 1950.
Also, Formula One Management takes an extra slice of the cake if the overall amount is beyond a certain point.
F1 teams are given prize money based on where they finish in the constructors’ championship. There’s a sliding scale that calculates how much each position earns.
The sliding scale shows the top team getting 14% and the bottom squad getting 6%.
As an indication, based on 2023 statistics, Red Bull will collect £52.5 million, and the lowest team will collect £11.95 million.
The end-of-season bonus money is crucial for the teams to sustain and improve their competitiveness in the sport.
However, the end-of-season bonus system can create financial disparities between the top and bottom teams.
Potentially, the lower-paid teams need to be more competitive and sustainable within the sport.