The compensation plans differ in their structures, and the structure of the Binary compensation plan has been a huge hit primarily because it has helped various companies reach high success levels. Each distributor in a binary compensation plan has a limit of not having more than two distributors in their first level of sales. It is supposed to consist of two legs (right and left), and every distributor has a subtree, so a binary tree is formed.
Case 1: Distributor X sponsors A, and distributor A then sponsors a new member B. B gets added to the left position or leg of A on the binary tree.
Distributor B is the new member sponsored by A and he is the direct downline member. Distributor A then adds another member C to his right leg.
The binary tree of distributor A is formed and he gets commissions. Dont forget one important factor, distributor C was added to the right because he chose that position as it was vacant. Here, distributor A is the sponsor as well as the ‘parent’ of B & C.
Case 2: Distributor A is sponsored by distributor X. Distributor A then sponsors a new member, B. However, B wasn't added on the direct left leg because it was already acquired by distributor Y sponsored by X.
Here, distributor Y got spilled over to the next vacant position i.e. on the left leg of A. The sponsor of Y is X but the parent is A.
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 up to 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