Companies who want to follow a simple
compensation plan choose a binary compensation plan. There are no complications
like spillover or other criteria, basically, the plan is simple to explain.In
binary plan, all the distributors in the same level would receive the same
compensation ( commission ) and the commissions are generally paid out on a
limited depth ( can be upto 5 to 7 levels deep). Some also consider this as a
disadvantage however, as the binary plans are constrained by the limited depth
of commission which inhibits deep sales organizations.
Commission calculation methods
1. Weak leg based binary commissions:
a. Weak leg (Sales leg): The leg with low sales is the weak leg on a binary
tree. Commissions are calculated based on this weak leg. It can be either left
or right, based on Sales Volume/Business Volume (SV / BV). “Usually weak leg
will be flushed out.”
b.Power leg (profit leg): The leg in the binary tree with higher sales
volume is known as a strong leg.” Here the matching pairs at the power leg will
get carry forwarded” .
Example: The downlines of distributor A are B, C, D, E, and F. Here, B, D, and E are
in his left leg whereas C & F are in his right leg. The left leg made a Sales Volume
(SV) of 500 and the right leg of 1100 SV.
SV is less on the left leg, hence it is the ‘weak leg’ and the right leg with higher
SV is the ‘strong leg.
2. Sales ratio based binary commissions:
Some companies set commission payout criteria based on sales ratio or pair
ratio. Most common pairing ratios or sales ratios are,
a.1:1 sales ratio
b.1:2 or 2:1 ratio.
Note: Commissions are paid or the binary payout cycle is set on a daily, weekly,
1:1 Sales Ratio: Commissions paid once the sales volume of the left and right
leg matches a 1:1 ratio.
Example: Distributor A sponsors two distributors X & Y and adds to the binary
tree. The commission payment criteria are set to a 1:1 ratio. Distributors get
$10 for achieving every 1:1 pair.
Case 1: Distributor X achieves 100 Sales Volume (SV) and distributor Y achieves
120 Sales Volume (SV).
Both legs have achieved 1:1 ratio (100 SV on both legs) hence distributor A gets
$10 as commission. The 20SV on the right leg is carried forward to the next
binary payout cycle.
Note: Carry forward option for unpaid sales volume is applicable for both left
and right legs. Also, some binary companies may not welcome carry forward option
by flushing the unpaid sales volume.
1:2 or 2:1 Plan: Commissions paid once the left and the right leg achieves 1:2
or 2:1 sales volume. I.e,(2:1) when 2 users towards left and 1 user towards
right and the ratio(1:2)when 1 user towards left and 2 on right
3.Sponsor Matching Income & Sponsor Pair Matching Income :-
Sponsor Matching Income :- The Sponsor Matching income is credited to sponsor,
whenever his downline gets the Direct Referral Commission.(If Sponsor Matching
Commission is set during the Plan Creation).
Sponsor Pair Matching Income:- The Sponsor Pair Matching Income is credited to
Sponsor whenever his downline gets the Binary Commission.(If Sponsor Pair
Matching Commission is set during the Plan Creation).