INTRODUCTION

When we talk about “levels” in an MLM, we’re talking about a group of distributors with the same upline leader and the same number of people separating them from that leader. Below, you can see all of the levels of Distributor A’s organization highlighted. Every distributor in this downline has A as a leader, but only Level 1 is directly connected to her. Level 2 is one distributor away from A, and Level 3 is two distributors away.

Every distributor that has an organization has levels, and a single recruit is usually on many different levels within her upline’s commission structure. That’s why levels go from top to bottom instead of bottom to top. Let’s look at the org chart below for an example. Distributor B is part of Distributor A’s organization, but she also has an organization of her own, made up of two levels. So, Distributor C is in both A and B’s organization—she’s on Level 1 in B’s downline and Level 2 of A’s downline.

This is why level commission rules don’t require Distributor C to be at a certain level. Instead, levels are made from the top down. And leaders like A and B get commissions from levels underneath them. This tiered structure, made up of multiple levels of distributors, is what gives the term multi-level marketing (or MLM) its name. Because all MLMs have levels, level commissions can work well in virtually every comp plan.

PROS AND CONS

PROS

EASY TO UNDERSTAND –
Because levels are the simplest commission type, they’re also the easiest to understand. This is a huge plus for your distributors, their recruits, your commission calculations team, and your customer service department. Less complications means less of an opportunity for error and confusion for all.
STABLE EARNING BASE –
A lot of MLM commissions struggle to provide consistent paychecks. But, because level commission rules are so simple and distributors’ number of levels are pretty stable month to month, regular distributor earnings are a lot more dependable. For this reason, levels make a great foundational commission.
SPREAD THE WEALTH –
Because level commissions are distributed into a pretty even upline pattern, they do a great job at rewarding a lot of upline distributors at once.
CONS
LACK OF URGENCY –
Some commission types increase their paid commission percentage when a distributor reaches a higher qualification level. For example, a distributor will make 5% on her downline’s sales earnings until those earnings are, say, $500. Then, she can make 8%. This increased percentage is good motivation for a leader to train and help her downline to sell more product faster. In a level commission, though, the percentage will always stay the same, whether the sales are $50 or $5,000. So, organizations aren’t as motivated to encourage rapid growth
STACKING –
Stacking can be a huge problem if you’re using a level commission, so you need to have good rules in place as soon as you can to prevent it. In essence, stacking means creating artificial levels in a distributor’s downline to amplify commission earnings.

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WORKING EXAMPLES

CONCLUSION

Levels are a great backbone commission for any direct selling compensation plan. Their ability to provide steady earnings and clear expectations have made them a mainstay in modern comp plans. As long as you watch out for stacking and add other incentives to supplement it, a level commission is a great addition to your plan.