The binary compensation plan is one of the newer pay plans out in the network marketing arena and is creating some frustrated network marketers. In this particular compensation plan the distributor is allowed to have only two legs of downline to place those that have joined the business. Depending upon the binary compensation plan it may be required to have the legs balanced so if you had twelve distributors in your downline you would place six in each leg. One of the plans requires the sponsor to place four in one of the legs and eight in the other giving a one third – two thirds division. Balancing the legs according to the particular policy qualifies you for a commission check.
In the past, some companies did not stress or even mention to the distributors that there was a product to sell. The company was supposedly based on selling a product. This was the one ingredient that was needed to make the binary plan legal and not fall into the category of a pyramid scheme. In these cases the authorities shut the companies down on the basis that there was no products sold but an exchange of money, for recruiting only. I reiterate, for the binary compensation plan to be legal the commission checks must be based on product volume sold and not on recruitment of new distributors. When checking the compensation plan in any company you need to make sure that the commission check is based on selling a product or you may find yourself without a company and even answering to the authorities for your participation in the scheme. Ignorance of the law cannot be used as an excuse in the Courts of Law, they will not accept it.
It is evident that if a sponsor brings in more than two new distributors, those over and above the two become spill over and will have to be placed under other distributors in the downline. One thought comes to mind and that is if a downline distributors was the recipient of spill over and this spill over was not a business builder than what choices would they have? One of the choices would be to let the new distributor remain as placed but the recipient distributor would have to build under that person in order to keep the legs balanced. This certainly would not be the best choice because it would force them to build that distributors business and why should they build a distributor a check when they do not take the initiative to build their own. The second option would be to have that spill over removed from the downline and if not removed resign and find a compensation plan that is more suitable to their personality.
In one of the binary compensation plans I was researching the commission check was based on the volume sold, for the month, and was paid out on the weak leg. As an example: the strong leg had a thousand points of volume and the weak had nine hundred points of volume. The commission check was ten percent of the volume on the weak leg which was ninety dollars. The nine hundred points in the pay leg was used to pay the commission and was reduced to zero for the next month and the strong leg was reduced, by the same amount, to one hundred points. The carry over to the next month was one hundred points on the strong leg. In the new month you have to build the volume on both legs again in order to qualify for a commission check. The commission rate is ten percent on the weak leg but you are building two legs so what is the real overall commission if you take both legs into consideration?
I am not a supporter of the binary compensation plan. I prefer a compensation plan where I get paid on my total sales volume and not just on fifty percent or less. I want to get paid for all my hard work. How about you? It is always advised that you read your compensation plan and understand how hard you are going have to work and what you need to do to qualify for your commission check.
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Darlene and Dave Mills
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