The compensation plan is one of tools used to drive network behavior. Networks that have a consumption bias would use a different plan to those who favour sales. In many cases, a hybrid of different plans is used to strike a balance between recruiting and sales. These hybrids rely on numerous forms of additional compensation rules that attempt to bypass or overcome weaknesses in the fundamental plan.
In order to make an educated decision you need to have a reasonable understanding of how each of the various compensation plans work. I will provide a brief overview in this section. I will then add a detailed description under discreet headings elsewhere in this blog.
Unilevel Compensation Plan
The Unilevel compensation plan is based on the
principle of unlimited width with limited depth. This means that you could recruit 5, 50 or even a hundred people into your front line and you would get paid on all sales made by them. If they did the same (your second level recruits) you would receive an income from their sales and so on. This plan usually pays down 5 to 7 levels. The percentage paid on each level can vary drastically from company to company but the total resulting commission is usually around 45% of wholesale.
Forced Matrix
The forced matrix is similar to the unilevel but restricts the width of your team. This plan usually has a 5 x 5 or 3 X 7 structure. It is this structure that has led to the term “pyramid” being used to describe the industry.
In this plan, you can only build your team a limited number of levels wide. Any person you recruit over the minimum levels will be placed into the next level down and so on until the matrix is totally full. You would land up with a structure that looks as follows:
Stairstep breakaway plan
With the stairstep model, a member is paid according to qualification milestones. As their overall volume rises in relation to their downline, they receive bigger personal discounts and larger over-riding commissions on their team’s sales. At a predefined volume, they break away from their upline to become a leader of their own group. As the breakaway increases in rank and status, he receives additional bonuses and royalties.
In this example, a Tripple diamond will receive 45% on his personal sales and 25% on the sales made by a Ruby in his team.
With the binary plan, you typically have a 2 leg forced matrix. Each moth your volume for the legs is totaled and you are paid on the weakest leg. This model has been known to encourage rapid growth but also results in high fall out due to the difficulty of balancing the two legs.
Within the above plans are subtle rules that allow you to maximize results.
Compensating for breakaway
In plans such as the stairstep model, differential commissions are reduced to zero as downline members climb the ranks and qualify for a bigger slice of the pie. To overcome this shortcoming additional rules in the form of royalties, bonuses, once off payments and fixed monthly amounts.
- Royalties
This is normally paid on breakaway members of your network + their entire team down to a specific number of break away levels deep. - Bonuses
These are paid to encourage team leaders to help their downline breakaways to achieve promotion up the rank structure of the organization. - Once off payments
At the time of breakaway, the upline can some times lose a large portion of his or her income. To soften the blow, many companies pay a once off bonus. - Fixed monthly payout
This is also sometimes called a lifestyle bonus. When network members achieve specific ranks and for as long as they remain at these ranks a fixed monthly amount is paid to the qualifying member. (Whew… what a mouth full!). This is often given in the form of a company car or some other such perk. - Shared compensation
Companies often reserve a couple of percent for rewarding the top members of their teams. This percentage is split between the top leadership and is traditionally paid on an annual basis.
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