Types of MLM compensations
Introducer or Sponsor bonus
When a new member is recruited or sponsored and placed under you as your downline, you (the introducer or the sponsor) will receive a bonus. The commission is paid based on the package/products chosen/purchased by the downline. This bonus is also known as a referral bonus.
Example: Distributor A sponsored a new member, Distributor B. The newly sponsored member bought a $100 package and the company gives 10 % as a sponsor bonus to the distributor A. i.e. $10 will be paid to distributor A.
On successfully sponsoring members into the right and left each time, and balancing the binary tree, the sponsor will be paid a bonus. The sales or business made by these downline members will also be considered for the commission payouts. Based on the company’s plan structure, a limit may be kept to pay the pairing bonus.
Example: Distributor A sponsored members to his right and left and balanced the binary tree. He then becomes eligible to get a pairing bonus.
Matching Bonus is a bonus received by the distributor from the sales made from the downlines that he/she personally sponsored. Otherwise, it is an additional percentage of the pairing bonus earned by the directly sponsored members and it can be configured into any number of levels.
Example: If the distributor ‘A’ sponsors distributor ‘B’, and when distributor ‘B’ achieves a rank or earn a bonus for his/her efforts, Distributor ‘A’ will receive the matching bonus of X%, which may be fixed by the company.
Rank advancement bonus
The distributor on reaching a higher sales level will be achieving higher ranks. For motivating or promoting to bring more sales a rank based bonus is paid. The rank needs to be maintained otherwise chances to get downgraded.
Example: If distributor A achieves a sales of $10000, he/she will be moved to a higher rank. If the rank bonus is fixed as 5%, he will receive $500 as rank advancement bonus.
Fast start bonus
In order to boost the interest of new distributors, the company pays off a higher percentage of commission for their initial efforts in the fixed time period. It will be higher than the normal plan commissions.
Example: If the company is paying a 5% commission to the new member as per the basic plan, the fast start bonus will be 10% or 20% as fixed by the company.
In home party plans, the party host introduces products to the guests. When guests or customers buy these products from the party, or join the network and host a party of their own, the party organizer will be paid a bonus for sponsoring new members to the network.
Example: Distributor or consultant A hosted a party. B and C are two guests who attended the party and bought products from the party. They become interested in and join the network. Distributor A will be paid X% of the joining package as a bonus.
Bonus paid on the total group volume of the entire organization. A certain percentage of point volume or bonus volume will be shared with the distributors who reach a particular rank. It is paid beyond the regular commission structure to make the distributors work more and keep their ranks high. If any other downline qualifies by meeting the volume requirements, the distributor will not get the entire bonus. This is because the bonus can’t be paid twice.
Example: Distributor A in rank 5 becomes eligible for a 2% infinity bonus. He will get a bonus from infinity levels when no downline distributors qualify for the same rank or above. When any distributor below him qualifies for the same, he will not get an infinity bonus. When any distributor below him qualifies for the lower ranks, the percentage paid to that distributor will be reduced and will be the difference of bonus percentage. Distributor B in rank 4 qualifies for a 1 % infinity bonus. This 1 % will be reduced from Distributor A’s bonus and he gets only 1% (2%-1%).
Roll-up or compression bonus
If a particular distributor is not performing any business, the distributor next to him or below him will be rolled-up to the higher level in order to fill the gap. This will be most fit only if the distributor has a larger organization. On reaching a higher level means, the commission is paid more. The number of levels for paying commissions can be fixed by the company.
Example: Distributor A is qualified to receive a commission for the sales volume of downlines in 2 levels. Distributor B who is sponsored by A on the first level will get 10% from B’s sales volume. Distributor C who is in the second level is inactive for the month and A will get no bonus from the second level. Distributor D who is in the third level is automatically rolled up to the second level and A will be paid 10% on D.
Leadership bonus pool
The company will keep a certain percentage of total commissionable volume in a pool. When a distributor qualifies the set criteria or achieves the required rank in that month, he will be paid a commission from the pool.
Example: Company ‘X’ assigned 10% of total commissionable volume in the pool. In a particular month, the commissionable volume was $60000. Distributors ’A’, ‘B’ and ‘C’ achieved or reached the eligible rank i.e.rank 2. Each of them will receive ⅓ of the 10% of $60000. i.e. $6000/3 =$2000 each.
