A binary compensation plan is an MLM compensation plan built around each distributor having two “legs” in their front-line. When a distributor recruits more than two new members, the excess members are placed under their front-line distributors in a process called “spillover”. Spillover is a major advantage of the binary system, because both upline and downline create growth in the shared leg of the binary tree. The binary system’s disadvantages come from limitations on payout: payment of a distributor is based on their “weak” leg (or “money” leg), despite the majority of sales coming from the “strong” leg (or “power” leg). Under a binary compensation system, a distributor must balance their legs for maximum payout, a process which usually involves limiting sales on one leg to no more than a given percentage of total sales.
See Also: Compensation Plan