When a distributor places an order, his/her upline will get a certain percentage of the order total as commission. A distributor is actually paid a percentage of order total generated on certain downline levels. i.e. a distributor with a specific rank will get the commission from those levels. As rank advances the distributor will be paid for more levels.
Example: Distributor A sponsors new members and completes a level and members on that level sponsor new members to the second level. The company pays 10% as a level commission at the second level. New members joined for a $100 package and Distributor A receives 10% of $100 as level commission.
In Matrix compensation plan, when a new member joins within the matrix under a distributor’s downline team, the distributor will get a position bonus. If the newly sponsored member isn’t placed within the matrix the distributor won’t get the position bonus.
Example: Distributor A sponsors a new member ‘P’ and he joins the 3*3 matrix plan in the first level of the matrix, and member ‘Q’ joins in the second level, and member ‘R’ joins in the fourth level as other positions in the second and third levels are filled by the upline through spillover. Distributor A will get the position bonus for sponsoring the P and Q as only they joined within his matrix. The joining package of both P and Q is $100 each and the distributor A is paid 5% of 200 ($100+$100), i.e. $10.
Matrix completion bonus
When a distributor completes the set matrix by recruiting downlines, he/she will be eligible for receiving a matrix completion bonus. i.e if the chosen matrix plan offers 3*3 matrix, he/she needs to complete, 3 in the first downline, 3*3 in the second level downline and 3*3*3 in the third level of downline.
Example: Distributor A with a 3*3 matrix plan in the first level recruits 3 downlines. Each of these 3 members will recruit 3 each as their downline(3*3=9). Those 9 again bring 3 each (9*3=27). Then Distributor A will be eligible for the matrix completion bonus.
Cycle commission/ Board split commission
On completing the set board or cycle, the distributor will be promoted to a new board. The distributor will receive a commission set by the company on achieving this. i.e. when the distributor completes board 1, he/she will get a position in board 2 and become eligible to receive the cycle commission.
Example: Distributor A with 2*2 board recruits B and C in the first level and D, E, F, G in the second level and completes the board. He/she will receive $ ‘X’ as a cycle commission.
In a matrix or board plan, a distributor or sponsor will be paid a re-entry commission, when his/her downline completes multiple matrices/boards and gets re-entry into the same matrix/board. This re-entry is given to encourage the distributor.
Example: Distributor A sponsors Distributor B, and he completes board 1 and is promoted to board 2. To encourage the distributor, the company gives a re-entry to board 1 again. The company gives $ 10 as a re-entry bonus to the sponsor.
Commission earned from the generation groups. A distributor will get a commission based on the percentage of sales made from the generations. The rate of commission will be different for each generation.
Example: Distributor A has 3 generations in his organization. The company gives 10% for generation 1, 7% for generation 2, and 5% for generation 3 to qualified distributors. Generation 1,2,3 make sales worth $200, $300, and $400 respectively. Distributor A will be paid $61 as a generation bonus. (10% of 200 + 7% of 300+ 5% of 400)
Direct referral bonus
Bonus paid to the distributors for referring new members as the direct downlines. Distributors are compensated with a commission for recruiting new members into the organization. The percentage of commission paid will vary according to the compensation plan and companies.
Example: Distributor A refers to 3 new members as his direct downlines. The company sets a 5% direct referral bonus. The 3 new members joined for a $ 100 joining package each. Distributor A will get 5% of $300 (100+100+100), i.e. $15.
A bonus paid to higher-level achievers based on his and team’s sales achievements. The company fixes a percentage of point volume (PV) for qualifying for an overriding bonus which varies for different levels. A distributor with a higher rank on achieving the qualifying PV will be paid a commission for that rank and an overriding commission.
Example: Distributors in rank 2, 3, and 4 will be paid 2%, 5%, and 10% as sales bonus respectively. Distributors in the higher rank, say rank 4 will be eligible for overriding bonus considering the sales bonus of the lower ranks. Distributor in rank 3 receives 3%, which is the difference between what he qualifies for and what is already paid to rank 2. i.e, 5% - 2%. Similarly, rank 4 will be paid 5 % from rank 3 and 8 % from rank 2. Here the overriding bonus is paid from both distributors. ((10% - 5%) & (10% - 2%))
Commission structure will vary according to each company’s custom plans. Based on the products or services offered by the company and the profit distribution decided by the company, commission payouts and the percentage will be different. These are a few commissions or bonuses that are offered under major MLM compensation plans. According to the specific needs of customers, bonus or commission can be customized.Schedule a Discovery Call